Yachts and Ferraris... The secret to the Top 10... What "negative real interest rates" mean for gold... Ackman doubles down... Tepper says no QE3... Reactions to Waldman...
"Yeah... I've already got the Ferrari and the 50-foot yacht, but I want a 200-foot yacht…"
It's no secret that gold expert John Doody likes the finer things in life. He'll be the first to tell you. We always invite John to present at our annual Spring Editors Conference. For one, his presentations are entertaining... (There's a good chance you'll see pictures of the Ferrari and yacht in action.)
But more important, John is the single best gold stock investor we know. In his newsletter, Gold Stock Analyst, John produces his famed "Top 10 List." These are the 10 gold stocks you should buy today. If you buy his recommended gold portfolio, you will outperform the market. John's method ensures he's only buying the cheapest gold stocks. But the method he uses to value these stocks is simple...
John calculates the value of gold stocks by measuring production, then dividing by the stock price. Then, he calculates how much you're paying for that company's gold production and its gold in the ground. Again, his system sounds simple. But it works. In 2010, his Top 10 returned 70%. From 2001-2010, his Top 10 returned 1,360%.
At this year's conference at Pennsylvania's Nemacolin Woodlands Resort, John also revealed the only indicator you need to know for investing in gold stocks. When this indicator is flashing "buy" – as it is today – gold stocks will rise. The indicator John described is "negative real interest rates" – meaning when the rate of inflation is greater than interest rates. When you experience negative real interest rates, the money you hold in bank accounts loses purchasing power every year (though the nominal value increases).
When negative real interest rate occurs, money flows into gold and gold stocks, which John says are cheap right now. To learn more about Gold Stock Analyst and receive John's Top 10, click here...
At the Ira Sohn Investment Conference in New York last month, billionaire hedge-fund manager Bill Ackman revealed a new position in Family Dollar (FDO). Ackman said Family Dollar, a dollar-store chain, is like Wal-Mart… But it has room to grow. He also liked the company's great return on capital.
Family Dollar received a bid to go private from Trian Fund in February for between $55 and $60 a share. The deal didn't go through, but Ackman still thinks Family Dollar is an attractive takeover target. At the time of the conference, he said shares of the dollar store could increase by 70% (to around $92 a share, including dividends). He owned 4.7% of the company, worth $305 million.
Today, Ackman's hedge fund Pershing Square, announced it nearly doubled its position in Family Dollar to 8.9%. He currently owns 10.87 million shares, worth $571.4 million. Shares are trading around $53 now.
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New 52-week highs (as of 6/9/11): BlackRock Corporate High Yield Fund V (HYV), Forest Laboratories (FRX), Texas Pacific Land Trust (TPL).
A few reactions to Peter Waldman's comments from yesterday. Send us your feedback here... feedback@stansberryresearch.com
"Not really sure I understood the point of Mr. Waldman's rant in Thursday's addition of the S&A Digest. Unless he of course wanted you to lay out a solution to ALL the problems facing the United States while downplaying the seriousness of them. I am sure the fact that we have a black man as president was full of significance, but only to someone who thinks that any criticism of this current government's incompetence is due to racism. Being successful at capitalism is what makes this country great and if you have a problem with greedy capitalism, maybe the U.S. is not the place to live." – Paid-up subscriber L. Lee
"I think it's Mr Waldman who needs to examine what plant material he's stoking his pipe with. It's clear to me this guy inhales.
"Solutions... what solutions? We are already past the tipping point. You've educated and advised us to the best of your ability to help us prepare for the inevitable.
"I'm dumbfounded by Mr Waldman's perception that 'our politicians have failed us to a certain extent.' How about to the extent of 100%? Who else created and implemented the policies that have brought us to this point? Who else has been responsible for keeping the currency presses running 24/7 and likely to continue to do so?
"Does he not get that the more corporations are taxed here in the US that they will eventually take their balls and bats and move off shore? The result... reduced tax revenue and more unemployed Americans. Great idea Mr Waldman!
"Then to accuse you of racism... where did that come from? And then call you a greedy small-mined capitalist yet he believes that a 5% yielding stock certificate should hold more value than gold, silver and oil. Doesn't that qualify him as a greedy big-minded capitalist? Mr Waldman will get his reality check soon enough... a check he can bank on... maybe we'll be invited to his pity party." – Paid-up subscriber Steven Morse
"I love the Digest and try to read it every day. Thanks. Now a view from the front line on the battlefield.
"I am in the retail furniture business in north Florida. I try to do my own informal surveys from time to time to make sure that my business isn't the only one that sucks. It's not. May this year to last year comparison, written orders down 29% and delivered orders down 15% (btw, last may wasn't exactly great either).
"What's interesting is in my surveys I have noticed a pattern. Towns or cities that have Air Force bases (Valdosta Ga.) or colleges (Gainesville Fl.) seem to either be holding steady or down just a little, while towns like mine that aren't so lucky are down significantly. Isn't it a shame and awfully scary that the only businesses that are holding up are the one's that are lucky enough to be around heavy government funding? Washington D.C. is the only area doing well in real estate. What a mess we're in!
"On a side note. I went to our local property appraiser's office this week to complain about the property taxes on my business. It's$28,000 per year. It was $31,000 in 2007. I showed him my sales figures from 2007 to today and begged for some help. Sales went from 7.1 million to 2.99 million (59% decline). Don't be impressed by those numbers too much. It is a very capital-intensive business, if I got 4% in an investment, I would be better off. Employment went from 46 employees to 9.
"I told him I was trying not to have to let anyone else go. We'll see what he can do for me. The property was valued at 1.2 million in 2007 and is now valued (according to them) at 1.1 million. I told him if he would like to buy it anywhere close to that, I would sell it to him. For some reason he didn't take me up on that offer, and he actually just acted like he didn't even hear me." – Paid-up subscriber Paul Mabile
Regards,
Sean Goldsmith
New York, New York
June 10, 2011