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

A $40 million stock tip?... Hedge funds pile into MOT... Spreading the plastic in China... An $80 billion dividend?... How to grill a leg of lamb... Who's the governor of Arkansas?... "Protecting" Sjuggerud...

This is a whole new level of lunacy...

William Ackman, a well-known "activist" investor who runs Pershing Square (a hedge fund), raised $2 billion simply by promising investors he'd invest in one, single, blue-chip, iconic American company. Ackman is charging 2% up front and then 20% of whatever capital gains accrue. So... in effect... Ackman is getting $40 million for a single stock tip, plus 20% of whatever money it makes. Word on the street is the stock he's buying is Budweiser.

Ironically, I told PSIA subscribers to buy Anheuser-Busch (BUD) in March 2006. It was the single most aggressive recommendation I've ever made:

This month, dear readers, you'll 'hear' me say something truly rare: my fear this month is that you won't recognize the significance and the scope of the opportunity and you won't buy enough. At a minimum, I recommend you establish a position equal to double your normal initial stake. If you're a 4% guy or gal, take an 8% stake this month. If you always buy more than I recommend, really double up this time. You can go as high as 25% of your equity portfolio with my blessing. Sell whatever it takes to free up the capital you need. Buy that new car next year. Turn down the heat. Whatever it takes: make sure you act on this month's recommendation. Don't wait.

We're up 32% so far... and if BUD really is the stock that Ackman is buying with his new $2 billion fund, we're going to make a whole lot more. Now... how can I get our subscribers to send me 2% of their BUD stake and 20% of the gains they've made?

This from Dan Ferris: "The big value hedgies love MOT. We know Carl Icahn owns Motorola shares... but did you know that it's also among the holdings of Eddie Lampert (who only owns six stocks, including the recently disclosed Citigroup), Jana Partners, Third Point Capital, Pzena Investment Management, and Highfields Capital? During the most recently reported quarter (ended 3/31/07), these folks have increased the number of MOT shares they own by more than 4,000%. So they've only come on board since the stock has bottomed under $20. All those firms are well-known activists. Dan Loeb of Third Point Capital has written some famous (infamous to CEOs) 13D letters. Highfields and Jana have been known to partner up with Icahn on previous activist campaigns. Pzena is the guy who found Lear first."

I bet this is going to be a big business... 12% Letter pick Citi, along with HSBC and two other banks, will be the first to issue local currency debit cards to the Chinese.

A shareholder group is pressuring British telecom giant Vodafone (VOD) to spin off its 44.4% stake in Verizon Wireless (VZ) and return nearly $80 billion in cash to shareholders in the process. The move could be great news for shareholders of PSIA pick Verizon, and S&A Dividend Grabber subscribers may have the opportunity to pick up one of the biggest special dividend payments in history. Vodafone will address the issue at its July 24 annual meeting.

The corporate devil, Extreme Value pick Wal-Mart (WMT), ranked No. 1 on Fortune's list of America's largest companies, which was released today. The other top 10 companies: ExxonMobil, General Motors, Chevron, ConocoPhillips, GE, Ford, Citigroup, Bank of America, and AIG.

We wrote it. Did you buy it?

Since 1999, Eddie Lampert has shown AutoZone shareholders an average ROE of 60%... and this company is still showing Buffett-sized returns to investors. So we've got a quality franchise, rapidly improving margins, with one of the best investors in the world on the board. He's still buying...

– Graham Summers, Inside Strategist, April 2006

Yesterday, Inside Strategist pick AutoZone (AZO) announced it would buy back an additional $500 million worth of stock, bringing the total to $5.9 billion. Subscribers are up 35% in just over a year.

To grab, or not to grab... Books-a-Million (BAMM) will pay a $3-per-share special dividend on July 5 to shareholders of record on June 20. The ex-dividend date should be June 18. Shares jumped 11% on the news. S&A Dividend Grabber subscribers will receive a recommendation next week.

One more barbecue tip... try a leg of lamb on your Weber Kettle. The boys came over last night and we did three legs – they came out perfectly. A leg of lamb is the easiest, most spectacular thing you can grill. First, it's a big cut of meat. You'll need a meat hook to toss it on the grill. (Every man loves using a meat hook...) Second, lamb has a lot of fat on it, so it won't dry out. Third, a good-sized leg takes about an hour and a half to cook, so there's plenty of time for gin and tonics and horseshoes – but the cooking time isn't so long you have to worry about adding coals to the fire. And the best part is, unlike steaks or burgers, you don't have to flip a leg of lamb. You just leave it till it's done.

I get a semi-boneless leg (I think the bone adds flavor and helps the cooking process). I put a Mediterranean rub on – it's mostly rosemary. And I add a lot of fresh ground pepper. You'll need to set up your Weber for indirect cooking (the coals on the sides, drip pan in the middle), and you want to vent it down to about 325-350 degrees. I put beer-soaked oak chunks on the coals for extra flavor... and there's nothing better than watching a ton of smoke come off your grill. Then you simply put the leg on till its done. Pull it off when the internal temperature reaches 125-130 degrees. Don't overcook it. Let it rest for 15 minutes, in foil, before you slice it. I guarantee you'll love it – even if you're not normally a big lamb fan.

New high: Raytheon (RTN).

In the mailbag... it worked! We asked for more mail, and boy did we get it. Hundreds of our subscribers know more than I do about the governor of Arkansas. We read every letter we receive... even when they're all saying the same thing. Send your best here: feedback@stansberryresearch.com.

"Huckabee is the former governor of Arkansas, not the current one. Is it still funny to point out mistakes?" – Paid-up subscriber James Poisel

"We are not too bright here in Arkansas, but we do know that Mike Huckabee is our former governor. Mike Beebe is our current governor."

– Paid-up subscriber Frank Foster

"Arkansas Gov. Mike Huckabee did remember a significant date in Ronald Reagan's life. He got the event wrong. June 5 was the date of Pres. Reagan's death." – Paid-up subscriber John Robinson

Porter comment: Uncle. And mea culpa. You shouldn't throw stones if you live (as I do) in a glass house. Unfortunately... I get so angry with politicians that I quickly forget my manners. As you can imagine, we were swamped with e-mails about my gaffe. But John Robinson is the only subscriber who figured out what Mike Huckabee was trying to say. Great job, John.

"Having 5 homes to manage was beginning to wear on me. I tried my hand in the stock market. From 12/99 to 3/2002 I lost $80,000. I got out, and purchased more property. When real estate took off, I earned the right to say, 'It's about time!' I learned then what it means to be a contrarian, to go against the herd or buy what's out of favor and wait. By '04 when the word 'real estate' was on most people's lips, I cashed out of real estate. I had a bone to pick with the equity markets. I learned about PSIA, paid the 5k [to join the S&A Alliance] and the rest is history. I have made over 200k net in 2 and a half years, all while globetrotting. So much for a 9 to 5. Much thanks to all editors." – Paid-up subscriber J. Freeman

"Only a 14% renewal rate for Extreme Value? That's mind-boggling, in light of Dan Ferris' stellar performance. What can the lapsed subscribers have been thinking? If you ever consider dropping Extreme Value, please tell me how much the annual price would have to be increased so that I and my fellow 14% renewal subscribers can continue to benefit from Dan's painstaking research and insightful recommendations." – Paid-subscriber John Wine

"I am a regular reader of most of your newsletters, and I have always been extremely impressed by the Extreme Value letters and recommendations. So I was shocked to see that so few renew their subscriptions to this excellent vehicle. People are missing an excellent product. It shouldn't be Poor Dan Ferris!" – Paid-up subscriber D.W.

Porter comment: We launched Extreme Value in 2002 with a specific goal in mind: to demonstrate how safe and effective value investing can be and to produce a newsletter of the very highest intellectual caliber. We knew publishing such a letter would be an uphill battle – because deep value investing, by definition, means covering stocks that are completely out of favor, stocks that people actively don't want to read about. So... we knew we'd never be able to judge our success by subscriber numbers.

But, I'll tell you a little secret... I knew we'd done very well with the letter when Bill Bonner (the founder of Agora Inc., our parent company) told me Extreme Value was the only Agora newsletter that he reads. Even if Extreme Value never earns a penny, we will continue to publish it. Many things in life are more important than money... though it wouldn't hurt us to have a few more subscribers.

"I understand the paradox of your research business: the more predictable and successful you are, the more boring you are. That inevitably leads to fewer sales – bummer. Nonetheless, there are those of us – including me – who pay for your research precisely because you are predictable and boring. Otherwise stated, it is because you do not compromise your quality or integrity: you tell it as you see it. Here is my suggestion: Tell those who are not happy with predictability and boredom to subscribe somewhere else (although I think you may already be doing that) and deal with those of us who are in the other category differently. Alternatively, offer another quality of research that is focused on a different clientele: give those who want glitz – glitz." – Paid-up subscriber Jerome McManus

"I love being part of the S&A family; it is the best discovery I've made in my two years of investment self-study. All the authors are exceptional and I've amassed a wealth of education. Always, number phobic (hence law school), I now find myself thinking in concepts such as book value, price to earnings and Jeff Clark's favorite metaphor 'the canary in the coal mine.' Finally, I invested in an Alliance membership because I just couldn't limit myself to one, two or even three of your great newsletters." – Paid-up subscriber Kim Chisholm

Porter comment: You made us blush. Thanks for your kind words, your trust, and your business.

"What is the best way for the common person to tell when to get out if the market has topped? Should we go by sector? For example, some of the writings of your cohorts tell us that this will be a good year for Wal-Mart, Home Depot, and others in retail and the building trades. Should we just get out or get out by sector?" – Paid-up subscriber Ken Turner

Porter comment: Boy... if I had a firm answer for that, I'd be the richest man in the world. Like I said the other day, we're only mortals. God doesn't whisper in our ear. We can't know the future. But... I think it pays to watch for signs of investor exuberance... and to be cautious when you see other people doing things that are foolish.

"I'm a new subscriber and I see your last recommended stock idea was mid 2006. Am I supposed to buy these old ideas after they have run up? What about some fresh ideas? Let me know or I'll just cancel my subscription." – Paid-up subscriber Howard Gore

Porter comment: Howard... I suspect you're looking in the wrong place. The advice you've paid for is in the most recent issue of the newsletter you've subscribed to, whichever one it was. The lists of stocks here, in the Digest, are merely the best examples of our work. (By the way, I noticed that Matt Badiali slipped into our top 10 list with a Gold Report pick. Nice job, Matt!)

"Where can I find the level of short sales on the internet? When I read that short sales have reached the highest level since 1931 or some other bellwether date, what stocks are the most vulnerable? Those that are shorted? Our most of the stocks? I hate to try and time the market, but it is scaring me. Please discuss this in a newsletter." – Paid-up subscriber Gary Bush

Porter comment: I usually see the number in The Wall Street Journal... but you can also get a subscription to our friend Jason Goepfert's service. Jason keeps the most comprehensive collection of sentiment data (like short sales) on the web.

"I'm 24, and we all know James is 23, so I'm curious to know how many youngsters we have out here, especially Alliance members. I'd love to be able to set up forums relevant to discussions, such as, 'Age 18-30, aggressive, residential apartment building, analysis, strategies, and opportunities'... I think this would add a lot of multi-visit traffic to the site and form an investment community... This would be a GREAT feature. Please add it. I'll use it all the time..." – Paid-up subscriber Chris Walters

Porter comment: I bet there are a lot of subscribers that wish they'd started learning about investing at your age, instead of so much later in life. Regarding the message-board idea, we've tried it. It doesn't work, unfortunately. There's no incentive for people to share good information... so what ends up happening is endless bickering, insults, and complaining. But... you're welcome to try.

"I would attend a boot camp where you taught people how to trade options on their own. Currently, I am breaking even but it takes a lot of work to do so. There has to be a better way..." – Paid-up subscriber Willard Ferguson

Porter comment: We are currently in discussions with Jeff Clark about adding more education and options designed to generate income to his Big Trend Report. In the meantime, here's an idea... just follow Jeff Clark's advice in the S&A Short Report.

In the S&A Digest there was a reference to a 'grading' of all the newsletters. I must have missed that previously. How can I get a copy?" – Paid-up subscriber Elizabeth Dean

Porter comment: See the December 27, 2006 issue of the Digest. It's archived on our website. Just click the "Digest" link on our homepage, and then click back to December 2006.

"I must be one of the view that profited from Steve Sjuggerud's FortuNet recommendation. I purchased 1,000 shares on 8/3/06 for $9593.90 and sold on 9/13/06 for $17,986.49 for a gain of $8,392.59 (87%+) in a little over a month... I hate to hear and see him taking a beating on this recommendation, as some of us made money." – Paid-up subscriber KB

I'm a huge fan of Sjuggerud. And I don't like people bad mouthing him. So far I've done very well with Steve's recos... I bought AAUK (up 35%), AUY (up 30%+), TYY (up 17%+). I was going to sell PTR but his reco came out the same day to buy it and it jumped 21% since then." – Paid-up subscriber Nirav Desai

"My bottom line on Steve, I think he is lucky he has you to protect him, if he was a stock you would be a Bear." – Paid-up subscriber Admar

Porter comment: Notes from our international subscribers often contain unique phrases. We assume something was lost in translation here...

Good investing,

Porter Stansberry

Baltimore, Maryland

June 7, 2007

Stansberry & Associates Top 10 Open Recommendations

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