THE S&A DIGEST

Stansberry & Associates Top 10 Open Recommendations
(Top 10 highest-returning open positions across all S&A portfolios)

As of 07/05/2013

The Baltimore sheriff is after me… Another look at Regeneron… BUD’s huge buyback… "Black" Jack Gifford’s reckoning day… The Taipan hornet’s nest (oh my…)

Many of you will be happy to learn that this is the second-to-last Digest of the year. I’ll publish the last Digest of the year, our annual report card, on December 27.

It looked like a parking ticket when it came in the mail…

There on the bottom was officer Ward’s signature. My name, filled into a form, was on top of the card. But… instead of a parking violation, the red ink on top read "Environmental Citation." Apparently I’d violated Section 305.2. What had I done?

Reading through the abbreviated notes on the citation – "Residential Single-Family" was checked, "Rear" was checked, and "Bulk – mattress, box spring and large cardboard box" were written under the details of the violation – I gathered that I was being fined for trash left in the parking pad of my townhouse in the city.

My townhouse has been empty and for sale since July. And my wife and I carefully threw our old mattress into the harbor, where it was sure to sink. (Yes… that was a joke.) I was being fined by the city because someone else was dumping garbage on my driveway. But isn’t the city supposed to be protecting my property? Isn’t that why I paid $7,500 in city taxes this year?

Now, in addition to paying property taxes for the police, I’ll have to hire a private security company to watch my townhouse. I shouldn’t be surprised. Once, when I found a crackhead in my car, I had to chase him down myself, tackle him, and beat him up. The cops arrived 20 minutes later. And 911 kept hanging up on me, saying, "We’re not allowed to talk to you if you’re pursuing the suspect."

When my best friend, Rey Rivera, disappeared last year, we had to find his car (and then his body) ourselves. Nobody rides the subway in Baltimore because it’s not safe. Nobody sends their kids to public schools – that is, if they expect their kids to learn how to read.

What’s the government really for in Baltimore?

After living here for almost 10 years, as far as I can tell, the government in Baltimore exists to extort money from rich people and give it to inner-city poor... who, not surprisingly, think government is a great deal.

Regeneron (REGN), one of the biggest all-time blow-ups in my newsletter (Porter Stansberry’s Investment Advisory), has seen its share price rebound from $5 to over $25 this year behind the success of its "trap" monoclonal antibody technology. I’ve always liked the company. It has great technology, and director (and former chairman) Roy Vagelos has consistently been a buyer of the stock.

As the former chairman/CEO of Merck, Vagelos knows as much as anyone in the world about the business of developing drugs. Regeneron seems to have stumbled onto a new class of anti-angiogenesis inhibitors… that could lead to dozens of new promising cancer drugs. See more about this here.

Note for Alliance members: If you’re interested in our best biotech ideas, Rob Fannon’s Phase 1 conference-call research service (which focuses on early-stage biotech) is available, for half price, until December 27.

Quick update on a running theme: Signs of a market top. Merger and acquisition activity for 2006 has reached $3.9 trillion. That surpasses the deal value of 2000, the dot-com boom, by 16%. Bankers keep saying the surge in M&A is "different this time" because these deals are being financed with debt, not with inflated shares. But that’s what really scares me. It’s easier to write down inflated share values than it is to declare bankruptcy…

How about a Budweiser? The March headline of my newsletter (PSIA) was, "Will You Buy Enough?" I was worried my subscribers wouldn’t recognize the magnitude of the opportunity in Anheuser-Busch stock. "If you buy BUD today, it could easily be the best safe investment you ever make in your entire life." BUD, which generates 60% returns on equity each year, was trading for around 10 times cash flow – a once-in-a-generation low price. I told subscribers to abandon their 4% position-size discipline and buy BUD equal to 25% of their entire portfolio. We’re up 20% so far… but much larger gains are ahead.

Recognizing that the stock is deeply undervalued, the board of directors has authorized an additional 100 million-share buyback program, which will reduce the total shares outstanding by 13%. Next year, BUD will spend at least $2.5 billion buying back stock. That’s the equivalent of a 6.7% dividend. Add to that figure the company’s 2.5% dividend… and you’ve got a blended, synthetic yield of over 9%. Thus… you’ll be earning 9% on capital return alone.

Poor John Gifford. As one of the most egregious stock-option grant abusers, he’s facing jail time in connection with an ongoing criminal investigation of the options he granted to… himself. He resigned this week as CEO of Maxim Integrated Products, citing "health reasons." He also relinquished his board seat, where he was formerly the chairman. No explanation for the board resignation was given. None was needed.

S&A Research portfolio highs: Raytheon (RTN).

PLEASE NOTE: Our offices will be closed from December 25 through January 1. We’re giving the staff time off, to spend with their families. Call us on January 2 and you’ll find us hard at work again.

And now for reader aspersions – the mailbag. We broke a record for the most mail in one day. Lots of opinions about Taipan. Lots of opinions about Newt Gingrich. And lots of folks who think we’re full of… it.

"I’m shocked that you have resorted to name calling against TAIPAN. I’m a lifetime member of both Taipan and Agora Financial. I thought that all of you guys were in bed with the others (i.e. Taipan & Agora). Now you seem to say that you are ‘different.’ Shame on you. If you are truly ‘different,’ then tell me what is the relationship between Taipan, Agora Financial, and you." – Paid-up subscriber William Lassiter

Porter Comment: Taipan, Agora Financial, The Oxford Club, and Stansberry & Associates all have a shareholder in common, Agora Inc., which is the world’s largest financial newsletter holding company. Each business is managed independently and competes against the others. Obviously, we don’t always get along. We object to Taipan’s use of similar trademarks and their plagiarism of our marketing copy. We think such actions confuse our readers. Far from "name-calling," we’re simply pointing out Taipan’s already-public actions. We wonder why anyone would trust a financial publisher that does these things…

"I’m very disappointed with this service [Stansberry & Associates]. This service is just as bad as Taipan. The problem with both services is that you send out a bunch of newsletters with just hype to buy more reports… The constant and irritating e-mails from Steve Sjuggerud, or whatever his name, is just ridiculous and frustrating as hell. I have to say this is one of the worst services I’ve ever purchased. I agree with all of the other people who’ve responded with hatred and negativity." – Paid-up subscriber Key Tek

"I am an Alliance member as well as Taipan Inner Circle member. You can’t compare your services to theirs… I got burnt not once by their "super" recos and now take a good, cold attitude to their newsletters… they are at the bottom of the list of my priorities." – Alliance member and Taipan Inner Circle member Aharon Fattal

"You should warn your readers about Taipan quarterly…" – Paid-up subscriber Steve Heitzig

"You must like setting yourself up as a target regardless of the season! I’m making 20+% on the 18 stocks I own in 2006. Most were from S&A. I’ll stick with a winner: The S&A Research Team." – Paid-up subscriber Larry B. Hall

"I subscribed to Alliance in March 2004, and it has been a great uphill curve for my investing knowledge and opportunity ever since… One of the best things Stansberry and Associates has taught me is to respect the trailing stops. Your team is doing a great job and for 2007 one of the resolutions highest on my list will be using more of your recommendations… If Matt Badiali or any of your team are ever in Peru let me know, and I can arrange a mine tour for you here at Yanacocha." – Alliance member Scott Smith

"I have been self administering my SEP IRA for something over 25 years. Many advisory letters, TV gurus, & Internet experts have come & gone. Your relentless advertising campaigns eventually hooked me on a ‘True Wealth’ trial. Not only am I very pleased with the advisory, but I have gleaned many freebies along with a few chuckles from your daily e-mails… BAM up over 30% since this spring… Your 10% cash & 16-position diversified investment plan is something I would highly recommend for anyone to start with & they wouldn’t go far off track if they stayed with it. I wish someone had recommended it to me 25 years ago." – Paid-up subscriber Bob Montgomery

"I have subscribed to True Wealth and PSIA for the past several years and use them to manage a portion of my 401k. This year I’m up almost 30%. Every stock in my portfolio is one of your recommendations, and I couldn’t be happier. My financial advisor, who manages the rest of the portfolio, has only managed about 10% this year. I’ve started calling him and telling him what to buy. He thinks I’m a genius. Sorry for taking the credit. I’ve recently signed up for the Private Alliance and Extreme Value, and can see the other newsletters are of the same high quality as yours. I’ve had a lifetime membership to ‘Strategic Investment,’ published by Agora since the 1980s. They can’t hold a candle to you guys. A big thanks to you and Dr. Steve for putting us over the ‘hump’ this year. My husband will be retiring early!" – Private Wealth subscriber Anne Denton

"Your investment philosophies and detailed reports you provide on your picks is top rate and worth every penny. You guys are delivering as promised." – Paid-up subscriber Bob Long

"You are WAY off base in your criticism of Newt. Like the mass media, you have failed to give the whole story. Those Muslim scholars were not ‘just praying’ as your brief announcement stated. There were actual ‘suspicious’ elements from these group of men. For example, they had one-way tickets, and asked for seatbelt extensions even though the stewardess had told them there was no need. Another passenger who was able to understand Arabic also overheard them speaking ‘angrily’ about the U.S. Any single bit of data may not be cause for suspicion, but when you have a series of somewhat odd behavior, it’s better to be safe than sorry, and that is NOT a violation of the First Amendment… Please make sure you tell the whole story and don’t try to paint Newt as some kind of biggot or anti-First Amendment person. He was responded to the entire event, and I for one agree with his cautious and reasonable approach." – Paid-up subscriber Ken Adler

"Your characterization of the Muslims as being removed from the airplane before takeoff for "praying" leaves out some critical details… The Muslims were indeed praying. In the course of their prayer, they were shouting ‘allahu akbar,’ which, apparently is what the terrorists shouted as they crashed the planes on 9/11… you make it sound as if there were these six quiet, humble, meek ‘scholars’ who were innocently minding their own business, praying silently in a remote corner of the airport when mean old Newt Gingrich overreacted and had them thrown out of the airport. And he kicked their puppy, too! If anything, we have UNDER-reacted to the threat the islamists pose to western civilization. So, I say ‘Boo! Hiss!’ to you for that. On the investment side of things, I’m a new ‘Alliance’ member and based on what I’ve seen so far, I look forward to many years of profitable investment recommendations from your ‘stable’ of ‘gurus!’" – Alliance member Steve Buege

"Newt Gingrich’s comments just go to show the sad state this planet is in. For a politician to say that anything supercedes the First Amendment would imply that our government has become the exact thing that it is fighting. We should leave the Middle East the heck alone. To see how blind they are think about this: Suppose that Iraq, Iran, or some other Middle East country established military bases in the United States and started telling our government how the country should be run. Wouldn’t our people resent this and become ‘terrorists’?" – Paid-up subscriber Michael Daily

Regards,

Porter Stansberry

Baltimore, Maryland

December 21, 2006

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