Another boring way to make a fortune... Why you're a bad investor... Own cigarettes, beer, and Coca-Cola... How to earn a 9% yield... Capital controls and falling oil prices to hurt Russia... A happy conference viewer...
In Monday's Digest, we told you about the top-performing stock in the Dow Jones Average this year.
It's a "boring" company with a $170 billion market cap that produces around $10 billion in free cash flow every year and controls 98% of its market. We're talking about semiconductor giant Intel.
Intel is one of the elite, blue-chip businesses that Extreme Value editor Dan Ferris has dubbed a "World Dominator." We wrote that Digest to show you how you can make big, consistent profits buying these companies... regardless of what's going on in the world.
Of course, nobody wants hear that the absolute best way to make money in the market is to buy and hold these high-quality companies that gush cash and pay large, growing dividends.
It's too simple. It's not sexy. There's no shot of making quick triple-digit gains like you can with junior mining stocks or speculative biotech stocks.
We've explained how investors can outperform the market. Consider this bit from asset manager Meb Faber from the September 17 Digest Premium...
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Simply buying and holding these World Dominators – companies like Intel, software giant Microsoft, and soda behemoth Coca-Cola – will vastly improve most investors' performance.
Here's more proof: tobacco World Dominator Altria (MO) is hitting new highs and paying big dividends, despite the recent market turbulence.
Like all World Dominators, Altria has consistently thick profit margins, gushes free cash flow, has a fortress balance sheet, generates consistently high returns on capital, and relentlessly rewards shareholders.
Altria owns Philip Morris USA... the largest maker and seller of cigarettes in the United States. Philip Morris owns half the U.S. cigarette market, including Marlboro, the world's top-ranked cigarette brand. Marlboro is bigger in the U.S. than its next 10 competitors combined.
Altria is also the world's leading producer of smokeless tobacco... the fastest-growing U.S. tobacco segment. Its U.S. Smokeless Tobacco Company subsidiary owns Copenhagen and Skoal, the country's two leading smokeless tobacco brands.
Altria also owns a 27% interest in SABMiller. The world's second-largest brewer is best-known for Miller Lite, Foster's, Peroni, and Pilsner Urquell.
Rumors began to circulate recently that the world's largest brewer, Anheuser-Busch InBev, is in talks to acquire SABMiller. It's also rumored that SABMiller may merge with liquor giant Diageo, whose brands include Guinness, Johnnie Walker, Smirnoff, Hennessy, and Bailey's. And SABMiller has expressed interest in acquiring Heineken, the world's third-largest brewer.
It looks like we're about to see major consolidation in the alcoholic-beverage industry... which could mean a big boost for Altria shares.
Today, Altria sports gigantic profit margins of more than 24%. In the past three years, it earned between $6 billion and $8 billion annually.
It also generated a massive $3.5 billion to $4.5 billion in free cash flow over the same period. Its balance sheet is fortress-like... The company has $35 billion in assets versus just $14 billion in long-term debt.
Plus, few companies have rewarded shareholders better. Altria has increased its dividend 48 times in 45 years. It has nearly doubled its dividend in the last six years alone.
To illustrate the power of increasing dividends, let's take a look at Altria's history. After the company spun off Philip Morris International in March 2008, Altria paid $1.25 per share in annual dividends. Six-and-a-half years (and eight dividend raises) later, the company has raised its annual payments 79% – to $2.08 per share.
Extreme Value subscribers who bought on Dan's recommendation in March 2008 locked in a 5% dividend yield. Today, they're earning 9% annually on their original purchase price.
Altria also pays investors a "stealth dividend" in the form of share repurchases. Over the last three years, Altria has bought back about $3 billion of its own shares. The company has repurchased 27 million of its own shares since 2008. And management recently authorized a new $1 billion share repurchase program, which it expects to complete by the end of 2015.
Altria is able to generate huge piles of cash and pay ever-increasing dividends because cigarettes are one of the most inelastic products in the world. Smokers continue to buy them even when prices rise and economic conditions worsen.
Including dividends, Altria is up 24% in 2014. The S&P 500 is up 7% over the same period. Extreme Value subscribers who bought on Dan's original recommendation are up 143%.
S&A Global Contrarian editor Kim Iskyan sent us an update on the ongoing conflict between Russia and Ukraine... And he discusses the possibility of capital controls in Russia...
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As Kim explained, there are wide-ranging sanctions on Russia's economy, some of which make it more difficult for some companies to raise capital in the West. Plus, it prevents foreign investment in some segments of the country's energy sector. Still, the Russian economy hasn't dipped into recession... yet.
But sanctions aren't Russia's biggest problem. Steadily declining oil prices are squeezing Russia's already-fragile economy...
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New 52-week highs (as of 9/30/14): CF Industries (CF) and Coca-Cola (KO).
On Monday, two subscribers were upset because they had scheduling conflicts and won't be able to attend the final Stansberry Conference of the year live in Nashville, Tennessee. In today's mailbag, subscriber Kenneth describes his experience viewing previous conferences from the convenience of his own home. Send your questions and comments to feedback@stansberryresearch.com.
"Porter and Goldsmith, I just wanted to offer a fellow subscriber's response to Joe and David who were concerned about not making it to Nashville on October 18. I had originally intended to attend the Miami conference live in January, but due to a family emergency I was unable to travel that weekend from Orlando and I was able to get access to the online live stream of that conference. Not only was the quality first rate, but the content was remarkable – everything from Julian Assange's fabulous keynote to James Altucher's unforgettable discussion and some actionable investment ideas from other speakers.
"Since then, I have attended both the Dallas and Los Angeles conferences virtually as well, and each have been equally worthwhile. It was a treat to watch Porter's interview with T. Boone Pickens in Dallas and the roundtable discussion on companies like Tesla and the progression of battery efficiency and other technology ideas from Los Angeles.
"Yesterday I was able to finalize arrangements so I can attend the Nashville event in person and have completed my registration with the very capable help of Ashley in Porter's office. I'm looking forward to the opportunity to meet some of the editors and staff of S&A in person and thank them for some of the great investment ideas I've been able to pick up from them since becoming an Alliance member.
"So to Joe and David and everyone else concerned about not being able to attend the conference in person, I can say with 300% confidence (Miami, Dallas, and Los Angeles) that subscribing to the online event is worth every penny and every second of your money and time you will invest. And if you're a multi-computer user like me, one of the great things about being online is that when a speaker starts talking about a particular investment idea, you can pull up the ticker in your brokerage account on the other computer and flag it with an alert or decide if it's something you want to research further for possible investment.
"Looking forward to attending Nashville in person. With luck I'll be able to make it to one event in person each year, but I'm definitely going to continue subscribing to all of the streaming conferences." – Paid-up subscriber Kenneth Nuckols
Goldsmith comment: We appreciate the kind words, Kenneth... and your support of our new Stansberry Conference event. We'll see you in Nashville.
For those of you who can't make the trip, you can sign up for online access to the show. Our world-class video crew live-streams every presentation. It's only $199 to see former Congressman Ron Paul, currency expert Jim Rickards, Porter, and many others streamed directly to your home computer. You can reserve your spot right here.
Regards,
Sean Goldsmith
October 1, 2014
How pawn shops factor into the 'disappearing middle class'...
Regular Digest readers are familiar with the "disappearing middle class" – the idea that the Fed's easy-money policies have helped the rich while squeezing lower-income wage earners.
In today's Digest Premium, Hardcore Pawn television star Seth Gold explains how pawn shops play into this big-picture thesis...
To subscribe to Digest Premium and receive a free hardback copy of Jim Rogers' latest book, click here.
How pawn shops factor into the 'disappearing middle class'...
Editor's note: As regular Digest readers know, we've been covering the "disappearing middle class" – the idea that the Fed's easy-money policies have helped the rich while squeezing lower-income wage earners. In today's Digest Premium – adapted from episode 40 of the James Altucher Show – Hardcore Pawn television star Seth Gold explains how pawn shops play into this big-picture thesis...
Pawn shops are banks for people who don't have bank accounts.
For many people, if you need $20, all you need to do is go to the ATM, put in your PIN number, and you'll get your $20. My customers often don't have that luxury, so they use their assets as collateral that I (Seth Gold) loan against.
Each state is different as far as the amount of time you have to come back to pick up your merchandise. In Michigan, where my pawn shop is located, customers have 90 days to come back and get their item back for the original price plus a small amount of interest.
If someone comes in with a television and needs $100, I'll give him $100. He has three months to come get it back. If he doesn't come back in three months, the merchandise becomes property of the store and I have the right to resell it.
If that television is five years old, I probably wouldn't take it. That's our cutoff. However, there's always a group of have-nots, and the digital divide is great. VCRs are a hot commodity. People still have a bunch of VCR tapes and they're still looking for VCRs because they're so hard to find. There is always a group of people looking for old technology. Obviously I can't loan tremendous amounts of money on it, but I will always be able to sell it.
Most think that people leave their stuff with us. But actually, 80%-90% of all merchandise that is loaned upon gets reclaimed.
The loan is 3% a month. Annualized, that's 36% a year. But we don't look at it like that. It's just 3% a month for the customer. And it's non-recourse for the customer. If you don't come back or you don't want to pick up your merchandise, it won't count against your credit score.
You'd be surprised by the people who come into the shop to get loans with me. We see everybody from people who don't have $5 to their name to athletes. And people are resourceful. In the summer, a lot of people will get a loan on their fur coats because they don't want to pay for storage. If they take out a $10 loan with me, even though their fur coat could be worth $5,000, all they're paying is $1.50 a month in storage and interest for me to keep it at the store.
– Seth Gold
How pawn shops factor into the 'disappearing middle class'...
Regular Digest readers are familiar with the "disappearing middle class" – the idea that the Fed's easy-money policies have helped the rich while squeezing lower-income wage earners.
In today's Digest Premium, Hardcore Pawn television star Seth Gold explains how pawn shops play into this big-picture thesis...
To continue reading, scroll down or click here.