The S&A Digest: Lunch atop Baltimore

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

As of 06/26/2013

Lunch atop Baltimore… Sovereign wealth funds… Insiders pour money into stocks… Pozen soars… Your editor's an %#@& … Casey on YouTube…

The fancy brokerage firm in town (sorry, I meant "asset management" firm) invited me to lunch at the top of the tallest building in Baltimore. The view was excellent, as was the food. The people seated around the table were of substantial means. We might have had a wonderful lunch… except, like at a time-share sales meeting, we had to listen to the presentation. The brokers… err… "asset managers" were superbly educated and even better dressed. If only I had one-tenth of their social skills, their refinement, their savoir faire. If investment returns were correlated to refinement, these men would make Warren Buffett look like a pauper.

From where I sit – among the great unwashed – all of the "alpha" (the return you might make above the average return of the market) from long-term investing stems from the application of valuation and risk management. If you can buy great companies at good prices… and avoid blowing up… you can usually beat the market. Great research and great ideas help… but neither will lead to solid results unless you know how to value businesses and unless you know how to manage risk. Thus, I asked: How do you value prospective investments? How do you manage risk?

Apparently at Ivy League schools, they teach students how to avoid answering simple questions. Their non-answers included: "We apply the whole range of valuation metrics… We take a team approach… We have a fairly concentrated portfolio… We have a fairly diversified portfolio… We have 12 analysts working for us." At least I know why they don't include any performance data in their brochure.

What I should have asked is: Where did you get those fantastic suits?

A new trend is emerging in global markets… sovereign wealth funds. These government-controlled pools of capital dwarf the investing power of hedge funds and institutions alike. For example, the investment vehicle for the United Arab Emirates currently controls $875 billion. One of Singapore's SWFs has $330 billion to toss around.

We can see what's bound to happen with these funds. Can't you? Forget about "Other People's Money" (OPM)… these funds are Other People's Confiscated Money. Surely these funds are going to be involved in some real disasters. Our plan? Find out what they're buying – and get out before the whole thing explodes. Graham Summers has a strategy to take advantage of these sovereign wealth funds in his new service, International Strategist.

Insiders doled out $465.6 million to buy their own companies' shares in August, the largest amount since 1990. The retail, energy, and insurance sectors lead the charge. To find out which companies are best poised for big gains, click here…

Phase 1 pick Pozen (POZN) was the biggest gainer on the Nasdaq last Friday, up 27.86%. The company announced the beginning of Phase III trials for an arthritis drug it's developing with AstraZeneca. Under terms of the deal, Pozen is eligible to receive $345 million in payments from its Big Pharma partner based on the drug's performance – its total market cap right now is only $380 million. Click here for more information on Rob Fannon's blockbuster biotech picks.

New highs: none.

In the mailbag… Lonely and bored? Want to get an avalanche of mail, most of it angry and threatening? Make simple, factual criticisms about the U.S. government. Folks won't bother reading anything you've actually written (never mind thinking about the criticisms) and will immediately assume you hate your country, you voted for Osama in the last presidential election, and you're a communist spy. Send your hellfire here: feedback@stansberryresearch.com.

"Your response to Carl Monson makes me wonder why you choose to live in such a dastardly place like the United States. Please give me some recommendations on other countries to move to. This place is worse than I thought." – Paid-up subscriber, Bob

"It's interesting that after paying for a subscription I find out that the editor is an asshole. Please do not interpret this to mean anything other than what it sounds like. I prefer not to have anything to do with someone who makes his money in the United States but hates the country. Please cancel my subscription." – Former subscriber Paul V. Christensen

"I loved, loved loved your response to the warmongering subscriber who lambasted you for advocating a constitutional army (non-standing). He and his kind have created blowback deluxe with all the visionary activities from Wilson through the present day. If we got out of all these countries we are meddling in, the world would settle back into its natural state of an American paradise and hell everywhere else on earth where visionary leaders rule."

– Paid-up subscriber Steven Washer

"Porter, your response to Carl Monson's rant about the US military was superb – succinct, accurate and apropos. Our abandonment of the very political and economic principles that first inspired this nation, combined with our hubris and our ignorance of our history, are the seeds of the demise of our empire, in my opinion. Past empires have fallen for similar reasons. Stubborn flag waving will not secure our nation. It only exacerbates the problems."

– Paid-up subscriber Angela Bates

"Your riposte to being called 'spineless' was sober, direct, concise and oh, so perfectly correct. It is a sad day for the republic when, to be a 'real man' or a 'real American' means mindlessly bowing before the thrones in Washington, or, Bluto-like, going about the globe poking our fingers into the chests of 90-pound weaklings... and taking pride in it!" – Paid-up subscriber Mike McCormack

"Porter, I am sure you are going to cop a lot of crap about the comments/feedback to Carl Monson and your right to speak freely. I concur with your comments, I have worked in Afghanistan with a lot of US military and ex military in the security field and feel I have a good understanding of US military after having served in New Zealand's own small green machine for nearly 28 years up to Jan 05. Your military does what its told so less blame should be attached to them but shame on your Politicians and Government. You would think I would as an ex military man agree with their stance but I believe Doug Casey sums it up in this tele debate. America should stop trying to be the world Policeman and let the rest of world get on with doing its own thing. Americans now seem to have placed upon them more restraints and constraints than they have ever had before. America a Free country, I wonder. It sure is a country I do love to visit though. Thanks for the quality analysis from all your analysts." – Paid-up subscriber Rob

Regards,

Porter Stansberry

Baltimore, Maryland

September 10, 2007

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