Goldsmith comment: Ferris is off to India this morning to find cheap stocks for his advisory service, Extreme Value. He's visiting a friend, Indian hedge-fund manager Rahul Saraogi. According to Sjug, Rahul is the "future Warren Buffett of India."
Expect some great updates from his travels in The Digest next week. In the meantime, we'd like to tell you about Dan's latest discovery – what may be the biggest investment story of the next decade...
Here's what he wrote in his latest Extreme Value special report:
[In] January 2010, a huge development took place in the financial sector. Although it was barely reported on in the mainstream press, it is the first time in the history of the stock market this has taken place.
This development concerns one of Dan's all-time favorite investment vehicles. It's one of the most reliable long-term, wealth-building machines around. Early investors have made millions, even billions of dollars in profit... The long-term investment returns are in the hundreds of thousands of percent.
But there's always been a catch: Many individual investors have been locked out because the initial "buy in" has been too high. But just recently, the folks who run this vehicle lowered the entry fee 97%. Now, you can get in for less than $100... But the media and retail investors haven't picked up on this yet.
Once the public realizes this "off-limits" investment has suddenly opened, they'll pour in. And prices will soar. Dan expects investors who buy today will make over 30% in the next couple of months as trading volume increases. But this isn't a short-term play. You've got to be willing to own this investment for a long time. Holding this stock for decades is probably the easiest way to get rich. And today, you can buy this vehicle at its cheapest point in 20 years. It's time to back up the truck.
Over the last few years, Dan has uncovered dozens of these investments. And his "boring" investment strategy has produced huge returns... International Royalty Corporation made readers 281% in nine months. Dan recommended IMS Health to readers only six months ago at six times cash flow. Today, readers are up 65%. And 10 months ago, Dan found a particular Canadian firm that invests in natural resources. Shares are up 45%.
In the long run, we have no doubt Dan's top recommendation today will outperform all of the stocks listed above. This stock has returned nearly 20% a year for the past dozen years (that's doubling your money every four years). Dan wrote about this new development in a special report he recently published for Extreme Value subscribers. You can read about it here.
In last week's Digest, Porter told you he was going to find obsolete businesses – what he calls "buggy-whip makers" – to sell short and use as a hedge against a downturn in stocks. As his subscribers know, he recommended two. Already, one is down 12% and the other is down 7%. But as Porter correctly predicted with Fannie, Freddie, and GM, both of his new shorts are "zeros." There's still a long way to fall. To get all the details on how to access Porter's report, click here...
New highs (almost exclusively Extreme Value stocks): Berkshire Hathaway (BRK-A), PowerShares Dynamic Biotech Fund (PBE), McDonald's (MCD), Procter & Gamble (PG), Tejon Ranch (TRC), Sequoia Fund (SEQUX), Jinshan (JIN.TO).
In today's mailbag, a great letter from subscriber "RL" explaining why now is still a great time to buy gold. Chime in here: feedback@stansberryresearch.com.
"Porter I will give two thumbs up for your exit strategy. Well thought out, I only hope it never comes to it, but unfortunately you might be right. Over the past two years I have come to respect your and your editors opinions on a wide variety of subjects and when I hear you sound the alarm on a company because of the games they play with their 'books' and the extreme risks they take, I'm listening. I know now that my decision to become an Alliance member has been one of the best ever. Keep up the good work." – Paid-up subscriber Paul
"The pounding on the subject of gold is starting to sink in on me. I was somewhat embarrassed that I could not raise my hand at the Kiawah conference when Porter asked how many people in the room had six months of expenses in physical bullion in their own control. Last week I bought American Eagles (gold) and Morgan dollars (silver). The reason Porter asked the question was someone in the room thought gold was priced at bubble levels. Porter's prescient question was to prove even that a sophisticated audience of investors had not caught the gold bug yet.
"I wanted to report back to you on my anecdotal experiences out in the field. Three tests. First, I went to a Citibank and a TD Bank in my neighborhood in Manhattan. I asked the tellers if they could sell me gold coins. Citi told me that they usually have them but are out right now. I figured this proved that people were catching on to the idea of physical ownership.
"Next I asked at TD Bank. 'Oh, yes, we do have gold coins' replied the young woman with a headscarf behind the counter. She promptly pulled out a bunch of Sacagawea dollars. 'No, that's not what I mean, those are just gold colored coins, I want coins made of actual gold.' I explained. She called over a supervisor. He told me he did not know what I was talking about, these in front of me were gold coins.
"So I asked if they had silver dollars. 'Oh, yes', said the supervisor and out came the silver colored copper dollars. As I told them that the U.S. Mint actually makes real gold and silver coins the whole staff looked at me like I was some sort of character out of a Dickens novel come to haunt them. At that point I realized that Citi did not know what I wanted either, they were thinking the same thing as TD Bank.
"'Oh well', I thought to myself, these are just low paid bank clerks and managers, not sophisticated investment people. I will try out the gold theory on an audience of very advanced people, the investment committee of my children's private school. Several of the members have 8 and 9 figure net worths. We had a conference call 10 days ago. I suggested that we sell some of our equity index/corportate bond funds and scale in to 5% holding in GLD. I got quite a grilling let me tell you.
"The hedge fund operator on the call seemed to buy the macro-economic argument I was making but said we should maybe hold oil instead. Most of the others recoiled as if I had just landed here from another planet. But my favorite was from the man whose career has been spent at a top 3 bank as a derivative salesman. He asserted that we should not put the school's endowment into 'an exotic investment'.
"My last test was yesterday. I called my broker at JP Morgan and told him to sell the GE stock out of both my accounts. 'Oh, no', he protested, 'that's our top pick!' He proceeded to tell me how well the industrial businesses were going to do with all the government contracts and subsidies. So then I explained to him that GE's balance sheet looks almost as bad as Obama's balance sheet and that I want to buy GLD with the proceeds. He then went on a soliloquy about what a poor investment gold makes and how it is over-priced.
"Porter, I have good friends in Buenos Aires whose parents (doctors, professionals) were wiped out by the government caused inflation. I did not think our own President and Congressional leaders would ever willfully wreck our currency as if we were a South American country, but I was wrong. Thank you for sounding the alarm." – Paid-up subscriber RL
Regards,
Sean Goldsmith
Baltimore, Maryland
February 25, 2010