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

I'll sue... Don't miss Private Wealth... Ross goes long coal... Poor Goldsmith... Two new special dividend situations... Careful with "forex"... NY Times says buy Timber (finally)...

We begin with a reminder... as though you could have forgotten. Our very best "lifetime" offer, the Private Wealth Alliance, expires tonight at midnight. You get a lifetime subscription to six of our best and safest newsletters – Steve Sjuggerud's TrueWealth, Dan Ferris' S&A Penny Letter, Matt Badiali's Oil Report, Jeff Clark's Big Trend Report, Tom Dyson's 12% Letter, and my own Investment Advisory – for less than $1,000. Plus, tomorrow we'll send you our first special report designed specifically for retired investors – Twelve Stocks to Retire With. Drawn from the pages of our newsletters, this report identifies our 12 favorite safe stocks for generating income and returning a reliable amount of capital gains. (If you're already a member of our Alliance program, you'll also receive this report tomorrow.)

One more thing... This is the last time we will ever offer the Private Wealth Alliance for less than $1,000. If you're interested, I urge you to buy now. There's no better offer in the entire financial publishing industry... but it's turning into a pumpkin tonight at midnight.

Poor Goldsmith. He volunteered to house sit and watch my one-year-old Vizsla, Ruby, over the long weekend. First, the pollen out in the country got to him (thanks for all of the remedy suggestions... we received thousands). Then, Ruby got sick... and crapped all over the place. There's nothing worse than cleaning up doggie diarrhea... especially when it's not even your dog.

When Wilbur Ross speaks, we listen. And Ross says Appalachian coal is a great long-term buy.

Along with Jim Rogers, Chris Weber and Steve Sjuggerud, Ross is one of the very few investors we know of who has never been wrong about a major investment thesis. He got his start working for the Rothschild family (not too shabby) and then founded his own firm, WL Ross & Co. in 2000. His first big bet was that, despite the precarious state of the steel industry's balance sheets, the world would need more steel – sooner or later. Ross bought up bankrupt steel companies between 2001 and 2003, paying pennies on the dollar. He sold his steel holdings (International Steel) for $4.5 billion a few years later to Mittal Steel. Ross has yet to sell a single share of Mittal. He's now repeating the process with auto parts companies, forming a venture called International Auto Components Group.

Last week at Ira Sohn's charity investment conference, Ross made the case for coal... Appalachian coal, specifically. Appalachian coal is one of the only resources in the world that hasn't been bid up by the energy boom of 2003-2007. In fact, Ross says the price of Appalachian coal has fallen 33% over the last seven months. Nevertheless, Ross sees:

1. The build-out of sulfur-dioxide mitigation equipment by eastern utilities favors Appalachian coal over coal from Wyoming's Powder River Basin.

2. The federal Energy Information Administration is forecasting 41% growth of total electricity use by 2030.

3. Given this growth in electricity use, power generators would have to build 35-40 new nuclear-powered plants for that fuel to sustain its 20% market share. None has been built in more than 30 years.

4. Meanwhile, power companies are planning to build 48 new coal-fired power plants by 2010.

Ross is putting his money behind his faith in coal. He consolidated a number of flagging coal producers under his International Coal Group – which was Dan Ferris' first pick for the S&A Penny Letter.

"Hi Porter: Could you at least pretend to read my stuff?" asked a miffed Jeff Clark. Last week, I said that our quant analyst Ian Davis was the only guy on my team who made money on the rebound in housing stocks. Wrong, wrong, wrong. Jeff Clark put people into the sector on April 22, recommending calls on a homebuilder (that he recently closed for a good, double-digit profit). He also has options outstanding on USG (a primary supplier to the construction industry) and Home Depot, which is another way to play the sector. Jeff... my apologies.

To grab or not to grab... Citadel Broadcasting Corp. (CDL) will pay a $2.46 dividend contingent upon a merger between its subsidiary and ABC Radio Holdings. Citadel expects the transaction to close June 12, and the record date to be June 8.

Another possible grab... RCN (RCNI) took on $595 million in debt, which it will use in part to pay a $9.33 dividend. The ex-dividend date is June 12. S&A Dividend Grabber subscribers will receive updates on these situations shortly.

The New York Times reported that financial institutions are buying timber. The paper said that institutions now own 5% of U.S. forests and the number will probably grow. This must sound familiar to our subscribers: In 2004, Steve Sjuggerud recommended timber REIT Rayonier (RYN). Readers made 64% before a stop loss trigger in 2006.

S&A Oil Report pick Pogo Producing (PPP) will sell its Northrock Resources subsidiary to Abu Dhabi National Energy Co. for $2 billion in cash. The transaction includes properties in Alberta, Saskatchewan, and the Northwest Territories. The sale is expected to occur in the third quarter. Pogo said that it will continue to explore strategic alternatives, including a sale of the company.

PSIA pick Convergys (CVG) expects to generate $1 billion in revenue from a 10-year contract to provide human resources to a unit of Johnson & Johnson. The deal will begin in early 2009. Shares of Convergys are up 2% pre-market. Readers have made more than 65% since 2004.

Royal Bank of Scotland, Fortis, and Santander Central offered $95.6 billion for Dutch bank ABN Amro, beating Barclays' previous offer. The latest bid consists of 79% cash and beats Barclays bid by 10%.

New Highs: Delta Financial (DFC), Manpower (MAN).

Besides the avalanche of allergy suggestions, we also received several excellent critical e-mails from irate and disillusioned subscribers. One even threatens to sue. Enjoy. And send your "hate bomb" to: feedback@stansberryresearch.com.

"Try managed Forex for the highest potential return on capital. It is a little more sophisticated than what you get from Porter." – Paid-up subscriber Peter Stephens in response to Clarence Hodgen's previous e-mail

Porter comment: I always advise caution when I see religion being used as part of investment management marketing. If you need God to sell your services, you're probably not that good of an investor... and you might be a fraud. The word "forex" is another tip-off. So... I'd be very cautious about getting involved with anything like managed "forex."

"Thanks Steve for slapping the sell on DHI. Whew, if I'd have held it just another month I may have been in the black. I'm a little guy (read "not a millionaire") who doesn't feel comfortable sending thousands of dollars to overseas brokers, despite your assurances. Please keep the Confidential investments in markets that are tradeable in my TDAmeritrade account."

– Paid-up subscriber Robert Houston

Porter comment: Remember the handful of people clamoring for a whole newsletter devoted to nothing but foreign shares tradable on foreign markets? For every subscriber we have that wants information on foreign stocks, we've got 100 that will cancel our letters if we recommend more than a few foreign companies.

"As an existing Private Wealth Alliance member, I am wondering whether we will get access to the report Twelve Stocks to Retire With. Doubtless we already know of the 12, but sometimes the different slant of special reports helps jar recalcitrant neurons into firing." – Paid-up subscriber Scott Maley

Porter comment: We're publishing it tomorrow. A copy will be sent to you, and a copy will be posted on our website.

"Why is it that we never seem to hear from the folks like myself, who has been a consistent loser. For example, I bought Sjug's recos drooy & the Icelandic bonds & Ferris' Westlake chemical only to watch them tank. Has anyone ever suggested that perhaps these two could emulate the bald-headed guys who put their heads together & made asses of themselves?" – Paid-up subscriber Frank Walker

Porter comment: No... both Dan and Sjuggerud have full, handsome heads of hair.

"Having been brought up in Michigan, we listened to the 'turn around' regarding Detroit for over 30 years. For a look into the future Detroit, take a trip across the bridge on US Highway #1 between Pennsylvania and New Jersey. A big, old rusting sign reads: Trenton Makes... the World Takes. Then look down amid the decay, welfare, and carcasses of rotting factories amid ugly government buildings pretending to do something useful. We can save Iraq, but we can't save Trenton, can we? Detroit... welcome to the future." – Paid-up subscriber Paul Gogulski

Porter Comment: You have no idea how much money Wilbur Ross made on those big hulking disasters. And you have no idea how much money will be made in the American auto business, once the American companies can rationalize their costs (aka, gut the unions).

"I am a paying subscriber to a number of your monthly letters. I am very disappointed on Mr. Ferris' apparent miscalculation that for each share of ABY shareholders will receive 16 shares of the newly formed ABYBOWATER Company. While it seems like it will be 0.0625 of a share of the newly created Co. for each share of ABY, which means 10 new Company shares will equal 160 ABY shares. This is a huge misrepresentation, and I for one intend to pursue this matter in every legal way unless I hear some explanation and remorse of some kind." – Paid-up subscriber Joseph N. Yamaner

Ferris comment: Here's what I wrote:

For each Abitibi share you buy today, you'll receive 6.261% of an AbitibiBowater share when the merger goes through. That means that one share of AbitibiBowater will be equal to about 16 shares of Abitibi. So, at current prices, AbitibiBowater's shares would go for more than $40. That'll put the stock onto the radar screens of institutional investors who aren't allowed to buy stocks under $10 a share.

It's generally easier to find undiscovered gems if they're trading for less than $10. When they go up, large new investors discover them, pushing their share prices even higher. One reason we like the stock and this merger is that it will raise the nominal price of the stock to around $40, putting it on the "radar" of institutional investors – as we explained. At no time did I even suggest that you'd make a $37/share profit on the stock. At no time did I commit a typographical error with regard to the share count ratio. What I wrote, and what Stansberry published, is correct.

Porter comment: We have never been sued by a customer... or even threatened with a suit before. But there's a first time for everything. We stand by our report... and if that means you want to sue, OK. We'd rather refund your subscription and part as friends... but some folks are impossible to please. Have your lawyer direct any legal correspondence to our office: 1217 St. Paul Street, Baltimore MD 21202.

"Wow – I leave the country for a few weeks, and you attack my religion and other members of my faith in Utah... As for your comments on my religion and Utah, I have worked for a number of these 'scam artists' that you deride in your e-mails, and I admit there seems to be an inordinate number of them in Utah. I can also assure you that these people believe in the Mormon faith in name only, as a way to further their own business interests. Surely you have or know people like this in your own community or profession?" – Paid up subscriber Matt Smith

Porter comment: Warning my readers that numerous frauds originate from Utah County, that numerous frauds have involved people marketing through their Mormon faith, and drawing attention to the fact that not everything you read is good advice... that's the "attack" you're referring to. It should go without saying that I have nothing against Mormons. Your divine myth is no more or less plausible than Presbyterians', Muslims', or Catholics'. And if Presbyterians from Scott County, TN, kept winding up in the national news for ripping off investors (while praying with them), I'd be writing about them, not the Mormons... There's a giant difference between reporting facts as they exist and bigotry. I am not saying (and I haven't said) that Mormons as a group are guilty of anything. I've simply reported what's true: Utah County is the center of ponzi schemes and fraudulent stock companies in this country. In nearly every case, the people perpetrating these frauds are members of the LDS church or advertise themselves as such. That's important information to know, especially to the subscribers of my newsletters.

Good investing,

Porter

May 29, 2007

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