The S&A Digest: The Digest: Nicaragua edition

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

As of 06/20/2013

The Digest: Nicaragua edition… Casinos and beer in Vietnam… A $650,000 lunch… Norway drops the ball… Gross triples up on mortgage debt…

 We're taking Memorial Day off from The Digest so I can practice my metric conversions. When we resume publishing on Tuesday, we'll be in Nicaragua. Our parent company was kind enough to invite us to tour Rancho Santana, its beautiful beachside development. All next week, we'll update you on our trip and post pictures of Nicaragua. Steve Sjuggerud, Tom Dyson, Jeff Clark, and Matt Badiali will join us.

 Also, we're considering running themed Digests on location from around the world. We thought you'd enjoy a week from Vancouver, a major oil and gas capital, including daily interviews with Rick Rule – one of the smartest natural resource investors around. Where else would you like us to travel? What's going on in the world that you want to know more about?

 One place where I've long wanted to travel, Vietnam, is finally opening up to Western investment. The Asian country is allowing a Canadian developer, teamed with hedge fund Harbinger Capital, to build a $4.5 billion casino-resort. The project, called Ho Tran, will be the biggest foreign investment there to date. When completed in 2015, the resort will have five hotels with 9,000 rooms and two casinos. Ho Tran will also have an 18-hole Greg Norman-designed golf course, a Cirque du Soleil theater, and a site for swimming with the dolphins.

I got excited about Vietnam after hearing hedge-fund manager Carlo Cannell's speech at last year's Value Investing Congress. Cannell titled his speech "Investing in the Dark," or something close to that, because no Vietnamese companies kept good financial records. Cannell said he met with CEOs and CFOs who had no idea what free cash flow and depreciation were. So, instead of running financial analyses, he based his decisions on management's character. And he made huge gains – several stocks returned thousands of percent.

Our favorite idea for Vietnam: Buy the brewer. Cannell reported the Vietnamese are the world's biggest beer drinkers. Whenever he went to a restaurant, the first thing the waiter did – without direction – was place a case of beer on the table.

 Bidding for lunch with Warren Buffett begins June 22 and runs through June 27. The winner of the eBay auction gets lunch with Buffett and seven friends at Smith and Wollensky in New York. Last year, our friend Mohnish Pabrai won the lunch with a $650,000 bid. The money benefits Glide, a San Francisco-based charity for the homeless. If you take home the prize this year, remember your friend Sean Goldsmith. I like Warren Buffett, but I really like free steak.

 The Norwegian sovereign wealth fund, the world's second largest, turned in the worst quarter since it started in 1998. The Government Pension Fund, with $350 billion under management, dropped 5.6% in the first quarter, erasing its 4.3% return last year. Leave it to the government to bungle a situation like this.

Norway should consider keeping more of its money in Matt Badiali's recommendation of its state-owned oil company, StatoilHydro (STO). The recommendation is up 40% in four months. If you know someone high up in Norway's government, encourage them to get a subscription to the S&A Oil Report. Click the link to learn how else S&A Oil Report readers are profiting from record crude prices.

 Bond King Bill Gross nearly tripled his holding of mortgage debt to more than 60% of his fund. Gross' $130 billion Pimco Total Return Fund has returned 12.6% in 12 months, beating 99% of its peers, according to Morningstar. Gross based his decision to buy more mortgage debt on the U.S. government's guarantee of Freddie and Fannie mortgages. "Government policy is moving to sanctify the status of the government-sponsored agencies. It became a question of which institutions would be sheltered by the government umbrella," he said. He's mainly buying mortgage-agency debt and "not the subprime garbage."

 New highs: Royal Dutch Shell (RDS-A), Petrobras (PBR), StatoilHydro (STO).

 Plans for the memorial day weekend? Let's hear em... feedback@stansberrryesearch.com.

 "It is a good thing that you are a good editor, because you stink in your math abilities. How on earth did you get 8x4 feet as equivalent to 10.2 square meters? Which is 3.1937 meters on a side. Just doing a quick and dirty conversion where 2.54 cm = 1 inch we get 10.47 feet on a side. This is 109.79 square feet, a far cry from your 32 square feet. Still, 5.5 euro per square foot is a bit high." – Paid-up subscriber Larry

Goldsmith comment: Everyone makes mistakes, Larry. I will certainly be more astute next time I'm shopping for an apartment in Europe.

 "Since they are prostitutes there has to be room for a bed." – Paid-up subscriber William

 "Since you provide a list of your hall of fame picks, could you also provide a list of your closed positions and the result so your readers could be more informed?" – Paid- up subscriber David Riva

Goldsmith comment: We have hundreds, probably thousands, of closed positions, and I don't think a list of them all would benefit anyone. However, we did publish our "hall of shame" in The Digest. We don't try to hide our losses.

Regards,

Sean Goldsmith

Baltimore, Maryland

May 23, 2008

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