The Secret of the 'Fat Pitch'
How I earned 30% annualized gains over the last decade... The secret of the 'fat pitch'... What I'm personally invested in right now... The simple strategy for hanging on to big gains... Join us tonight for a free 'Melt Up' event...
Editor's note: The big moment is almost here...
Less than two hours from now, our colleague Steve Sjuggerud will explain exactly what he believes 2020 holds for his "Melt Up" thesis – and U.S. stocks in general. And he'll detail a totally new way for everyday investors like you to take advantage of what's happening.
If you're wondering what's the one thing you can do to maximize your profit potential... this is it. The free online event begins at 8 p.m. Eastern time. Save your spot right here.
Before the action begins, we hope you'll take a few minutes to read today's Digest. In it, Steve explains how waiting for the "fat pitch" helped him earn 30% annualized gains in his personal IRA over the past decade. And more important, he details how you can do it, too...
'Huge gains! Nice work, Steve!' my colleague Austin Root e-mailed me last month...
I (Steve Sjuggerud) had shown Austin the returns on my Charles Schwab personal IRA...
My seven-figure Schwab IRA was up 63% in 2019. That's a good number, of course. But it gets better...
Schwab tells me I've earned more than 30% a year (compound annualized gains) since the market bottom in 2009. That's more than 30% a year – for nearly 10 years.
In today's Digest, I'll share how I've done it. It's probably not how you'd expect, though.
I don't like to make a lot of little bets. And I only put money to work when things line up just right. When that happens, I bet BIG.
Simply put... I wait for the "fat pitch."
Fat pitches don't happen often. Sometimes you have to wait years for them to appear. But fortunately, there's a huge one in front of us right now...
I'll share the details of that opportunity in a moment. But first...
You need a good understanding of what a fat pitch really looks like...
This is an idea that might sound familiar to you. It comes from the most successful investor of all time... Warren Buffett. He once said...
I call investing the greatest business in the world because you never have to swing. You stand at the plate, the pitcher throws you General Motors at 47! U.S. Steel at 39! and nobody calls a strike on you.
There's no penalty except opportunity lost. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it.
The concept, as Buffett puts it, is simple and brilliant. But it goes against how most investors feel... and certainly how they act.
The typical investors feel like inaction is a bad thing. Simply doing something... buying this or selling that... shows that you're on the pulse. You know what's happening in the markets, and you're acting to take advantage of it.
The problem is that you don't get multi-decade buying opportunities very often. They're rare. And it's often better to do nothing, waiting for the big one, then to take action for the sake of action.
I've personally done this with my own money...
Sitting in cash often, waiting for big opportunities.
In fact, I've only swung at a few fat pitches over the last 12 years...
In late 2008, I saw a fat pitch coming in stocks. I bought all I could – and I took out a home-equity loan to buy even more. That's the only time I've ever done that. But the fat pitch just looked too good.
I was a bit early – the real bottom was March 2009. But it worked out fantastically... I paid off the home-equity loan a little more than a year later out of my profits from stocks.
In 2011, I started buying Florida real estate heavily. I may have gone overboard... but the fat pitch was just too good. In one deal, I bought a couple hundred acres for 90% less than they were worth under contract just two years before. And along the way, I sold a condo for twice what I paid for it less than three and a half years before.
In late 2015, I started building up a portfolio of microcap gold-mining stocks. This sector had lost more than 90% of its value in the previous four years. It was the cheapest it had been in a generation, at least. Most of those positions earned me two to three times my money in less than a year.
The most recent fat pitches I took advantage of were in late 2018. They're what helped propel my 63% return last year.
When I shared the number details with Austin, he followed up with smart questions. And those answers help explain my investment plans for 2020...
Austin, by the way, knows how to make money through investing as well as anyone...
As regular Digest readers know, he's a former hedge-fund manager who has worked for some of the most successful investors of our time...
- Julian Robertson (Tiger Management)
- Stephen A. Cohen (who the TV show Billions is based on)
- George Soros (who "broke the Bank of England" in the early 1990s)
Austin also worked for prestigious asset manager Blackstone (BX). Today, he's the portfolio manager of our Stansberry Portfolio Solutions products, our company's director of research, and more. It's a huge responsibility... but he's more than qualified for all the different roles.
Again, Austin wanted more details about what I'm doing with my money right now. So he immediately asked me two short questions...
- Are you keeping the same positioning in 2020, or are you ratcheting back the risk?
- And if this represented the lion's share of your net worth – which I know it doesn't – would you have been as bold?
The first two things I said back to him were...
- The short answer is, I haven't sold yet.
- The bulk of my net worth is in North Florida real estate.
Now, to be clear, I don't hold that North Florida real estate in my Schwab IRA. It's a fat pitch, no doubt. But it's not what generated my huge 2019 gains.
Instead, it was investments in two other fat pitches. They center around two big investment themes I've been covering...
- The opportunity in Chinese stocks. I expect this will be the best-performing market on earth, by far, over the next five years.
- The incredible runway still remaining in the U.S. Melt Up.
Don't let the simplicity of these ideas fool you... I believe these are the best places to put your money to work – out of anywhere else in the world. They're the big ideas that led to my fantastic 2019 returns. And they're fat pitches that I plan to continue owning in 2020.
Now, I know a lot of Digest readers simply won't hear me out on China. And that's OK. If you only take advantage of the U.S. Melt Up, you should do just fine. (More on this in a moment.)
Whether you're a Melt Up believer or a market skeptic, you might be asking the same question. It's the one our founder Porter Stansberry asked me as well...
I copied Porter on the e-mail I sent back to Austin. He got back to me right away...
Sjug – That's fantastic. NOBODY makes 30% a year for a decade. Wow!!! But you know, the real test is... can you keep it when the next big downturn hits?!?
That's the goal... to be bold and swing at the fat pitches when they come – and to have the courage to be much safer when the time comes. (The latter is actually the harder part.)
So, how do you make really big returns – and not lose a lot of money?
I've been working on this for more than 25 years. The simple truth is that you have to step up to the plate when a fat pitch arises, like the ones we have today... Then, you have to be hyper-disciplined in following your stops when things turn south.
No matter how you feel, if you hit your stop, it's time to move on.
The goal is to not let small losses turn into big ones. And I urge Digest readers to strictly follow that advice. It's the only way to safely make big bets on fat pitches. You need to have an exit strategy and follow it.
Knowing I have an exit strategy is why I feel safe being heavily invested in the U.S. Melt Up right now. Sure, we're 11 years into this bull market. That alone feels scary... But with a defined plan for selling, I always know what I'm risking. There aren't any surprises.
Personally, I think the Melt Up is far from over...
As I explained in yesterday's Digest, we haven't seen the market euphoria that I expect to come with the blow-off top. Instead, folks are mostly scared of betting big.
That's why I continue to pound the table on the Melt Up. I want to share the big idea with as many people as possible... So that as many of them can profit while there's still time.
It's also why I'm hosting an important Melt Up event TONIGHT – in just a couple of hours...
Beginning at 8 p.m. Eastern time, I plan to share a full update on what I see in the U.S. market and why I'm so excited right now. I'll also be sharing my favorite Melt Up stock for free... It's one that could easily double in the coming months. And I wouldn't be surprised if it ends up soaring by as much as 500%.
Legendary stock picker Matt McCall is joining me as well. He'll share another free recommendation... a small technology company that he believes could be a "10x winner" during the Melt Up.
It's going to be a fantastic event. And I hope you'll join me. Again, the action starts in just a couple of hours. It's free to attend... I don't want you to miss it. Save your seat right here.
New 52-week highs (as of 2/11/20): AllianceBernstein (AB), AbbVie (ABBV), American Financial (AFG), Amazon (AMZN), Blackstone (BX), Cerner (CERN), Quest Diagnostics (DGX), DocuSign (DOCU), Western Asset Emerging Markets Debt Fund (EMD), Franco-Nevada (FNV), Alphabet (GOOGL), Hannon Armstrong Sustainable Infrastructure Capital (HASI), Home Depot (HD), Invesco Value Municipal Income Trust (IIM), Ingersoll Rand (IR), iShares U.S. Aerospace and Defense Fund (ITA), iShares U.S. Home Construction Fund (ITB), Invesco KBW Property & Casualty Insurance Fund (KBWP), Lennar (LEN), Lockheed Martin (LMT), Lonza (LZAGY), Motorola Solutions (MSI), Nvidia (NVDA), New York Times (NYT), PepsiCo (PEP), Parker-Hannifin (PH), Polymetal International (POLY.L), ResMed (RMD), Splunk (SPLK), ProShares Ultra S&P 500 Fund (SSO), TAL Education (TAL), T-Mobile (TMUS), ProShares Ultra Semiconductors Fund (USD), ProShares Ultra Financials Fund (UYG), Vanguard Real Estate Index Fund (VNQ), Vanguard S&P 500 Fund (VOO), and W.R. Berkley (WRB).
In today's mailbag, one subscriber provides a good reason for the "date confusion" we highlighted in yesterday's mailbag... another praises Vic Lederman for Monday's Digest... and another says he's ready for tonight's big event... Have a question or comment for us? As always, send your notes to feedback@stansberryresearch.com.
"Clearly a couple readers enjoyed 2019 so much they don't want to leave it and haven't entered 2020 yet." – Paid-up subscriber Rob P.
"Vic, Wow, the decision to write a reflective article (of outside distractors) was extremely timely and on point. The historical relevance was what I have routinely asked myself, when, where in past markets has this happened. Affording me the analysis of what strategy and when to heighten engagement.
"The writing style was superb in bringing the importance of focus. The emphasis now is the buckle up/tighten up, get (your picks) it in order.
"So, there are a lot of great writers at Stansberry. I think, for those who have read past Porter articles realize there is an art and skill. This article has achieved Porter's level of writings. Cheers Vic! I hope this nourishes you to keep doing a great job!" – Paid-up subscriber George G.
Vic Lederman comment: Made my day! Thank you.
"Regarding Dr. Steve's assertion that people are getting out of stocks, I am an example of that, as I retired in June, and left my 401K with my employer. That plan had 12 Mutual funds, a couple bond funds, and a guaranteed income fund. However, in early December, I had done enough studying, and [had] the courage to roll my 401K into a self-directed IRA brokerage account. That probably added to the numbers you have been seeing...
"However, I've since been buying the Stansberry Total/Defensive portfolio blend, along with a 7% disbursement to another self-directed IRA in which I can buy precious metals, (which I did)... 20% has been allocated to other advisors, and speculative investments. So, I have gotten out of the street funds, and am building my own. Out in 2019, mostly back in in very early 2020. Looking forward to the 'Melt Up Event'! – Stansberry Alliance member Jerry F.
Good investing,
Steve Sjuggerud
Baltimore, Maryland
February 12, 2020