Why Steve Sjuggerud Is Selling

Why Steve Sjuggerud is selling... A gentle reminder about trailing stop losses... How to make volatility work in your favor... Don't miss Doc Eifrig's live 'demo'...

While one legendary investor was closing out the worst trade of his career, our colleague Steve Sjuggerud was taking profits...

Last week, we discussed Bill Ackman's multiyear crusade against nutraceutical firm Herbalife (HLF). As we noted, the famed hedge-fund manager reportedly lost hundreds of millions of dollars when he finally threw in the towel and closed his massive short position on Wednesday.

Ackman clearly had plenty of conviction. But it appears he ignored the advice we've been telling Stansberry Research readers for years: A well-defined exit strategy is critical to your investment success.

Of course, longtime readers know Steve always has an exit plan. And this month, his True Wealth Systems subscribers stopped out of five winning trades.

Why are we bragging about that, you ask?

It may sound counterintuitive, but stopping out of your trades can be a good thing. As Brett Eversole – Steve's right-hand man with all things True Wealth Systems – explained to us in a private e-mail this week...

It has been months since we've seen this. The True Wealth Systems computers issued several sells all at once. We closed five winning trades in total, which had an average holding period of just 11 months... and an average return of 25.2%.

At first, it's a little shocking. We had a bunch of trades that were going well. Now, they're down from their highs... And we're getting out.

This is all about discipline. All investors need an exit strategy. Without one, it's too tempting to chase a trade lower. And sooner or later, that will lead to disaster.

As Brett noted, this is true even in a winning trade where your reasons for bullishness may not have changed...

The broad market just experienced its first 10% correction in two years. As you know, we remain bullish. We expect the "Melt Up" will resume and recoup those losses before long... so it's possible these five positions could do the same.

But we can't be certain... And the reality is that in these trades, the trend has turned against us for now. So we're happy to take profits on those five positions, and look for the next opportunities where the trend is already on our side.

Fortunately, True Wealth Systems subscribers didn't have to wait long...

In this month's issue – published last Thursday – Steve and Brett recommended a new trade on one of the strongest uptrends in the world today. This trade has delivered an incredible 52% compound annual gain when it's in "buy" mode. And it just flipped back into buy mode this month. They expect it could be one of the biggest winners as the Global Melt Up continues.

Unfortunately, we can't share all the details on this opportunity with you here today. It simply wouldn't be fair to Steve's subscribers. But you can get instant access to this trade with a 100% risk-free trial to True Wealth Systems right here.

Again, Steve remains bullish today...

Despite the recent pullback, all of his trusted indicators remain in "green light" mode this month. He says his Global Melt Up thesis is still in place.

But we could still see additional volatility. In fact, history suggests volatility is likely to surge as the Melt Up plays out... and stocks could suffer several more double-digit corrections along the way.

Having a well-defined exit strategy on every position you own will protect you from suffering a catastrophic loss. But it won't necessarily help you to weather these moves. If last month's 10% correction kept you up at night, chances are you're still taking far too much risk with your money.

You might be overexposed to stocks in general... you might have too much money in certain sectors of the market... or you might have huge positions in several individual stocks. It could be a combination of all three.

If this is the case, we urge you to adjust your portfolio immediately. Simply holding reasonable position sizes, raising some extra cash, and adding a short sale or two can go a long way toward helping you sleep well no matter what comes next.

But you don't have settle for playing 'defense' alone...

If you're willing to try something new, you can actually make stock market volatility work in your favor.

Longtime readers know one of our favorite ways to do this is with a simple options strategy from our colleague Dr. David "Doc" Eifrig.

Doc's strategy takes advantage of volatility to allow you to safely generate hundreds or even thousands of dollars in extra income every month. And believe it or not, it is designed to work even better – to generate bigger payouts, with less risk – the higher volatility rises.

In short, it's the perfect strategy to add to your investing "toolbox" right now. And despite what you may have heard about options trading, Doc says this strategy is simple enough for anyone to use... no matter your age, education, or background... and no previous trading experience required.

But you don't have to take our word for it. This Thursday, March 8, at 8 p.m. Eastern time, Doc will show you how it works in a live demonstration.

For the first time ever, he'll walk one of our own young staff members – a total novice with zero trading experience – through the entire strategy in real time. You'll see exactly how you can put this strategy to use for yourself... step-by-step... from start to finish.

This live "demo" is absolutely free for Stansberry Research subscribers. Simply click here to reserve your spot now.

New 52-week highs (as of 3/5/18): Amazon (AMZN), First Trust Nasdaq Cybersecurity Fund (CIBR), CME Group (CME), Grubhub (GRUB), MarketAxess (MKTX), and Okta (OKTA).

In today's mailbag, a couple subscribers tell us how they're handling the recent volatility... and several more weigh in on Porter's critique of Warren Buffett's Berkshire Hathaway. Send your notes to feedback@stansberryresearch.com.

"I'm holding up just fine. All of the history that your team presents regarding past bull markets and how they correct/pullback, before going higher, then pulling back again, gives me a better understanding of what is currently occurring in the market.

"Three weeks ago I cashed out a sizable life insurance policy and I'm investing it in line with a combination of The Total Portfolio, The Capital Portfolio and The Income Portfolio. I've kept a lot of dry powder which I used this morning and purchased quite a few stocks at much lower prices than if I had I jumped in with both feet right away. I still need to fill a few positions, but I'm carefully watching for a good entry point.

"Stansberry has taught me to be much more patient than I ever was before. Kudos to everyone at Stansberry for their fine research and due diligence. Staying the course." – Paid-up Stansberry Alliance member Rick R.

"[Buffett] is one of the best investors of all time. He had a rock-solid plan, and it worked for decades. How did Warren go from investing in 'inevitables' to 'incorrigibles?' Simply put, Warren is not 'infallible.' He went off his own script, and in doing so, went off the rails. Forgive the insensitive metaphor.

"Some folks will be upset by hearing these things Porter said of the Icon. It does seem silly to be offended by the truth, but there you have it. America is full of people who are perpetually offended.

"To the folks who are struggling with sticking to their stops... In the past several weeks I've sold both Walmart and Coca Cola. Each was the victim of the VQ Trailing stop. When the tool says sell, sell. A lifetime of data makes better decisions than your feelings. Falling in love with an investment that cannot love you back is on a par with being offended by the facts surrounding Buffett. Neither is fruitful. Besides, cash is so very under rated. Move to cash without blowing up your position, use the cash to buy something better.

"The point is to keep your bottom line moving up and to the right. And it doesn't matter if you are doing that with Berkshire, Coke, Walmart or selling puts for some conservative income. If your favorite stock takes a breather, don't sweat it. Sell it, put it on your watch list and buy it back when it's a better value. If you want to love something, get a puppy." – Paid-up subscriber Terry G.

"Porter, one thing I've come to understand about you and your team is that you will not lie to me. I have full faith that your research is spot on. Your predictions I pay attention to obviously as an Alliance member, but I don't hold to the same standard as I do your research. This is because no one can see the future perfectly or in perfect time. This must be a fact, otherwise what's the need for a trailing stop?

"What impresses me most with your work on BRK is how literally valuable it is. Just by be being subscribers, and getting the Digest, we have access to this great effort from you and your team. I've become used to getting more than my money's worth from Stansberry Research, but for this essay, I offer you a hearty thank you." – Paid-up Stansberry Alliance member Jason Barrera

"Just wanted to say you did not go too far on Berkshire, and in fact did the job I've tried to do for some time now. It's been extremely tough to put together the puzzle of BH, but you did it and it was a bit worse than I thought. Great insight and clear explanation on all the factors. The team at Stansberry always delivers. My only regret was last year spending money on [a competitor of Stansberry Research]..." – Paid-up subscriber Alley Catyb

"Buffett is a favorite of most of us... You probably didn't enjoy 'calling him out' at this stage of his life. But this makes perfect sense!!! And your last quote of his is amazing." – Paid-up subscriber L.W.

"Dear Porter and Team: Your essay and your team's analysis seem spot on to me. I read the Berkshire letter and found myself asking why he would allow the RR to keep having negative capital and substandard returns. It didn't make sense. And the reduction in deferred taxes due to the lower tax rate increasing book value disguises this and many other issues this year as $29 billion covers lots of sins.

"You have confirmed my suspicions and I will do more reading, but probably some selling. Buffett has succeeded in bamboozling his most loyal followers. I suspect his ego (which is as big as yours!) will not react well to your letter, but you should send it to him anyway and see his response, if any. A great essay, thank you." – Paid-up subscriber Ken Wakeen

"Porter nailed it on Berkshire Hathaway. I work in the Berkshire Hathaway group of companies as a Sr Analyst. Moral in most companies is poor, and management changes made by Senior leadership in the holding company are generally less effective than those in place when companies were first acquired." – Paid-up subscriber Mike

"Good Day Porter: Thanks for stepping up to voice a thorough analysis of Berkshire. Your article was on target.

"I, too, wondered what the heck Buffet was doing when he bought the railroad. You didn't say it, so I will: It seems to me Warren was fulfilling some childhood dream to own a real set of trains, not just the miniatures – just because he could. Or, he saw himself as a modern-day Cornelius Vanderbilt, 'The Commodore,' who built his business reputation on highly successful expansion of transportation for the masses with ferries, steamships, and railroads. Either way, his decision was a monumental shift away from his capital-efficient business model.

"To be sure, I've made a significant amount of money over the years with BRK.B. But as you pointed out, Buffet's original investment strategy has gone through enormous changes and could be said to have 'gone off the rails.' Now may be a good time to de-train. Best regards." – Paid-up subscriber Tom Achterberg

"Finally!!! Someone speaking against the Oracle. Every interview I see him or Charlie on I flip the channel, and have been for years. They remind me of people who routinely hold court and some nit whit will grovel at their feet for an interview or worse some expensive lunch." – Paid-up Stansberry Alliance member Steve J.

"Mr. Buffett, you don't have to own the railroads & utilities to win Monopoly... (Tongue firmly in cheek.)" – Paid-up subscriber Pete

"Porter, I read your Friday essay with fascination. While others may be upset or worse, cancel their subscriptions, an essay like this is precisely why I read your work. What you have done is point out that Warren Buffet is simply human after all.

"Rather than doing nothing, staying the boring course of making double digit returns year after year by simply allowing what he built to continue to bear fruit, he decided to prune the tree to the point it might no longer live, much less produce delicious returns. How many of us have done the same? How often have we been our worst enemy? Meddling, tweaking, shifting assets to take advantage of the latest trend, often ignoring proven advice on position sizing, asset allocation and trailing stops.

"The hardest lesson I have learned is to ignore the emotional urge to do something. It has taken awhile, but I now trust the proven financial model of doing nothing. By getting the position sizing right, the asset allocation right, and following trailing stops, I can ignore the chaos around me, letting the market demand the attention of others. My portfolio has evolved over time to include may Buffet type investments, Coke, McDonalds, American Express, to name a few. The difference is I didn't invest in them because Buffet owned them. I bought them because of what I learned from you.

"Warren Buffet may not listen to you, Steve, Dan or Doc, but he sure could learn a thing or two from Stansberry Research.

"P.S. I often wonder why Buffet never bought Hershey. I truly believe it is because of what you just outlined. He stopped being 'Buffet' and became an 'Average Joe.'" – Paid-up subscriber Mark Tobino

Porter comment: Mark, he might have other reasons for not buying Hershey (HSY). There's a permanent controlling investor and he may not have been able to get a big enough position – it's not a big stock.

But the bigger question is, why didn't he buy any of the great businesses that were for sale back in 2009/2010?

Why didn't he buy more of the two he already owned and were obviously still growing – Disney (DIS) and American Express (AXP)?

Why didn't he buy any of the incredible businesses we were able to recommend back then, like Visa (V), eBay (EBAY), Starbucks (SBUX), or Tiffany (TIF)?

All of these stocks have vastly outperformed BRK... not to mention IBM (IBM), Bank of America (BAC), and Burlington Northern Santa Fe.

It makes no sense.

Regards,

Justin Brill
Baltimore, Maryland
March 6, 2018