The S&A Digest

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

As of 06/28/2013

Update to our American Oil Pension... Japan is China's partner... A deal for CHAP... A deal for WEN... Porter & Jobs... The biggest loser at S&A Research... A good test of character...

We've been getting a lot of questions about S&A Oil Report editor Matt Badiali's recent special report, The American Oil Pension. The report explains the structure and benefits of master limited partnerships (MLPs). Similar to real estate investment trusts, MLPs pay no taxes but must distribute their earnings to shareholders. This makes them more attractive to investors seeking income. If investors put the four companies that Matt recommends together, investors can create their own "Oil Pension" and receive distributions throughout the year.

Subscribers are wondering about the next round of payouts. Here's the deal: Three of the four companies Matt's recommending will pay their next dividends on or around May 15 (of course, to qualify for these payouts, you have to be a shareholder by early May... exact dates vary). The fourth company we're recommending will pay its next dividend around May 31. We've updated Matt's report for subscribers.

As of yesterday, China officially replaced the U.S. as Japan's largest trading partner. Japanese exports grew 21% last year to $95 billion. Fears that Japan's economy would never recover from its 15-year recession might be misplaced...

Chaparral Steel (CHAP) announced it will explore strategic alternatives and hired Goldman Sachs to shop the company around. The steal-beam producer gained 12.3% yesterday on the news.

More strategic alternatives... Wendy's International (WEN) also announced a possible sale, and shares gained about 16% today. News of a sale came after Wendy's announced a 71% drop in earnings for the first quarter.

By the way... if you're wondering why we mention these M&A situations, they can be worth keeping an eye on. Often times – as we saw yesterday with ABN Amro (ABN) – bidding wars erupt, sending stocks even higher than the original offer.

While Steve Jobs may be going to jail, Apple (AAPL) is doing just fine. Shares were up 9% in pre-market trading, after the company announced an 81% increase in profit and a 21% increase in revenue.

S&A Oil Report pick Marathon Oil (MRO) announced a stock split that will be distributed as a stock dividend payable June 18 to shareholders on record as of May 23. The split will bring the outstanding shares to 688.6 million. Please note: Dividends payable only in stock have no effect on the intrinsic value of the shares. We advise you of this split only to warn you that the coming drop in the nominal price will not result in a loss.

Goldsmith has gotten fat.

I knew it would happen. It's a peril of this job, which requires you to read and write for 10 to 12 hours a day. Many years ago, when I first joined Welt Research, I ballooned from 185 pounds to 250 pounds. When I ran into a friend from college, he said, "Porter, who did you eat?"

Unfortunately, Goldsmith didn't have much room to spare. If I were more kind, I might say Goldsmith is "big boned." After only seven months on the job, he's reported breaking the clasps off his pants.

However... this sequence of events and his natural predilections now place young Goldsmith in the pole position of a $2,000 contest...

Our parent company (Agora Inc.) is sponsoring a weight-loss challenge for all of its affiliate companies – The Oxford Club, Agora Financial Publishing, Taipan, etc. The contest is team-based, which makes Goldsmith the top draft pick in the company. Each group of three contestants will be judged on weight lost, as a percentage of the group's total. The winning team gets $3,000. The two biggest individual losers (male and female) will win an additional $1,000.

The starting weigh-in is on Monday. Two of our copywriters are on Goldsmith's team. Unfortunately, Goldsmith is the only one of the three that could fill in at the mall for Santa. So... much is riding on those well-rounded shoulders.

As with any endeavor, I expect my people to win. We've installed a full gym in the basement of our building. Team Goldsmith will have a personal trainer, all of the best equipment... and a little extra motivation. S&A will match whatever monies they win.

We'll keep you posted...

New highs... it's a bull market: Alexander & Baldwin (ALEX), Oneok (OKE), Enterprise Products Partners (EPD), JP Morgan Chase (JPM), KHD Humboldt Wedag (KHDH), Macquarie Global (MGU) Exelon (EXC), AmeriGas (APU), Nokia (NOK), American Express (AXP), AutoZone (AZO), Posco (PKX), Janus Capital (JNS), Convergys (CVG), ExxonMobil (XOM), Chevron (CVX).

In the mailbag... several dozen new applications to be a part of our advisory board. We'll keep accepting applications through May 1. We plan to have the board in place by June 30.

Again, we're looking for five to eight readers who have decades of experience in their field and/or decades of experience as investors to serve as advisors to our editors. We will pay a $10,000 annual retainer and your reasonable travel expenses to attend one or two of our meetings each year. And... while it's a perk of dubious value... you'll also be tied into our research and investment vetting process.

Our dream candidate? A 65-year-old professional with 30-plus years of hands-on experience in his field, a track record of professional success, a personal familiarity with the peaks and perils of investing, and a personality mellowed by success. If this sounds like you... please send us a resume. And, don't worry, it doesn't need to be anything fancy or formal. We simply want to know what you've done, where you've been, and what you know a lot about. (One more thing... we strongly favor applicants whose primary experience comes from outside the financial sector. We want people who know how real businesses work.)

"I missed the name of the [British merchant] bank you recommended. Please tell me again." Paid-up subscriber Larry

Porter comment: Unfortunately I can't reveal that information... which is being held tightly confidential on behalf of our Phase 1 subscribers.

"Regarding Dan Ferris' comment about Reminiscences of a Stock Operator... I was surprised this book did NOT make the list! I read about this book in these very pages touted from time to time as a 'classic.' In fact, one of the points in the book is parroted in S&A research frequently... 'after all this is a bull market' should ring a bell and applies very fittingly these days, doesn't it? This one nugget alone should indicate the book is still relevant. Why the change in heart?" – Paid-up subscriber John Young

Porter comment: If you go back and see what I wrote, you'll note I made the point repeatedly that this list was only concerned with how-to books that deal with long-term investing. There are dozens of great books about finance that didn't make the list – they don't deal with the nitty-gritty business of buying stocks you can safely hold for five, 10, 20 years or more. Reminiscences has sections that deal with the advantages of being a long-term investor, but it's not a how-to book. It doesn't delve into the specifics. As such, it didn't make the list. Meanwhile, Dan Ferris has repeatedly criticized the main approach dealt with in the book – risky speculation.

"I think I'm going to put you down as undecided on Steve Jobs...?" – Paid-up subscriber John

"Porter, I must say, I suspect you may have a dark past haunting you. In reference to Steve Jobs option scandal: I say, 'The ones that protest the most are guilty of the very thing they protest against.'" – Paid-up subscriber John Matsch

Porter comment: I learned a long time ago that your friends and partners influence you in ways you can't measure. In short, over time, you will become like your friends. There's no resisting their influence – so you have to choose them wisely. (Jobs most recently picked Al Gore to join his board of directors...)

I've only had two business partners in my entire life – and they're both still my partners. One is Bill Bonner. The other is Steve Sjuggerud. These two men have been my close friends for a combined 34 years. You'd be hard pressed to find two more honest and reputable people in any industry – but especially in ours. If you widen the circle a little bit, you'll find Cactus Schroeder is my main contact in the oil business. David Isenberg in telecom. David Eifrig in medicine. Rick Rule in money management. Meet my key staff members – George Rayburn, who is like the mayor in Baltimore. Mike Palmer, the only honest man in advertising. I could go on.

If you want to know what a man is really like, if you want to know what he does when no one else is looking, if you want to judge his character – look to his friends and partners. When I wake up every day, the first thing I think is, I can't believe she married me. The second thing I think is, what in the world did I do to deserve such an amazing group of friends, partners, and clients?

"Can you make a general comment as to why Akamai took such a big hit after announcing earnings that met estimates? Are we to assume that there was a 'whisper' number that for some reason was not 'revealed' in any material written or spoken, as usually happens? What good are these estimates if there is yet another number that the public is not privy to? Wouldn't you deem such a number (held by the big boys) to be, in effect, yet another way the big guys screw us little guys?" – Paid-up subscriber Duncan DeBond

Porter comment: Akamai is the most expensive stock in my recommended portfolio, by a huge margin. It's naturally the fastest growing. And it's naturally the most volatile. Regarding "whisper numbers"... the only way another market participant can "screw" you is if you make a bad decision. Don't make bad decisions and you have nothing to fear, not even from the biggest investor in the world.

"I just want to tell you that the more I read your newsletter and other notices... the more I appreciate the personality and focus that represents your whole team. I am learning all the time just because of the clarity of your written presentations and focus." – Paid-up subscriber Madia

"I've been following Jeff Clark's advice in the S&A Short Report for 5 months and I find his approach simply understood and very valuable. A great example of his insight into trading is the April 24 Growth Stock Wire. He lays out his reasoning in a clear, concise manner then adds a chart to illustrate the concept. He's a keeper!" – Paid-up subscriber Ken Dziedzic

"I chuckled at your mention of JRCC tonight. Timing is everything. The stock should have been an oil tanker – I've never seen so many false bottoms."

– Paid-up subscriber Jim Pursley

"I have yet to make a trade since reading The Dhandho Investor, and since I finished the book in a relaxing few hours at Barnes & Noble, I second your recommendation. Thanks for the heads-up Stansberry, and I'm sure I'll be devouring your other recommends as well." – Paid-up subscriber Alan Church

"Seems the dividend grabbing technique can be successfully applied not just in the United States, but in other markets around the world. I was screening high-yield Hong Kong stocks today, looking for a few new investment ideas, and came across... Asia Financial Holdings, ticker 662 on the Hong Kong Stock Exchange. They sold their banking division, and paid out a hefty special dividend about 6 months ago with the proceeds. The stock rallied a little in the lead up to the dividend, dropped by the dividend, and has since proceeded to recover about half the ground lost already." – Paid-up subscriber Tim S., Hong Kong

"On April 3rd, I bought 200 shares of Dean Foods @ $34.50 as recommended by your Dividend Grabber. On the 25th, 22 days later, it was up 8.2% and I had more than recouped my $500 subscription fee. I'm glad I opted for the auto-renew subscription." – Paid up subscriber William W. Miller

Best,

Porter Stansberry

Baltimore, Maryland

April 26, 2007

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