How Porter Met Steve

My friend Steve... Double the market's return?... Why computers make better investors... Have you bought discounted corporate bonds yet?... Horse, meet water...

I bet you knew a guy like this growing up...

The guy who was a little bit taller than everyone else. A little bit smarter. A little bit better looking.

Maybe he drove a really cool car, like a convertible '66 Mustang or a Porsche 911. He was definitely the guy who could do just about anything athletic – soccer, tennis, rowing, surfing, etc.

And he was the epitome of cool... Even though the most beautiful girls in school all loved him, it seemed like he didn't care. He'd cancel any date to go on a surf trip... or just to hang out and play guitar.

As you know, in the Friday Digest, I (Porter) do my best to explain what I'd most want to know if our roles were reversed...

Usually, that involves trying to show you things about finance and investing that no one else has an incentive to share with you, like why you should learn how to buy bonds before you start buying stocks. Like why selling puts can be a dramatically better way to buy stocks. And why understanding risk management and position sizing are the two most important things to do if you want to actually improve your investment performance.

But that's not what I'm going to do today. Instead, I'm just going to introduce you to my friend Steve.

You see, he was "that guy" when I was growing up in Winter Park, Florida. Even though he went to a rival high school, we all knew him. There wasn't a better surfer, guitar player, or athlete in my hometown. Nobody was smarter or more well-liked, either.

Why does any of that stuff matter now? Because my friend went on to become the best investor in the world. I'm not exaggerating: There isn't a better investor anywhere in the world than Steve Sjuggerud. If you haven't figured that out for yourself yet, I want to show you exactly how I know it's true.

And I want you to see how easy it is to follow his strategies. I promise, it's far easier to invest Steve's way than anything else you've ever tried. And ironically, it works a lot better, too – something we can prove.

But before I get to the hard data – including Steve's unbelievable 10-year track record – let me share the story about how I met him.

If you're going to trust someone with your investments, you should know where he comes from and what he's really all about.

This is that story.

When I was younger, I idolized my older brother...

Mills was three years older than me. He was movie-star handsome and the coolest guy I had ever met (still is). Mills has what I call an "inner scorecard." He judges the world and himself by a standard that he'll never discuss.

In fact, he says very little, ever. In college, we would go on three-day hiking trips through the Pisgah National Forest in North Carolina, on the Art Loeb Trail, up Cold Mountain and through Shining Rock National Wilderness. We'd spend three days of difficult hiking, climbing, and camping and he'd say maybe 100 words to me the entire weekend. Didn't bother me at all. I could always tell what he was thinking. I knew what was unspoken.

Mills' quiet charisma always drew others toward him, especially other leaders. One year, when Mills was about 15, he met Steve at summer camp. The way Sjug tells the story, when he first walked into their cabin, Mills was on the floor, asleep, with his head and shoulders in a closet.

Steve thought, "Whoa, that's different. This guy is so laid back, he just falls asleep putting stuff in the closet." That was Mills. They became friends. Of course, Mills never said a word about it. But Steve started showing up every weekend at our family's beach house. And that's how we met.

Left to right: Porter, Mills, and Steve, about 30 years ago.

As the little brother, I was used to my brother and his friends ignoring me...

But Steve was completely the opposite. He's a natural teacher. He loves to figure things out and show others how to do it. He taught me to surf. He taught me to skateboard. He taught me how to play the guitar. (Well, he tried really hard.) And he taught me all kinds of things about getting along with other people and how to talk to girls.

I didn't make it easy for him.

My brother is like Steve McQueen reincarnated. Cool and incredibly competent at everything, especially cars. But I didn't get any of those genes. I was excruciatingly awkward and clumsy.

Once, on a surf trip to "Spanish House" (a beach break just north of Sebastian Inlet), we were camping out in my brother's '69 VW Westfalia. I was trying to make a clothesline for our wetsuits out of bungee cords. I had stretched them from the back of the bus to a nearby tree. I was trying to fasten the hook at the end of the last cord to the tree.

Steve's brand-new surfboard was resting against the bus, right next to where I had latched those bungee cords. Can you guess what happened next? As soon as I let go of the cord, it pulled through the branch and shot back toward the bus, putting a silver-dollar-sized hole right through Steve's new board. Steve just smiled and said, "Well, good thing I have a repair kit. Come here, Porter. Let me teach you how to fix a surfboard."

Our friendship grew, even after Sjug went to college. I have no idea why, but when Steve would come home, he would always swing by our house. He'd play the piano for my Mom and take me surfing or skateboarding.

Even though Steve was only two years older than me, he graduated from high school three years before me...

He finished college before I got there. He was always way, way ahead of me in life. One summer, while I was still in college and working as a lifeguard at Walt Disney World, we all lived together at my brother's first house in College Park, Orlando.

My brother was the senior mechanical engineer at a manufacturing company. In the evenings, he was rebuilding an old 1970s BMW 2002. Sjug was managing a $500 million global mutual fund in Winter Park. In the evenings, he would go windsurfing on Lake Fairview. He was dating the most beautiful woman who had ever attended the University of Florida. She looked like a supermodel. They got married a few years later.

And then there was me... the lifeguard. In the evenings, I was driving the champagne float boat and fireworks cruise out of the Contemporary Marina on Bay Lake. (Still clumsy, the day I moved into my brother's house, I pulled the cord on the ceiling fan in my room to turn it on. It immediately fell on to the rock-hard terrazzo floor and smashed into a million pieces. Next time you see Sjug, ask him about the story... He loves to tell it.)

I finally finished college the following year...

I had studied economics and history, and I had always been an avid reader. But saying I didn't have a lot of job offers would be a pretty big understatement. The "management training" program at JC Penney didn't seem like a good fit. My plan was to drive a pickup truck through Mexico and down to Costa Rica to tend bar and surf every day. I was a few days from leaving on that trip when Sjug called...

Hey Porter, listen, I know you have some plans to go down to Costa Rica, but why don't you wait a couple of weeks and come down here first. I'm not managing money anymore. I've started working at a research firm. I'm going on a trip to China and I need someone to sit at my desk and make sure that the phone gets answered and the faxes get returned. Who knows, you might like this kind of work...

My life was about to change forever.

That call came in July 1996, and Sjug was right...

I loved this kind of work. He taught me the real way markets work (and often don't work). He showed me the drama of the markets and how they're a giant game – a game you get to play against the smartest and most ambitious people in the world. Just as important, he let me sleep on a couch in his living room for about six months until I could get on my feet.

And although I didn't have Sjug's amazing natural talent (and still don't), I learned I could outwork everyone else in finance. I had always been a bookworm, so this stuff was easy for me. I started attending every conference I could. I worked every day from seven in the morning until seven at night... Then I went home and read for another four or five hours. Plus, every morning in the office, Sjug would spend an hour or two with me – day after day – teaching me the art of investing.

Can you imagine someone giving you such a gift? It happened to me.

Steve is still married to that beautiful girl he met in college...

They live on the beach in Florida, in the town where she grew up. They have two children who are just about to head off to college. I live on a farm in Maryland, with my wife and our two small sons (10 and 6). Our lives are very busy and, unfortunately, I don't get to work (or surf) with Sjug as much as I'd like to anymore.

But nothing about our friendship has changed. Tomorrow, I'm flying down to Nicaragua to go surfing with him for the first time since 2007. I can't wait.

I took the time to tell you this story because I've never met anyone as generous with his incredible gifts than Steve...

Most people that smart and talented are quickly bored with "mortals." But not my friend Steve. For more than 20 years, I've watched him take his time with others. He never argues, but if you want to learn from him, he's happy to teach. I've seen him do it again and again for decades. There are probably several hundred people in the world who owe their most important skills and knowledge to Sjug.

You can get investment advice from a lot of different folks...

It seems like every day, a new "guru" is out there pitching a new system that's way better than the rest. These folks promise that you'll make 10 or 100 times your money. I hope that works out for you. But all of that kind of stuff tends to work out a lot better for the guy selling it to you.

That's not the kind of business we've ever been interested in. Instead, Sjug and I figured out something different. We discovered that if we simply did the hard work that all investors should do before they invest their capital, we'd find our way to plenty of subscribers.

We found that if we worked hard to serve them honestly and well, two good things would happen. First, we would get rewarded with a stable income that grew over time (thanks to renewal income and lifetime subscribers, not hype). And second, our hard work would translate into excellent results for our subscribers. They would win, too.

It worked. Within about five years of launching Stansberry Research, we had built the biggest and most successful independent advisory business in the world. It continues to grow... and we're looking forward to a public offering of our company's stock in the near future.

Don't worry. It hasn't gone to our heads. We haven't let up. We both still work long hours. And we both still feel a massive sense of obligation to our subscribers, a group that includes our parents, closest friends, business partners, and most of our employees.

The next time you come across someone promising to make you 80 times your money on the "next bitcoin" or whatever, just ask yourself, "Would I rather have that advice, or the advice that Steve is giving to his mother?"

The answer should be obvious. Let me show you how I know.

Each year, we compile our track records and publish a report card...

We'll be publishing our report card next Friday. But we have a lot more data that we don't publish regularly.

You see, in addition to our report cards, which typically review the results from the most recent market cycle (in this case, the current big bull market move), we also maintain long-term track records since the inception of each newsletter.

My newsletter's results go back to 1999. Sjug's go back to 2001. Doc Eifrig's go back to 2008. That means for the first time ever, we have 10-year total return figures for all three of our largest-circulation newsletters – Stansberry's Investment Advisory, True Wealth, and Retirement Millionaire.

Anyone want to wager on whose long-term results are the best? Who has done the best for you?

There are lots of ways to compile track records...

Trust me when I tell you that nobody knows how to exaggerate results like investment newsletter writers.

Therefore, it's at least as important for you to know how the results are measured as it is to know the nominal numbers. We take the simplest and most conservative approach: We measure the total return of each recommendation and then we annualize the figure to compensate investors for holding periods that are longer (or shorter) than one year.

We don't attempt to calculate more realistic "compound" returns that most actual subscribers would enjoy. Instead, we assume that each new investment requires additional capital. We believe this is the fairest and most accurate way to measure the real-world results of our work.

(By the way, let me be clear about that: We aren't claiming that your results will be the same as we what represent. You have to deal with market conditions and possibly taxes. We can't track your results, only ours.)

Over the past 10 years, the S&P 500 has gone up 8.2% a year on average...

As you probably know, few investment firms are able to beat the S&P 500's returns over long periods (like 10 years).

In his True Wealth newsletter, Steve has produced average gains of 15.9% per year over the last decade.

That's almost double the S&P 500's results in the same period. Was it a fluke? Nope. Sjug's results are remarkably consistent. His five-year annualized return is 16.5%. His three-year return is 20.2%. (It has been a bull market.) And his annualized return since inception in 2001 is 16.2%.

Virtually no one in the world who has been investing in large-cap, long-only, liquid equity can match these results over this period.

One person does put Sjug to shame when it comes to long-term, real results...

Well, it's not really a person. It's a computer.

You see, as good as Steve is at investing, his computers are able to scan more markets... and they're totally unemotional.

Almost 10 years ago, we asked Steve to work with a top-notch computer programmer to more or less download his brain into a computer. We turned Steve's strategies into algorithms and tested them using decades of data – a process that cost us millions of dollars.

We tested his strategies, found the best ones, and put the computers to work. The result was a publication we call True Wealth Systems. And its track record is even better than Steve's.

Since its inception, the annualized gain from True Wealth Systems is 26%. That's nearly double the S&P 500's return in the period. Again, this isn't a fluke. The five-year annualized return is 22.2%. The three-year annual return is 14.2%.

What about our other main letters?

How did Doc and I do?

Well, comparing these investment letters is a little unfair. These are not apples-to-apples comparisons. As you know, my newsletter, Stansberry's Investment Advisory, follows a much different kind of strategy. We "hedge" our long positions with short-sell recommendations, which are a big drag on performance during bull markets.

However, even with these handicaps, my newsletter, over the past 10 years, has produced average returns of 15.1% annually, far outpacing the S&P 500 and coming very close to Sjug's stellar returns. (Interestingly, if you ignore our hedging and don't include our short sell-recommendations, the 10-year average annual return of our recommendations was 16.5%. The student has done well.)

Doc's newsletter also shouldn't be compared to Sjug's without a caveat...

Doc's newsletter contains a sizeable fixed-income allocation. That's appropriate for retired investors, but it will reduce total returns during a bull market. Even so, over the past 10 years (which is also since inception), Doc's recommendations have generated 14.4% average annual gains.

These are world-class investment results.

I am super proud of the quality of our results. For subscribers who have wisely invested with us for the long term, you have unquestionably been well served. For those of you who haven't decided to join us in a lifetime subscription (which will radically lower your subscription costs), well... there's only so much I can do. Horse, meet water. We have consistently generated market-beating results for subscribers, again and again and again.

Two more things...

First, I often tell folks that they shouldn't buy stocks at all until they've learned how to buy corporate bonds.

For a lot of people, that advice is hard to take seriously. Bonds are subject to interest-rate risk. They're expensive. Par value for most corporate bonds is $1,000. And these bonds can be confusing, with their long CUSIP numbers, their huge prospectuses, and the limited liquidity of the bond markets.

I admit that buying bonds is a lot different than buying stocks. But I still think you should learn to do it first. If you do, you might find that buying corporate bonds (when they're trading at a discount from par) is both far safer and far more lucrative than buying stocks.

To prove it, we've been recommending bonds since late 2015 in our exclusive Stansberry's Credit Opportunities letter. So far, we've produced average annual gains of 21.1%, with more than 75% of our recommendations in the black. That's a far higher winning percentage than my newsletter... and better average returns, too.

We are obviously a long way from a 10-year track record of success, but with 22 separate bonds recommended so far, there's plenty of evidence that my team can successfully cover distressed corporate debt. And as I promised, you can make more money with bonds than with stocks... while taking far less risk.

Now for the last item... As I explained earlier, the 2017 report card will be coming out next Friday. It contains a lot of data, and I'd like to make sure you understand what we've measured, how we've measured it, and what it means. I also want to highlight some of our results for you because I know that some strategies – like the ones we use in Stansberry's Credit Opportunities – are difficult for many of you to understand.

I hope you'll allow me to walk you through everything "in person." I'm going to host a free event on Thursday, February 8 at 8 p.m. Eastern time. Tune in and join me and Editorial Director Brett Aitken. We'll give you early access to all of the numbers and we'll answer all of your questions.

For everyone who takes the time to join us, we'll also offer you a special discount on a new lifetime subscription that will allow you to get some of our very best work at an obscenely low price. But this offer is only available to attendees the night of the webinar. You don't need to sign up or reserve a seat. Just go to StansberryReportCard.com on Thursday, February 8 at 8 p.m. Eastern time. I hope you'll join us.

New 52-week highs (as of 2/1/18): American Financial (AFG), Boeing (BA), Berkshire Hathaway (BRK-B), CME Group (CME), PowerShares Chinese Yuan Dim Sum Bond Fund (DSUM), Facebook (FB), iShares U.S. Aerospace and Defense Fund (ITA), JPMorgan Chase (JPM), KraneShares E China Commercial Paper Fund (KCNY), Lockheed Martin (LMT), Mobile TeleSystems (MBT), Match Group (MTCH), New York Times (NYT), Travelers (TRV), W.R. Berkley (WRB), and short position in Sprint (S).

If Steve has changed your life as an investor, I hope you'll take a minute to write us a short note. We are both highly motivated by the success of our subscribers. I know his outstanding investing has led to financial security for thousands and thousands of people. Please, take minute and tell us about what my friend Steve has done for you. Send your notes to feedback@stansberryresearch.com.

Regards,

Porter Stansberry
Baltimore, Maryland
February 2, 2018

P.S. If you're interested in getting to know Steve better, I highly recommend listening to episode 36 of the Stansberry Investor Hour podcast. Steve joined us in-studio and we covered our early days and the intricate details of our investment strategies. We've gotten great feedback on that episode. (Access it on iTunes here or on Google Play here.) Also, if you want to judge for yourself how talented my friend is, watch this video.