Back from Tuscany...

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(Top 10 all-time, highest-returning closed positions across all S&A portfolios)

Why this expert agrees with Porter and Steve on real estate prices...

Porter and Steve Sjuggerud are both bullish on real estate prices... Porter believes South Beach could become some of the most expensive real estate in the world. And Steve thinks low interest rates and the Federal Reserve's monetary policies will push prices to new highs.

In today's Digest Premium, Pensam Capital cofounder Michael Stein addresses both points of view.

To subscribe to Digest Premium and access today's analysis risk-free, click here.

Back from Tuscany... A convoy of Ferraris... A great wine discovery... Microsoft nears a six-year high... Dan's five financial clues...

 Porter and I (Sean Goldsmith) return to the Digest this week...

We were in Tuscany last week with the private club we founded, The Atlas 400. Before we get to stories from the trip... I hope you enjoyed the Digests our Editor in Chief Brian Hunt and his DailyWealth Trader co-editor Amber Lee Mason wrote in our absence.

 In case you missed it, they shared a series of videos produced for DailyWealth Trader. These "Three-Minute Trading Expert" videos describe important trading info in a short and easy-to-understand format.

The videos cover topics like how to use trailing stops... follow big trends... and choose the right position size for your trade. These are concepts that the best traders in the world use to beat the markets.

While the ideas are simple, having the discipline and willpower to follow these rules is more difficult.

Still, if you internalize and apply these lessons, I guarantee your trading will improve. You can view those videos here, here, here, and here...

 I'll provide a more complete write-up of our trip to Italy later this week (and Porter may address it on Friday). But for now, I'll share a few details...

The highlight came on our last day, when we stepped outside our hotel to find nine Ferraris sitting under the trellised parking area with velvet ropes in front of them. We had them in every color and make... black 458 Italias, silver 430s, red Californias.

Take a look...

 We took the cars for a two-hour joyride through the Tuscan countryside, down tree-lined streets with views of villas and vineyards, through windy hills, and through small towns. Our final destination was Siena – a gorgeous, small city in Tuscany.

We drove in a convoy the entire way – no easy task with nine cars on the open road. Our hosts were a great help. One drove his souped-up Smart Car like a maniac, weaving between our cars with his passenger taking pictures. He also yelled at us if we got too aggressive, which is easy behind the wheel of these machines.

A Mercedes SUV took the lead of our convoy and a BMW brought up the rear. The Mercedes would urge the tractors, scooters, and slower vehicles in front of us to pull over. The Smart Car would often pull into a roundabout to block traffic for us. Nobody seemed to mind...

 It may sound like we were bullies on the road... To the contrary, my favorite memory of the joyride is the faces of the folks we passed in the small towns. Everyone – from the smallest child to the oldest man – was grinning. Girls were dancing in the street at the sight of our Ferraris... and giving us catcalls.

The young boys were literally jumping with excitement. Everyone stopped to take pictures (even the people who pulled over for us to pass).

These cars are a source of great national pride for Italians. It's amazing the effect they had on the bystanders.

 When we stopped in Siena, a security guard had to watch the cars to make sure the roughly 1,000 tourists taking pictures didn't harm anything.

Again, I'll share more details later. But what a day!

 Porter and I also discovered a great and affordable bottle of wine in Tuscany. We drank the wine during lunch at the Antinori estate – Tuscany's largest and among its most renowned winemakers. It's called Marchese Antinori Chianti Classico Riserva 2010... It sells for $30 a bottle. And it's delicious. We thought it stood up to wines that cost more than twice the price.

 Shares of World Dominator Microsoft surged nearly 6% on Friday – a huge move for one of the largest companies in the world. Shares are near a six-year high.

Microsoft earned $0.62 a share on revenue of $18.5 billion. The market was expecting $0.54 a share on revenue of $17.8 billion.

The company's "devices and consumer" division – largely PCs and Windows software – saw a 4% increase in revenue, even though Windows revenue from PC shipments fell 7% year-over-year.

The company's commercial software revenue rose 10% to $11.2 billion. Revenue from "cloud computing" – technology that allows people and organizations to access their data and software without having to store it on their own computers – more than doubled.

 Lots of investors are skeptical about Microsoft's future. They're worried a slowdown in PC sales (as consumers prefer smartphones and tablets) would hurt the company. Yes, Microsoft has lost revenue in this sector. But as you can see from the numbers above, the majority of Microsoft's revenue comes from selling software to businesses. And that sector saw double-digit revenue growth.

Extreme Value editor Dan Ferris has long dismissed the market's fears surrounding Microsoft... He has held shares in his Extreme Value portfolio since 2006.

"The Wall Street Journal and investment bank Goldman Sachs seem to think PC users – individuals and small businesses – are Microsoft's primary customers," Dan wrote in the August 2013 issue of Extreme Value. "And they're betting Microsoft will fail because of the growing popularity of mobile-computing devices among individual consumers. That's not true."

Dan went on to note that big-business "enterprise" customers account for more of Microsoft's sales than the rest of its customers combined. "Everybody loves to criticize Microsoft for failing to serve individual consumers as well as Apple and other companies," Dan wrote. "The correct response to this observation is, 'So what? It doesn't need to serve them as well as Apple does. The real story at Microsoft is the enterprise.'"

 Today, I asked Dan for his comments on Microsoft's earnings:

 Extreme Value readers are up 57% on Microsoft since Dan first recommended the stock... And they continue to collect healthy and growing dividends. The company raised its quarterly dividend by 22% to $0.28 a share last month and announced a $40 billion share repurchase.

 As Dan alluded to in his comments on Microsoft's earnings, he looks for "five financial clues" to lower risk and raise returns on stocks.

The five things Dan looks for are: consistent returns on equity, consistent profit margins, gushing free cash flow, financial fortress balance sheets, and shareholder rewards (dividends and buybacks).

 If a company passes the five-part test... and is the leader in its field… Dan dubs the company a World Dominator. Microsoft is one such business.

These firms (which also include companies like Wal-Mart and ExxonMobil) are the best businesses in the world. Simply buying them at the right price and holding forever is the best way to grow your wealth through the stock market.

No, it's not the sexiest way to invest. But it's one of the most tried and true ways to compound your wealth at amazing rates.

 Another one of Dan's World Dominators, Apple, announces earnings after the market close today. We'll update you in tomorrow's Digest. But Apple has been on a tear recently... Shares are up from $476 on September 30 to less than $530 today – an 11% gain. The strength is in part from Apple's strong iPhone launch and activist investor Carl Icahn agitating for a $150 billion share buyback.

 New 52-week highs (as of 10/25/13): Automatic Data Processing (ADP), Aflac (AFL), Brookfield Asset Management (BAM), Anheuser-Busch Inbev (BUD), Chesapeake Energy (CHK), Dominion Resources (D), Emerson Electric (EMR), EnerSys (ENS), Energy Transfer (ETP), iShares Germany Fund (EWG), Fluidigm (FLDM), Home Fed Bancorp (HOME), Kohlberg Kravis Roberts (KKR), Ligand Pharmaceuticals (LGND), Longleaf Partners Fund (LLPFX), 3M (MMM), National Fuel Gas (NFG), Oneok (OKE), PowerShares Buyback Achievers Fund (PKW), RPM International (RPM), and ProShares Ultra S&P 500 Fund (SSO).

 In today's mailbag, paying politicians more to do less... a brilliant proposal. How would you fix the government? Let us know here... feedback@stansberryresearch.com.

 "Can we figure out a way for our politicians to be rewarded more to do less? Perhaps we could take federal budget numbers to 1995 (1.5T), then double our congressman's salary for every year that they do nothing. I think we'd come out way ahead." – Paid-up subscriber Eric B

Regards,

Why this expert agrees with Porter and Steve on real estate prices...

Editor's note: Today, we conclude our Digest Premium series with real estate professional Michael Stein, cofounder of Pensam Capital. In our final installment, we asked Michael to comment on two real estate theories held by our own Porter Stansberry and Steve Sjuggerud…

Porter is bullish on South Beach real estate... He thinks it could become some of the most valuable real estate in the world. We covered this idea here.

Steve is bullish on real estate in general... He believes the Bernanke Asset Bubble – price inflation driven by the Federal Reserve's easy-money policies – will send real estate prices to all-time highs.

Here's how Michael responded to those ideas…

 I (Michael) think South Beach is an anomaly. South Beach today rivals markets in New York, San Francisco, and Boston. It's an international destination. It's on every international investor's radar screen.

The question with South Beach is always – is it overvalued? Is it a bubble? As long as foreign capital continues coming into Miami, South Beach will continue to see the kind of appreciation it has experienced. But if the world's markets – particularly in Europe or South America, which really fuel the economy in Miami – suffer any major dislocations, you could also see some type of devaluation in South Beach. But as far as I'm concerned, in looking at it today and within the next year, South Beach is gold.

 I would also tend to agree with Dr. Sjuggerud's views. We see a lot of capital sitting on the sidelines in our own investors' balance sheets. So as long as our government is in business, which I expect it will be, we should see inflation and some asset appreciation. That's why we're in the business we're in. We believe in hard assets and income-producing assets for the long term. There may be little blips along the way, but long term, I would agree with that theory.

Editor's note: For more information on Pensam Capital, please visit its website (www.pensamcapital.com). You can also reach Michael Stein at mstein@pensamcapital.com.

Why this expert agrees with Porter and Steve on real estate prices...

Porter and Steve Sjuggerud are both bullish on real estate prices... Porter believes South Beach could become some of the most expensive real estate in the world. And Steve thinks low interest rates and the Federal Reserve's monetary policies will push prices to new highs.

In today's Digest Premium, Pensam Capital cofounder Michael Stein addresses both points of view.

To continue reading, scroll down or click here.

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(Top 10 highest-returning open positions across all S&A portfolios)

As of 10/25/2013

Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any S&A publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.