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

We call the doctors... Trends worth watching, even in the summer... More PowerShares (careful)... Is Soros gay?... Who's smoking the pokeweed now?... Bill Bonner on what he reads... Mom defends me...

It sure feels like the summer doldrums have set in, doesn't it? Everyone's watching interest rates now... wondering what will happen.

12% Letter pick Citigroup (C) upped its stake in Japanese brokerage Nikko Cordial to more than two-thirds of the company. The bank spent $961 million to gather its 68.23% stake. We think readers should keep a close eye on Citigroup. It's one of the world's few underpriced blue-chip assets. And someone at Citigroup sees that the yen is deeply undervalued, something we've been writing about too...

PSIA pick Intel (INTC) will reduce prices on some processors by 50% to better compete with American Micro Devices (AMD). Intel will cut the price of its high-end Core 2 Quad processor by 50% on July 22. The move will put pressure on American Micro, which is preparing to release its own quad-core processors in the second half of the year.

Right now, we're seeing the outcome of what we predicted when we originally recommended INTC almost a year ago. With its $7 billion R&D budget, it was only a matter of time before Intel returned to its normal position of technological dominance, which in the commodity processor market equals market share and rising net income.

Activist hedge fund Atticus has acquired a 6.4% stake in the world's largest publicly traded copper company, S&A Gold Report pick Freeport McMoRan (FCX). Atticus said it is seeking out third parties to consider strategic transactions with Freeport in order to maximize shareholder value, but would not elaborate.

Toyota overtook PSIA short sell General Motors (GM) as the world's biggest carmaker. The Japanese auto-giant sold 8.8 million vehicles worldwide last year, topping GM by 128,000. Somehow, Toyota also managed to earn a profit... while GM lost $2 billion.

Signs of a market top... PowerShares, a large player in the ETF market, will launch five foreign ETFs: Global Water Portfolio, Global Clean Energy Portfolio, Dynamic Developed International Opportunities Portfolio, Dynamic Asia-Pacific Portfolio, and Dynamic Europe Portfolio. If you buy these ETFs... just remember to cut your losses. Bankers launch new products in sectors that are wildly popular, like newsletter publishers. Remember: It's best to avoid the crowd.

The Bancroft family, controlling shareholders of Dow Jones (DJ), will send a new set of proposals to News Corp. on how to protect The Wall Street Journal's independence. The family stated that it would continue talks with News Corp. only if Rupert Murdoch agrees to the set of guidelines. Ha! I've been reading The Wall Street Journal daily for more than 12 years. It is a great paper – by far the best newspaper in America. But it is far from independent. It goes to great lengths to protect its major advertisers. I'm sure it always will – it's a newspaper.

"No... I don't actually invest on my own. I don't have time to read newsletters. I use the world's best managers. I've been a hedge fund investor since 1982. I had assets with Soros, Robertson, and Steinhardt – all the best guys. Right now I'm mostly doing pair trades in currencies... Did you see my grades at MIT?..."

Yesterday, we were conducting telephone interviews for our editorial advisory board. We were looking for self-made men, with unusually long and successful careers in industries outside of finance. We wanted people with true, first-hand experience. We wanted people who enjoy investing. We wanted people who have time and an interest in reading our letters. And most of all, we wanted people mellowed by success. In my life, I've always found that the truly talented among us are typically the most humble. If you've ever met Bill Bonner, Chris Weber, Steve Sjuggerud, Dan Ferris, or Jeff Clark, you know what I mean: These guys have nothing to prove. (Note: I'm not in that category... the chip on my shoulder couldn't be knocked off with a Louisville Slugger.)

We received thousands of applications... and about two dozen were truly extraordinary. There's a guy who was in the top ranks of the world's largest copper company – who spent 40 years working in base metal mining, starting as a miner! Another applicant had been a top CEO in the restaurant business – he's even done turnarounds for Blackstone Group. And although we weren't looking for financial candidates... when one of the best-connected former floor specialists at the NYSE says he'd consider joining the board, why not? The man is a treasure trove of trading rumors.

There was only one group of applicants I wasn't looking forward to interviewing... the doctors. I don't know why – and I know this doesn't necessarily apply to any individual doctor – but as a group they tend to be... how shall I say this... NOT mellowed by success. In fact, the half dozen or so of my friends who happen to be doctors all say the same thing: Being a doctor is great, except you have to work with doctors.

Sure enough... the first doctor we talked to (quoted above) was so consumed with his own accomplishments, he hadn't even bothered to consider what we were looking for in a candidate. He's not an investor! He doesn't read newsletters!

I think Goldsmith will have to interview the rest of the doctors with Rob Fannon (our medical analyst). I just can't take it. But... we'll have the board in place by June 30. I'm looking forward to introducing them to you. You'll be well served.

New highs: BHP Billiton (BHP), Pike Electric (PEC).

In the mailbag... we're taken behind the woodshed for publishing an essay by George Soros. I guess that makes us homosexual, one-world government democrats. Who knew? What have we done to make you cancel? Let us know... please... before we lose the whole crowd. Denunciate us here: feedback@stansberryresearch.com.

"George Soros is a Far-Left political activist whose promotion of the homosexual agenda around the world is destroying traditional family-based societies. If you consider him a role model, I cannot trust your judgment. Please take me off your list." – Paid-up subscriber Scott Lively

"I don't want to have anything to do with George Soros or anyone that associates with this man. He is trying to kill this country. So take me off of your mailing list immediately! I will also tell other people about your organization." – Paid-up subscriber Charles Carter

Porter comment: We don't have an opinion on Soros' politics. Quite honestly, we've never understood what he means when he talks about an "open society." And we certainly wouldn't recommend investing in his funds (which charge ridiculous fees). I don't think we even endorse any of his books – they're mostly unreadable.

So, why do we republish Soros' essays from time to time in DailyWealth? Think if it this way... We don't endorse John Daly's lifestyle (he's been married four times and has a world-renowned drinking problem) or recommend you buy his brand of golf clubs. But if you want to learn how to hit the golf ball a mile and how to chip with soft hands, you should watch him play. If you refuse to learn from people you dislike, you're missing out on a lot of good education.

"You said, 'We don't talk about religion here... and we only discuss politics as it applies to economics.' But I remember well your diatribe about your disdain for politicians in general. With no relation to economics. Sometimes you are too flippant and conveniently forget your history. That is OK... your diatribes are entertaining too. But be honest." – Paid-up subscriber Curt Whitney

Porter comment: Having distaste for politics is human. And saying so isn't a discussion anymore than saying "good morning" is a conversation.

"YOU ARE FULL OF IT THAT DETROIT IS UNDERGOING A RENAISSANCE – MY THINKING IS OPPOSITE YOURS AND I NEVER TASTED POKE WEED SON. YOU WERE FED TOO MUCH OF IT BEING FROM TN. ALSO GM IS NOT GOING BANKRUPT!!! INVEST IN ONLY OIL GOLD AND URANIUM!!!" – Paid-up subscriber CHASKORPAK

Porter comment: As a matter of fact, I am not from Tennessee and I've never lived there. (I've also never tasted pokeweed... but I understand they grow good stuff in them hills.) Regarding Detroit, I don't think it's undergoing a renaissance right now – but I think it will. Just as soon as GM goes bankrupt. When GM (along with the other two big automakers) is able to retire its debts, there will be a ton of capital available to restore the U.S. auto industry – and Detroit along with it. If you don't think GM is going bankrupt, then you're the guy on the pokeweed... or else you've never seen a balance sheet before.

"As Porter's Mom, I felt I needed to respond to Stan Ragle... All those years of raising Porter have been worth it a thousandfold. He is a wonderful son, taking his dad and me on many fabulous trips and spending precious time with us when he can. He is a loving husband and a very good businessman. I am sure that if you would spend some time with Porter, you would find him to be a man of extreme integrity... This I know for sure: He speaks the truth in all situations." – Complimentary subscriber Lynn Stansberry

Porter comment: I was very hard on my parents growing up... I was stubborn, argumentative, and constantly doing things that were incredibly dangerous... like getting attacked by sharks (twice) and cutting my neck open (to the bone) surfing. So, I've spent the last 10 years trying to make up for it. Next week, I'm taking my father to play golf in Ireland for Father's Day. A bunch of us are going – Steve Sjuggerud, Beirne White (who writes for the Motley Fool), and most importantly, Mike Palmer.

Palmer, as you may know, is our top copywriter. He is also the author of the definitive guide to golf in Ireland, Secrets of the Irish Golf Links. He took six weeks off from work, went to Ireland, and played 44 different golf courses. Our fathers will thank us for the trip. But they should actually be thanking you guys, our subscribers. So, thank you. You've given us the opportunity to do wonderful things for our employees and our families.

"Perhaps if the yearly fee for Extreme Value was $300 instead of $1000, most of the 86% terminations would choose to stay. Instead of losing $86,000 per 100 previous subscribers, you would make $25,800, not to mention that 200 more would sign up if the fee were lower." – Paid-up subscriber Keith Harmon

Porter comment: There are lots of ways we could make more money with Dan Ferris' excellent research. For starters, we could simply recommend stocks that are more popular... like uranium stocks... But, believe it or not, with Extreme Value, money is not our main objective. We truly want to publish the single-finest equity research publication available. And we believe the high price is essential to make sure that Dan is able to pick any stock, even if it has a small market capitalization.

"About the beer can chicken picture – that looks like a Weber grill you used to cook it. How do you close the lid on your Weber? I can never get the lid down over a beer can chicken standing upright. It's too tall to fit. Can you tell me the secret?" – Paid-up subscriber Phil

Porter comment: It'll fit. There's no secret. I cooked the chicken in that picture on a classic 22-inch Weber kettle grill, the same grill that's available in almost any hardware store, anywhere in America. It was a big bird, more than six pounds. The beer was a can of regular Budweiser (a recommended investment). I like to cook my beer can chicken at a higher-than-average temp – around 450 degrees. To get this temperature, I use about one and a half charcoal lighters full of natural lump charcoal, and I fully open the vent holes. Cooking at a high temperature makes the skin extra crispy, which I prefer. The only trick is you've got to take it off right when it's done, or you'll burn it.

Extra... Bill replied, via e-mail, to a subscriber's question about why he reads Extreme Value but not Inside Strategist.

Bill Bonner: Well, I cringed a little when I read Porter's comment. Yes, one time I did tell Porter that Extreme Value was the only one of our publications I ALWAYS read. As he explained, we publish dozens of financial letters – including some in Spanish and French... and some books in Latin and ancient Greek, too. So there is a lot to keep up with. And now he's got me hooked on this S&A Digest. I already spend way too much time reading this stuff. Thank god I don't have to pay for it.

Good investing,

Porter Stansberry

Baltimore, Maryland

June 12, 2007

Stansberry & Associates Top 10 Open Recommendations

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