The Secret to Safe, 1,000% Gains in the Stock Market
Editor's note: Despite popular belief, you don't have to take a lot of risk to make huge gains in stocks.
That's the foundation of what Porter has nicknamed the "10x Project."
This weekend's Masters Series is a two-part interview with senior analyst Bryan Beach. In it, he explains the approach he and his team are taking... and how you can use this strategy to safely make 100%, 500%, or even 1,000% in high-quality stocks...
The Secret to Safe, 1,000% Gains in the Stock Market
An interview with Stansberry Research senior analyst Bryan Beach
Sam Latter: Can you tell us a little bit more about the "10x Project" and where it fits in within the Stansberry Research suite of products?
Bryan Beach: Sure. We're looking for small companies – many in "boring" businesses – that are flying under the market's radar.
Sam: To be clear, we're talking about small caps here, right? Aren't those inherently riskier than large-cap stocks?
Bryan: That's certainly the conventional wisdom. And to some extent, it's a fair assessment.
There are about 9,000 companies trading on U.S. exchanges that have a market cap of less than $1 billion. We loosely refer to this group as "small caps."
About a quarter or a third of these companies are garbage from an investing standpoint. Either their market cap is way too tiny (less than $1 million) and they're too illiquid to buy, or worse, they have no revenues or prospects of revenues.
So in terms of both percentages and the sheer number of companies, the small-cap universe has a lot of lousy companies.
But it's important to note that these aren't the kinds of companies that my colleague Dave Lashmet focuses on in his Stansberry Venture advisory. He may pick a few companies with no revenues... but only after interviewing doctors, management, and in some cases, regulators. It's a calculated risk. And that's why his track record has been so incredible.
The "10x Project" is different, too. We'll be identifying small companies... but only established, high-quality businesses with potential for long-term growth and share-price appreciation.
Sam: How do you define "high-quality businesses"? What traits are you looking for?
Bryan: Well, we aren't talking about junior miners or companies testing out the next blockbuster drug.
Like I said, we're looking for established – and often "boring" – businesses with growing revenues, a strong balance sheet, a solid reputation, excellent management teams, and a capital-efficient business structure.
Sam: Talk to me more about "capital efficiency." That's a phrase that gets thrown around a lot around here, but we mainly hear about it for large-cap companies like McDonald's, Hershey, and Coca-Cola. Can a small-cap company be capital efficient?
Bryan: Of course. My kid's lemonade stand can be capital efficient.
When we say capital efficient, we're talking about the ability to significantly grow your revenues – up to two or three times – without investing a substantial amount of cash back into the business.
Porter always talks about this with Stansberry Research. Our business is incredibly capital efficient. We could double our subscriber base tomorrow and we wouldn't have to make significant cash investments to fulfill those obligations. We already have our analysts and editors in place. We would just need to send e-mails to twice as many people.
Similarly, software companies are famous for their capital efficiency. They have no factories to build, no warehouses, no trucks for distribution, no inventory to manage. They can easily double their revenues without making significant investments back into their businesses.
Sam: So will the "10x Project" involve a lot of publishing and software companies, then?
Bryan: Well, nothing is off-limits. If we find a great, established business with growing revenues and a solid balance sheet, we'll take a hard look at it.
These are the same kinds of companies we look for in Stansberry's Investment Advisory... only smaller. So you might see some software companies, but we'll also recommend insurance companies and some stodgy cash-generators.
Sam: Can you walk me through an example of one of these types of stocks?
Bryan: Sure. Actually, I was just looking at a good example this week. Let me turn things around and ask you a question. Do you own a motorhome or know anyone who does?
Sam: No...
Bryan: Is it fair to say you know pretty much nothing about motorhomes, then?
Sam: Yes, that's fair.
Bryan: But when I say "motorhome," what company comes to mind?
Sam: The only brand I can think of is Winnebago. It's almost to the point where I'd call a tissue a Kleenex, or a copier a Xerox machine.
Bryan: Exactly! Everyone has heard of Winnebago. Even people who know nothing about motorhomes. It's a ubiquitous brand.
But from 2005 to 2010, Winnebago's business tanked. The recession hit Winnebago hard. Revenues fell in half. The company had to lay off hundreds of employees. Things were ugly for a while.
And yet even in its worst years, Winnebago had a pile of cash in the bank and no debt whatsoever. In fact, during those five terrible years, the stock fell as much as 90%... but Winnebago actually made something like $200 million.
By 2012, Winnebago shares had bounced around from a low of $4 to something like $8. But even after doubling, it was still trading at an enterprise value of less than $150 million, despite having $70 million in the bank and generating $200 million during five lean years.
Sam: I see what you're saying. That's a fantastic setup. Where does it trade today?
Bryan: Around $33 a share. So you would have made around four times your money in five years, even if you had bought after shares doubled. It didn't go straight up, but it was a great trade regardless.
Editor's note: Tomorrow, we'll share the conclusion of this interview. And Bryan will explain how to identify these opportunities... and why they have access to these types of trades that even legendary investors like Warren Buffett don't.
And on Wednesday at 8 p.m. Eastern time, Porter and Bryan will go live on-air to pull back the curtains on the "10x Project." If you're interested in safely making 1,000% in the market – without using leverage or touching any risky options – you won't want to miss this event. Reserve your spot here.