The S&A Digest

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

As of 07/01/2013

A drop in the bucket for GM… Rob Fannon on fire… Gartman sees a bear… Great free advice… How Al Gore profits from global warming…

General Motors (GM) may face $1 billion in charges due to defaulted mortgages made by its home-lending unit GMAC. No worries, what is another $1 billion to its already existing $458 billion in liabilities?

UBS upgraded shares of Google (GOOG) to "buy" from "neutral," stating the company's success with keyword advertising. Shares of Google are currently $457.55 and trading at 46 times earnings and 8.17 times book value.

Tekturna is the first new blood-pressure pill to be approved in more than 10 years. Importantly for investors, it has the most favorable labeling from the FDA – it works with all the other blood-pressure medications on the market or by itself. This label should make the drug a blockbuster. News of the drug's approval and label sent shares of Tekturna developer Novartis (NVS) up 6% yesterday, which is an unusually big move for a Big Pharma stock. Novartis was Rob Fannon's first recommendation in our new publication, The Medical Investor.

Another note from Rob Fannon about a very small stock – his "favorite" in the Phase 1 portfolio – which jumped 10% yesterday on good news out of a drug program that isn't in human trials yet: "This is strong data from a proof-of-concept study, which bodes well for future clinical trials. This 'safe aspirin' program is unpartnered and hasn't factored into our valuation to date… This 10% bounce higher today is a good example of early-stage pipeline programs that can be bought for free in biotech right now because of the severely depressed valuations."

Our friend, Dennis Gartman, who writes a well-regarded daily letter that's widely read on Wall Street, says we have entered a bear market, not just a correction. In our experience, the more market watchers say the words "recession" or "bear market," the less the chances are of either occurring. I continue to expect U.S. indices to experience a correction (less than a 20% decline) and emerging-market stocks to endure a bear market (more than a 20% decline).

Instead of reducing his impact on the environment, Al Gore prefers to buy "carbon offsets." This practice involves giving money to people who will invest it in windmills and solar panels, thereby reducing carbon emissions by an equivalent amount. Gore buys his offsets from a company called Generation Investment Management, owned by… himself.

Now you see what "global warming" is really all about… convincing all of us to send yet more of our money to our fearless leaders. And, lacking the ability to convince us, they'll end up forcing us to do so – for our own good, of course.

In the past couple of months, tens of billions of dollars have been lost as mortgage defaults have been on the rise. Fortunately, some people are still profiting from the disaster. In the past six months, insiders at Countrywide Financial (CFC), one of America's biggest mortgage lenders, have sold 7.84 million shares of stock.

Yesterday was another day with no new highs throughout our recommended portfolios.

We have received hundreds of e-mails telling us how you all fared with the market downturn. Most of you have managed to do pretty well by adhering to our recommendations. Looks like we might have a knack for this thing. Keep the comments coming: feedback@stansberryresearch.com.

"I read your March issue and twice your February issue after the fact that the market has done some nasty damage. Your writing has been precise, so was Jeff Clark's. What I did was sell the few stocks when they hit 25% trailing stops.... [The] rest of the stocks have taken a beating but have not reached the 25% trailing stops. Paper loss is significant. But the stocks you, Dan, and Steve recommended are value stocks and long-term, so I thought to weather it out." – Paid-up subscriber Ashok Vachhani

"I started investing last June and was up about $12,000. I am now at $6,450 in profits. One of the big losers is Orleans Homebuilders, touted by Steve S. I have a larger-than-normal stake in this one and when it went down with the others, it went down about $2,500 on my account. I am holding on hoping for better things, as Steve wanted a 50% stop loss on this one. If this one hadn't been so bleeding bad, I would be at around $9,000. That is it." – Paid-up subscriber Dave E.

Porter Comment: It's probably the hardest lesson for nonprofessional investors to learn: Position size matters. And position size should always be determined by your total portfolio size and the estimated risk of loss. A good rule of thumb is to never expose yourself to more than a 1% loss in any position. Ergo, if Steve says the position requires a 50% trailing stop, the most you can invest is 2% of your portfolio. What if your whole portfolio is only $10k? Then you can only buy $200 worth of stock.

"So how did I weather the storm in the market? Another difficult period similar to last May, but then I've had some great gains since that time. I had some VIX calls I bought in November that expired worthless last month, so as you know I didn't buy enough time. Last week, I decided that raising cash was in order [and] somewhat regretfully I sold CECO. But check this out, this one trade was enough to pay for an Alliance membership, a trip to Spain and Portugal, and several cases of wine to boot. Not to mention the GM puts I sold today (a freebie from you) for another 23% gain in 10 days! Now I thought that just the free cocktails at the Alliance meeting were worth the price of the membership, [but] I've gotten my money back many times over. A great return on my money and without putting up with tenants." – Paid-up subscriber Bob Greene

"In the recent market plunge, I lost less than 1% of my portfolio. Your warnings about insider selling and the low VIX readings encouraged me to go about 50% in cash plus pick up a few put options in the IWM. I would have normally lost a great deal more. Now, I can hopefully position myself and enter some trades at more attractive levels and get back in some of the issues I sold like DHI and ACAS. Thanks for your timely advice." – Paid-up subscriber Sal Piccolo

Regards,

Porter Stansberry

Baltimore, Maryland

March 7, 2007

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