Porter Grades the Trading Services

Porter grades the trading services... 'I've never seen anything like it'... Grading the 'Report Card' in more detail...

Editor's note: Yesterday, Porter unveiled the first half of our annual "Report Card." In case you missed it, be sure to read the first installment, where he reviewed the monthly newsletters. You can read it here.

Today, Porter discusses our more expensive trading services and our elite, small-cap research service, Stansberry Venture...

Retirement Trader: A+/B

Longtime Report Card readers aren't surprised by Retirement Trader receiving yet another "A+" grade.

Doc's trading service has received an "A+" every year since we launched the product in 2010.

Before writing anything else, let me be clear... If you aren't reading Retirement Trader, you're missing out on the best trading product we've ever published – and likely the best trading product ever to exist in our industry.

Over the bull market period, Doc achieved a 90%-plus win rate and a 46.1% average annualized return on margin (versus only 4.4% for the weighted S&P 500 return). He took advantage of market dips to collect even larger premiums as volatility increased. We know most people completely shut down when we mention options, but let Doc's track record serve as proof: You can achieve large, consistent returns using this strategy.

And Doc is also one of the best educators on our team. He spends a huge amount of time making sure his readers understand options and the best way to implement his strategy. He has created videos, published reports, and even written entire books on the topic.

Not even the bear market has reversed Doc's trading results. Why? Because part of Doc's strategy is to "roll over" certain trades if they don't produce gains immediately. By continuing to generate income by selling covered calls, you can reduce losses or even turn a losing trade into a winner. So over time, we should see the win percentage creep back up.

Also, Doc is excited about current market conditions. We're seeing huge pullbacks on high-quality companies. And more market volatility means higher premiums for selling options.

Stansberry Venture: A++/A+

In my entire career, I've never seen anything like it.

The string of winning, early-stage technology recommendations that Dave Lashmet has made in our most exclusive research product, Stansberry Venture, has been incredible.

Since relaunching his advisory in November 2014, Dave went on to pick three 100%-plus winners in a row. And out of six recommendations made during the bull market period (through May 21, 2015), only one Venture recommendation went down. Dave achieved an 83.3% win rate, despite investing in high-risk, early-stage technology companies. That's simply unheard of. I can't recall ever seeing an investor in these kinds of ultra-risky ventures produce anything like this "hit rate."

This track record wasn't luck. It's a testimony to Dave's incredible work ethic and talent. He's constantly traveling to industry conferences, meeting with corporate management teams, and hiring consultants to help him vet new technologies and drug pipelines. He has also built a deep personal network through his almost 20 years in technology.

When you get so many big ideas right... and make virtually no mistakes... you can produce mind-blowing results. Venture's bull market average return was an amazing 77.8%. These market-crushing results led to 252.4% gains, annualized, during the bull market.

It's fair to say that Dave's bull market results were among the best in the world, by any investor, in any market.

If you weren't reading Venture last year, you missed out on one of the most impressive performances in Stansberry Research history. And if you were reading, I'm sure your accountant is going to be impressed with your 2015 tax return.

Even when the market turned lower in May and most tech and biotech stocks started to decline, Dave continued to produce great results. His bear market average return was greater than 24%, and his bear market win rate is more than 60%.

You could argue that Dave's bull market gains resulted from a big mania in technology. You would be wrong – but you could try to make the argument. But you can't argue with Dave's bear-market results. Put the entire trading history together – both bull and bear – and this track record is simply the best I've ever seen in my career. If you've profited from Venture over the past two years, I hope you'll send Dave a note saying "thanks." He deserves it.

And now, hopefully, you'll understand when we explain that, even though we charge $5,000 per year for a subscription to Venture, it's the best value we offer. Nobody else can do what Dave does in the technology side of the market – nobody.

Stansberry Alpha: A+/A

Stansberry Alpha takes advantage of a simple (but profound) anomaly in the options market. Investors are routinely willing to pay more – sometimes a lot more – for puts than they are willing to pay for calls on the same security. We exploit this anomaly by using leverage and volatility.

On the surface, some people think our trading seems risky. We prefer to enter the market when other investors are panicking, and part of our strategy includes selling puts. These are sophisticated trades that most investors genuinely don't even know exist. But this approach is actually safer than buying stocks. That's not a typo... Our strategy involves much less risk than merely buying stocks.

The secret to understanding how this is possible is realizing that we're mainly selling volatility. Volatility spikes – which increases the cash we receive from selling the put options – and then it recedes. We capitalize on these wild swings of emotion by selling puts on safe stocks and buying calls on the same companies.

Market volatility was nonexistent for the bull market period. So our 74.2% win rate and 43.2% average annualized return on margin are both excellent – earning Stansberry Alpha an "A+" grade. We made triple-digit gains on margin on super-safe companies like software giant Microsoft, energy infrastructure firm Chicago Bridge & Iron, and tobacco company Lorillard.

Where this product can really shine, however, is during the panics that accompany bear markets. Remember, what this product does is exploit the put/call anomaly. Since the bear market began, we've posted winners on 71.4% of our recommendations, including our position on cable TV provider Sinclair Broadcast Group (up 40.7% on margin), baby-formula maker Mead Johnson Nutrition (up 36.3% on margin), and high-end grocery chain Whole Foods Market (up 36.7% on margin).

DailyWealth Trader: B-/C

DailyWealth Trader is different from the rest of our trading services...

First, as the name implies, we publish DailyWealth Trader every day the market is open. So each day, subscribers get updates on market action, education, and often actionable trades.

DailyWealth Trader is a favorite product among the more active traders on our file. And if you're active in the markets, it's a must-read. You learn technical analysis, get updates on big trends, and receive trading recommendations on the latest opportunities. And most of our subscribers cherish the educational value of this product even more than the day-to-day recommendations.

But DailyWealth Trader gets a "B-" this year. While it still outperformed the market with a 68% win rate, it lagged some of our other trading services.

DailyWealth Trader did a good job racking up consistent small gains with options trades on big blue chips, like burger chain McDonalds, drug maker Pfizer, consumer-electronics giant Apple, and global soft-drink brand Coca-Cola. It also did well with the call to go long the ProShares Ultra 20+ Year Treasury Fund (UBT) – a 47% winner in less than a year.

But its track record was weighed down by too many losses. In the last months of the bull market, DailyWealth Trader took hits on trades of retailer Wal-Mart, electric-car maker Tesla, and the ProShares Ultra MSCI Brazil Fund (which holds a basket of Brazilian stocks).

DailyWealth Trader lagged the overall market during the bear market period. So while subscribers still received great market commentary and education, the win rate and average return weren't acceptable. We're giving DailyWealth Trader a "C" for the bear market so far.

Stansberry Short Report: F/A+

The long bull market was tough for Jeff Clark and the Stansberry Short Report. But there is a silver lining...

In short, during the bull market period (2012-2015), Jeff took lots of losses trading precious metals. The grinding bear market in gold gave lots of false buy signals over the years. And like every other analyst on our team who tried to profit from a rebound, Jeff got burned.

But what isn't included in this official track record are the numerous profitable trades Jeff makes with his intraday trading. These ultra-short-term "scalp" trades are one of the most popular features of the Stansberry Short Report, which Jeff delivers to subscribers via the Direct Line, his real-time blog.

For example, on May 7, 2015, Jeff suggested Direct Line readers buy shares of the Market Vectors Gold Miners Fund (GDX). Just two trading days later, he closed that trade for a 6.2% gain. He traded GDX again in July for a 5.5% gain in just a few hours... and again in August for a 6.5% gain in one week.

But we haven't included his Direct Line trades – which readers are profiting from – in the official Stansberry Short Report track record. For one, with him posting multiple times a day, he recommends a lot of trades. Also, sometimes he'll be in and out in a single day. And it's difficult to accurately track how our subscribers would have performed following along with that advice.

Here's the thing... Jeff's track record in Direct Line has been incredible. If we were to assign a grade just on that performance, it would certainly be an "A."

His win rate was roughly 90%. His average gain for Direct Line recommendations in 2015 was 2.86%. This gain might seem negligible. But when you put on super-short-term trades like this multiple times a month, you start to see outstanding results. Based on time-in-trade, Jeff's annualized return for the Direct Line in 2015 was a ridiculous 286%.

And as the market changed from bull to bear, Jeff Clark's trading in the Stansberry Short Report got red-hot again. Jeff shot the lights out during the bear market period. He racked up big gains in resources as the market bounced. He had a great win rate (77%) and his average return (7.9%) crushed the S&P 500. With Jeff's short-term trading, you would generate annualized returns well over 100% with that kind of average return and high win rate.

As we often say, when you hit Jeff on a hot streak, you'll make a fortune. And it looks like he's hitting his groove in this current market.

He gets an "A+" for the bear market period.

True Wealth Systems: A/D

Dr. Steve Sjuggerud spent around $1 million creating True Wealth Systems. Using advanced computers with massive data-processing capabilities, he has developed and tested hundreds of models of the world's markets – trading everything from stocks and bonds to commodities to currencies and derivatives. These models help Steve know which market movements can lead to profitable trades.

Much like in True Wealth, Steve's True Wealth Systems strategy is to cut losses early and let the winning trades run. This led to a 45.5% win rate (lower than we would like to see for our products), but a huge 34.9% average annualized return (versus 13.2% weighted for the S&P).

While a win rate lower than 50% wouldn't be acceptable for an investment newsletter (not good enough for an "A"), in a trading system, having a sub-50% win rate can be completely normal. Most systematic trading systems work in the same way. They will signal trades multiple times before a major trend begins. Often, that means Steve is a bit "early"... but by sticking with the system, big gains can accrue.

The best example during the bull market was how True Wealth Systems got readers into an uptrend in health care, earning just over 300% from one trade. True Wealth Systems subscribers also made triple-digit gains buying warrants from financial firms, and nearly 200% on biotech stocks.

The big weakness of these kinds of trend-following systems, however, is that they are slow to detect a major change in trend. Thus, as the market switched from bull to bear, the effectiveness of Steve's models waned. Since the bear market began in May, True Wealth Systems' win rate has plummeted to less than 15%, and its average return is negative.

But I'm confident you'll see True Wealth Systems perform well as the bear market intensifies. For example, I know Steve's computers now have investors in short oil trades that are likely to be highly profitable.

As always, thank you for your loyalty to Stansberry Research. We don't take the trust you place in us for granted. Every day we come to work and try our best to position your portfolio to both protect and grow your wealth.

We look forward to working for you in 2016.

As longtime subscribers know, I fear the raging bull market in U.S. stocks has come to an end. I'm concerned about the financial fallout that's still to come from super-low commodity prices, a strong U.S. dollar, and weak emerging-market economies. We could see a big, ugly bear market in stocks this year.

New 52-week highs (as of 2/8/16): NovaGold Resources (NG), OceanaGold (OGC.TO), short position in Santander Consumer USA (SC), and AT&T (T).

In the mailbag, incredible praise from one of our best subscribers. Did you agree with our grades this year? Let us know at feedback@stansberryresearch.com.

"Hello Porter and the entire Stansberry team, I am not one who typically writes 'thank you' letters to publishers. However, I am so pleased with the work of Stansberry Research that I feel compelled and inspired by today's Stansberry Digest Report Card issue. I have studied the Stansberry's Investment Advisory for 5+ years and about two years ago became a Stansberry Flex Alliance member. I want to give the entire Stansberry Research Organization an 'A+' for the outstanding work that you do every day. The fact that you take the time to transparently and fairly assess all of the Stansberry Research services in the annual report card is truly extraordinary.

"Through careful daily study of your team's work, I have begun to learn how to confidently make investment decisions. While my track record is still only 'improving,' I have begun to develop an investment process that is both responsive to market conditions as well as providing me great satisfaction through learning and implementing the various Stansberry Research strategies.

"While you chide yourself for the two losing short positions on Tesla, TSLA represents a fantastic example of the concepts that you teach: 'There is no teaching, only learning.' I was fully convinced with your first, deep analysis of Tesla back in spring of 2015 (April, 2015?) in the Stansberry's Investment Advisory. I had also been studying Doc's Retirement Trader and learning how to make appropriate trades with calls and puts. I am also studying and learning the Stansberry Alpha strategies.

"Rather than shorting Tesla, I purchased Tesla January 2017 puts at a $190 strike price. This set an absolute maximum downside at the value of the puts that I had purchased. Further, by long-dating the puts to January, 2017, the Tesla 'short' had a lot of time to play out. As of today (February 9 mid-day), these puts have a book gain of $2.21 (Current market of $40.71 on a put cost of $38.50). While the current book gain is small (5.7%), I am confident that this trade will be very profitable.

"I also have the opportunity to 'roll' this trade should it need an even longer time to play out (thanks, Doc). Tesla has an 'infinite' P/E ratio as you have pointed out, it produces no actual earnings. And Tesla has a VQ% of 42.3%, so it is very volatile. As such I have set my position size on this 'speculative' position so that a total loss would represent 1.7% of my investing portfolio. While Tesla got as high as $282.26 (on July 20, 2015) that was an astronomically absurd enterprise valuation (EV). Using this put strategy (that Stansberry Research has taught me), I have not been stopped out on this 'short' opportunity on Tesla.

"Note that one year ago I did not know what an option was nor how they worked. Studying Doc's Retirement Trader and Porter's Stansberry Alpha publications has given me a whole new toolbox to work with. Again, I cannot thank you enough for all the cogent 'learning' opportunities that you provide. I look forward to continuing to implement your outstanding team's work during 'the greatest legal transfer of wealth in history.' For the first time in my life (and I just retired), I am viewing the coming bear market as a tremendous opportunity! Thank you." – Paid-up Flex Alliance member Tom S.

Regards,

Porter Stansberry

Baltimore, Maryland

February 9, 2016