THE S&A DIGEST: We're Not Taipan

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

As of 07/05/2013

Subscribers mistake us for (gulp) Taipan… For $1 billion, you could be president… A new dividend grab opportunity… Newt’s take on "freedom"… Ferris warns his perfect track record won’t last forever…

Federal Election Chairman Michael Toner predicts the upcoming presidential election will see per-candidate spending in excess of $1 billion. If our government wasn’t corrupt… would the presidency be worth this much?

Newt Gingrich, who’s preparing for a presidential campaign, is staking out some very interesting territory, vis à vis civil liberties. In short, Gingrich says the "War on Terror" and our efforts to bring "freedom" to the Iraqis are more important than the First Amendment. Gingrich cites a case last month in which six Muslim scholars were thrown out of the Minneapolis airport for "suspicious" behavior. They were praying prior to the flight. Says Gingrich: "If you give me any signal in the age of terrorism that you’re a terrorist, I’d say the burden of proof was on you [to prove you’re not a terrorist]."

Try "grabbing" this dividend… Boston Properties (BXP), an office REIT, has just declared its quarterly dividend of $0.68 payable on January 30 to shareholders of record as of the close of business on December 29, 2006. In addition, Boston Properties also announced a special dividend of $5.40 payable on the same date to those who qualify within the same timeframe. The special dividend is being awarded because of a sale of assets.

Dan Ferris, trying to prepare his boss for the inevitable, sent me the following note:

"Davis Advisors did a study called The Inevitability of Underperformance. The study looked at the investment records of 116 large-cap equity managers whose returns ranked in the top 25% during the 10-year period ending December 31, 2004. 110 managers out of 116 (94%) spent at least one three-year stretch in the bottom half, and two-thirds were in the bottom 25% for at least three consecutive years. Yet they outperformed the market over those 10 years."

You’re not off the hook, Ferris. I’ve noticed that, while value-oriented investors do suffer periods of "underperformance," this almost always happens during periods of investment mania, when low-quality stocks soar. So, the underperformance is making 14% in a year when the stock market is up 25%. That’s underperformance that I can live with.

In the long run, I know investors like Ferris, who stick to a disciplined value strategy, are going to outperform the market by a wide margin and, even more importantly, suffer much smaller drawdowns during bear markets.

In fact, a great way to evaluate mutual funds is to ask the fund management company for a track record of quarterly drawdowns. Great investors won’t have more than one quarterly drawdown greater than 10% in any 10-year period.

New Stansberry portfolio highs: Raytheon (RTN), Disney (DIS), American Capital (ACAS), Eni (E), McDonald’s (MCD).

Lots of satisfied customers in the mailbag today (at least the writers who didn’t confuse our publications for Taipan’s…) Send us your drunken rants and your condemnations here: feedback@stansberryresearch.com.

PLEASE NOTE: Our office will be closed from Christmas through New Year’s Day. We think it’s important for our staff (more than 50 people now) to spend time with their families during the holidays. I hope you’ll understand. Give us a call on January 2, and you’ll find us hard at work again. ALSO, if there’s a golfer in your life, spend a few dollars buying Mike Palmer’s book, Secrets of the Irish Links. There’s no more honest, useful, and beautiful book available about golf... see for yourself.

"Hi, I am a new subscriber to the Alliance. I very much like the way you guys look at investment opportunities since you have a contrarian approach to investing… thanks to Mr. Fannon’s recommendation on RNAI (which I don’t subscribe to yet) I was able to make over 400% return on my investment (as soon as I learned that Craig Mellow won the Nobel price for his research, I loaded up on options for RNAI and the rest is history)." – Paid-up subscriber Antonio Pennella

Porter Comment: Nice work… how about buying a subscription with some of your gains?

"I run two portfolios – one aggressive and one conservative. S&A stocks amount to about 45% of the aggressive portfolio and 53% of the conservative portfolio. S&A stocks in the aggressive portfolio have an overall 14% gain this year (since I began in April). S&A recommendations in the conservative portfolio have gained 20% over the same period." – Alliance member Jim Pursley

"I am a subscriber to True Wealth and PSIA (I started with TW and liked it – and so thought that since you are the boss your newsletter would be at least as good!!) … I have recovered my ‘investment’ in you 20 times over in a short time." – Paid-up subscriber in Singapore Shalu Wasu

"I receive Doc Sugar’s True Wealth and use it for trading a 401k. I pick and choose among the recommendations because I don’t have enough for all of them. I have a 29.8% increase so far for 2006." – Paid-up subscriber Gerard Cotter

"Your complaint to GS regarding shareholder participation in the gigantic profits of these banking firms is right on, as they are being financed by the owners!! The owners should get the MOST reward!! I’m not denying the management a strong compensation, but let’s face it – mostly it is just luck, and the lower level employees are certainly not better deserving than the owners… In the ’40s, ’50s, & ’60s I think there was a lot more fairness, industriousness, as well as higher ethical standards, than unfortunately we see today." – Paid-up subscriber George Matthews

We’re Not Taipan

Yesterday, I asked subscribers to send us a "report card" for the year. How did we do? I wanted to know. By the way, if you haven’t sent one yet, please don’t hesitate: feedback@stansberryresearch.com.

I should have put a nail through a post and hit myself in the head with it.

The responses were amazing… amazingly angry and amazingly confused. Dozens of readers accused us of recommending trashy bulletin-board stocks… and of falsifying our track records… and of being, in general, rotten and deceitful.

I was shocked. And I began looking into the accusations. Did we really recommend that horrible stock? Oh no, I thought. How did that happen? Wait a minute. I pulled up the list of every single recommendation we’ve made this year (156 in all, across all of our newsletters)…

Those aren’t our recommendations. Those are our competitor’s recommendations!

Folks were sending us hate mail for letters we’d never written… for stocks we’ve never recommended… One example:

"GRVY – Gravity Corp recommended by one of your other services promising 858% or so returns in the ads… Another of your services touted XSNX, XSUNX because it won the world technology award for its Power Glass technology… The stock has declined from the $1.75 area where your service recommended it to about 45 cents today… You have the right to do whatever you want as long as you don’t break the law. Unfortunately, you believe that your readers can’t see through your relentless hucksterism. Talking about potential returns of 500% to 1,000% in your ads serves only one purpose: To get the reader to make an emotional decision rather than a rational one. Isn’t that ironic given the criticisms you often level at other investors and funds?"

We’ve never recommended either of these companies… and we wouldn’t.

We don’t recommend bulletin-board stocks (like XSNX) because they don’t offer enough disclosure. I don’t know what to say about Gravity Corp… it’s a single-product, Korean, small-cap tech stock suffering from ongoing accusations of insider dealing. Scary.

Who does recommend stocks like these all too frequently, with legendarily bad results? Our competitor, Taipan. And yes, it was Taipan that pitched these "gems" to investors this year.

We understand your confusion – it’s intentional.

Taipan has plagiarized our marketing copy and it has named its newsletters using words that are nearly identical to our trademarks, like Diligent Investor and Small Cap Confidential. Unfortunately, there’s not much I can do about this…

How can you tell a genuine Stansberry & Associates newsletter from a knockoff? Simple. Just look for our masthead, our symbol, and my name.

That should work… until Taipan decides to launch the Stansbury Report…

Regards,

Porter Stansberry

Baltimore, Maryland

December 20, 2006

Stansberry & Associates Top 10 Open Recommendations

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