2022 Report Card, Part II: How Did Your Favorite Newsletter Do?

2022 Report Card, Part II: How did your favorite newsletter do?... Navigating the booms and busts... Grading some of our flagship publications... Readers respond to the Fed...

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Today, we're opening our grade book to look at the performance of some of our traditional newsletters, including some of our most popular services...

Last Friday, I (Brett Aitken) kicked off our annual Report Card by sharing the story of Peter Cundill, one of the great opportunistic investors in modern history.

I wanted to highlight how the market environment he faced at the start of his career in the 1970s is rising again: inflation... rising interest rates... fears of recession... a wipeout in tech stocks... a burgeoning rally in commodities. I hope Cundill's story illustrates how opportunities always exist, even in a challenging environment like today's.

My point was not just to focus on how our editors have fared in the past, but also to help us think about how they are positioning their publications to navigate the markets ahead...

With that in mind, today we're turning our attention to eight of our traditional monthly newsletters... We have one more batch of grades that we'll deliver in Friday's Digest, but for today, let's look at some of our most popular services...

For the traditional publications, we want to capture the booms and busts...

Every year, we receive feedback with questions about our grading criteria. We receive some of the most colorful – and least friendly – commentary from those who believe we should only grade the most recent year.

We cover this in our grading criteria explanation every year – which you can find in the gray box below.

But every year, I feel it's my responsibility to point out why that doesn't make sense for traditional publications that make new recommendations every month...

Our goal is to help our subscribers succeed in the markets over the long term... and by long term, I mean years.

I know some people buy our products looking for "hot tips"... thinking they will get rich by next Tuesday. But that's not realistic. Sure, any one of our publications may hit a home run or two in a given year. But most investment strategies take years to play out. You will benefit most from our work if you can stick around long enough to see these investments through.

Also remember, our traditional publications normally make new recommendations every month that accumulate in their model portfolios. These are not risk-adjusted, fully allocated portfolios, like the kind professional money managers or our Portfolio Solutions team maintain. Many of the recommendations have only been on those lists a few weeks... hardly enough time to evaluate.

So it makes sense to us to grade publications that make monthly recommendations over a period of years – not months.

As we showed last week, the market soared more than 70% between 2018 and the end of 2021. And when stocks soar like this, investors often fall prey to the misconception that making money in the markets is easy. They become greedy... and complacent.

Still, I'm sure the two big corrections in 2018... the 34% crash in early 2020... and the bear market of 2022... served a healthy dose of humility to even the most confident of investors.

We therefore think the five-year track record captures those booms and busts best, and that's the time frame we'll use to evaluate our traditional publications.

Let's start by looking at some of our most widely read publications...

Stansberry's Investment Advisory: A+

Our flagship publication provides investors with investments across a handful of core investment strategies, including capital-efficient and global elite businesses. Software giant Microsoft (MSFT) and chocolate manufacturer Hershey (HSY) are both long-standing names that have been in the portfolio for more than a decade. Both are among the top-returning open positions across our company. Microsoft is up nearly 800%, and Hershey has returned more than 550%.

Also among the publication's core strategies is investing in the best of the best in the property and casualty (P&C) insurance sector – what we have long called "the best business in the world"... with another two Top 10 open recommendations: W.R. Berkley (WRB) up more than 400% and American Financial (AFG) up around 440%.

Naturally, I'm biased... but I believe that capital-efficient stocks and P&C insurance companies should hold a place in everyone's portfolio. They might not always sound like the sexiest of stocks to buy (especially insurance)... but they are about as close as you can get to the Holy Grail in investing. These are exceptional businesses that you can buy and hold forever, collecting a fat dividend while you watch their share price plow steadily higher.

But you can't just go out and buy them at any price. As we always say... identifying great companies is just one part of finding financial success in the markets. Buying them at the right price is what will make you rich in the long run. No one is better at identifying these stocks and the best time to buy them than this team.

The Future of Medicine... Gatekeepers of the Financial Markets... and Software as a Service ("SaaS") are a few other sectors the team specializes in. And they will sprinkle a few crisis hedges and speculations into the model portfolio for good measure.

For the five-year period, the Investment Advisory team has done a superb job navigating volatility and maximizing opportunities when they presented themselves.

Some of their top-performing recommendations over the past five years include a double in Parsley Energy and a 117% gain in DocuSign (DOCU). The team booked a 23% gain when closing out a short position on HCA Healthcare (HCA) during the COVID-19 crash in March 2020.

And last year, they kept subscribers safe. Their recommendations showed a small 2% decline as of December 30, while the benchmark was down almost triple that with a nearly 7% loss.

For the five-year period, Stansberry's Investment Advisory earns a well-deserved A+.

True Wealth: B-

Editors Dr. Steve Sjuggerud and Brett Eversole's mantra is simple:

Buy things when you can find them cheap, hated, and in an uptrend.

They take a top-down approach to identify big macro trends forming... find a way for their subscribers to get in – mostly through exchange-traded funds ("ETFs") and large-cap plays... then look to ride the trend as long as possible.

Since its inception in 2001, this service has racked up average gains of 15.2% – a remarkable feat... one that any hedge-fund manager in the world would be envious of.

Now, the trades are often early. So sometimes that means getting bumped out of a trade for a small loss before the trend gets underway. But that's OK. The team is always ready to step aside until they get a new signal. And when the trend does finally kick in, they can ride it for a long time.

Brett and Steve did a great job identifying the opportunity in energy in late 2020... and have ridden that trend well through to today, scoring triple-digit and double-digit winners in the model portfolio. But they took a hit with semiconductors, a real estate recommendation, and an emerging market play in 2022 that hurt the performance.

When you get a few heavy declines like we saw between 2018 and 2022... the win rate suffers. And the 2022 bear market meant a larger-than-usual hit to average gains and a lower five-year average.

The average gain fell a bit short of the benchmark, and the win rate is lower than usual for this service. For that reason, True Wealth earns a B- for this year's five-year performance.

I know Brett and Steve will be disappointed with this grade. I also know they identify big trends better than anyone else around... especially after a "clearing out" of overvalued stocks and sectors like we've seen over the past 12 months or so.

And they believe they have found a doozy in the making. I'll touch more on that matter in the True Wealth Systems section. You won't want to miss it.

Retirement Millionaire: B

The performance of this service since its 2008 inception is outstanding.

And last year, editor Dr. David "Doc" Eifrig earned an A+ in the Report Card for this publication. But 2022 proved challenging for everyone... including Doc and the Retirement Millionaire team.

As I mentioned at the outset, it takes time for most investment theses to play out... So I expect many of Doc's picks over the past 12 to 18 months to pan out for his subscribers. For example, at the end of December 2022, one of Doc's recommendations – a great software company with a fantastic business model – was showing a 27% loss after just four months in the model portfolio. But now, the position is almost back to breakeven. Another position that was showing a 10% loss is now almost flat. And the trend is working in these stocks' favor.

And you should know that Doc has scored several triple-digit winners over the course of Retirement Millionaire's history, including a more than 850% gain in Microsoft and a 448% gain in Warren Buffett's holding company Berkshire Hathaway (BRK-B), as well as several big double-digit winners like Match Group (MTCH), which was up 53% at year-end.

He has identified several strong buys in his portfolio today.

Still, for the purposes of the annual review, the track record is through December 31, 2022, and 2022 was tough. While the average gains of 11.9% beat the benchmark slightly... Doc and his team suffered several losses through the year which dragged on the win rate for the five-year period. And for that reason, Retirement Millionaire earns a B for this year's annual Report Card.

I know Doc will be livid with this grade. But I also know Doc will be disappointed with the results... and will take the necessary action to ensure he and his team course-correct by this time next year.

If you haven't followed Doc's work before... he has a history of outperformance on those rare occasions he has received anything other than an A in the Report Card. My bet is he will do the same this year. Don't say I didn't warn you.

Stansberry Innovations Report: A 

We launched this publication in April 2018.

With average gains of roughly 15% from its stock recommendations over the five-year period, the Innovations Report crushed the benchmark by more than 30%.

Editor John Engel focuses on technology trends and has covered everything from space technology to gene editing, 5G, robotics, video games, SaaS, cloud computing, and digital payments. In January 2020, editor Eric Wade joined the mix to cover the blockchain and crypto technologies.

Over the past five years, many of the stocks John has recommended have rocketed up by triple digits, including gene-editing technology firm Crispr Therapeutics (CRSP)... in-space technology company Maxar Technologies (MAXR)... and SaaS company DocuSign, to name a few.

Given the brutal conditions last year for stocks in general, but especially tech stocks, the Innovations Report recommendations held up well... but some of the picks from 2021 struggled. The publication logged a 50% win rate for the period.

Still, like I've said, it's the ability to navigate the ups and downs of the market over the longer term... and this service has outperformed over the five-year period.

In Crypto Corner, we're mostly providing high-level coverage and industry commentary. However, editor Eric Wade has made a handful of recommendations, starting with bitcoin (BTC) and Ethereum (ETH) in 2020. He recommended taking some money off the table in each of those positions in 2021... advice for which I'm sure subscribers are grateful. Bitcoin plummeted from a high of more than $40,000 to around $15,000 last year. It has since rebounded a little and trades for around $23,000 as we go to press. Eric sold a small position for $37,536 – locking in a 333% gain. Despite the massive decline in price, the combined position is still up a hefty 139%.

The Innovations Report earns an A for this year's Report Card.

Commodity Supercycles: D

Until early 2020, it had been a tough decade for commodities investors.

Aside from a few relief rallies here and there... the definitive trend was down from mid-2008 through early 2020.

That is brutal for even the most avid commodity investor to endure.

But things finally began to turn around in April 2020. Since then, the Invesco DB Commodity Index Tracking Fund (DBC) has more than doubled. The five-year period we are using for this Report Card shows roughly a 50% increase.

Subscribers should have done well over the past two or three years in the energy sector. We have recommended several energy plays that have racked up double- and triple-digit gains, including a 119% gain in liquefied natural gas exporter Cheniere Energy (LNG)... an 87% gain in oil and gas royalty play Viper Energy Partners (VNOM)... and a 26% gain – in three months – with integrated oil and gas giant Chevron (CVX)... among others.

Unfortunately, 2018 and 2019 proved beyond challenging with heavy losses across the entire commodity space in both years. And that hurt the five-year track record.

With an essentially flat result over the period, Commodity Supercycles earns a D for this year's Report Card.

Before I move on... you will recall I mentioned last week that we believe the investing landscape has changed. Many of our analysts believe we are on the cusp of another bull run in commodities.

You have heard us say before that when commodities enter a bull market, they can soar way higher and way faster than anyone expects.

Among the open positions in Commodity Supercycles' model portfolio, you will find some exciting opportunities in energy, metals, minerals, and agriculture.

Please know, we always recommend managing risk. We would never suggest betting the farm on any one sector or position. But if you believe, like we do, that we are on the cusp (finally) of another supercycle in commodities... you should consider having at least some exposure to the sector.

If you are new to the space, identify a few stocks with stories you like and place a little capital into them. Make your bets small, an amount you are prepared to lose. You can always add more later if they rise and as you get more comfortable with the sector and individual stocks.

The McCall Report: F 

While this publication hasn't had the benefit of the full five-year period, we are sharing the results since inception – October 2021.

I'm sure editor Matt McCall agrees that 2022 was beyond brutal.

Tech stocks got obliterated. At one point last year, even the behemoths of tech like the once-$1.9 trillion retailer Amazon (AMZN) fell more than 50%... Alphabet (GOOGL) – the owner of search engine Google – shaved off almost half of its former $2 trillion market cap... and social media giant Meta Platforms (META) plunged more than 70%.

The tech-heavy Nasdaq Composite Index plunged more than 30%. Some of the smaller companies did far worse.

And Matt's portfolio – which focuses on speculative growth opportunities – got crushed.

While almost every investor's portfolio saw some pain last year, where this portfolio suffered most was with not cutting losing positions sooner. Yes, almost all innovation and tech stocks took a hit. As the market punished the more speculative stocks, several positions in this portfolio racked up high-double-digit losses before closing them out. That dramatically hurt the performance.

As we've seen in other sectors in years past, it's tough being on the wrong side of a heavy downtrend. The "everything" bubble burst and took down these stocks just a few months after we launched the service. Still, that is no excuse. We must manage risk... no questions asked.

As is the case with all editors, I urge Matt and his team to make sure we do a better job with that moving forward.

Matt did close out several losing positions last December. In addition, he and his team have been diversifying the strategy of this publication over recent months. They have identified opportunities in various sectors... including energy and health care to find profitable businesses trading at attractive valuations. It's early, but so far this year, they have already booked two doubles.

Now, given the short period this publication has been in service... and the timing... it's important to have context.

Matt has spent more than 20 years in the markets focusing on innovation trends. His overarching theme – "the Roaring 2020s" – centers around his belief that new industries and the companies within them offer the potential to book double, triple, and quadruple gains over the long term. You can think of it like finding the Apples or Amazons of the world 25 to 30 years ago.

I'm sure you don't need me to tell you that if you put just $10,000 into Amazon back in 1997 when it traded for only $18 a share, you would be sitting on $17.3 million today – even with last year's sell-off. Of course, you had to endure enormous drawdowns along the way. At one point, the stock fell more than 80%. Most people can't stomach that.

No secret is guaranteed to uncover the next Amazon… but Matt has a proven track record of finding big winners. Prior to joining Stansberry Research, Matt wrote a similar service and had exceptional results. Obviously, I am not using these for this Report Card, but you should know that between 2017 and 2020, he had a win rate better than 60% and average gains of more than 50%. He has found his subscribers 14 triple-digit winners in that period.

Still, for the purpose of this year's Report Card, we are using the "since inception" track record – which earns an F.

True Wealth Systems: A 

You can think of this service as "systemizing" the investment theses and strategies of editors Steve Sjuggerud and Brett Eversole.

Steve and Brett built True Wealth Systems together back in 2011... and have been refining it ever since. We invested more than $1 million on developing the system, and we spend tens if not hundreds of thousands on it every year to improve and maintain it.

And it has been worth it...

Since launching in 2011, True Wealth Systems has racked up average annualized gains of 25%. The benchmark is 10 percentage points lower at 15%.

And the "system" did its job in 2022.

Like its sister publication True Wealth, True Wealth Systems identifies big trends and pinpoints entry and exit points. But you need to know that it is sometimes early. So you might get bumped out of a trade for a small loss a couple times before getting back in and being able to ride the trend for a longer period. That can hurt the win rate a little. But it also keeps the losses tiny so the average gains don't suffer too much over the longer period, as you can see in the results since inception.

The average returns for the year came in at -1.7%. In a bear market like 2022, I consider that essentially flat. Perhaps more important, it beat the benchmark, which showed a 3.3% loss.

Brett and Steve crushed it in 2020 – more than doubling the benchmark and locking in triple-digit gains on the technology sector as well as semiconductors. But they hit a couple speed bumps in 2022... including an emerging market play that cost them a 43% loss.

Last year, they put together a portfolio of energy stocks with every single open position currently showing a profit.

Some might argue the win rate is too low for an A. But that is where context matters. With a five-year average gain of 12.8% compared with 7.6% for the benchmark, True Wealth Systems earns an A for this year's Report Card.

Before I move on... just last week, Steve and Brett came out with a new report on how to ride this secular bull market higher. It's a compelling argument. As you can imagine with these two... they have more than 100 years of data to support their case.

I've worked with both Steve and Brett for more than a decade... and know how meticulous they are when it comes to crunching the numbers. More important, they have an outstanding track record at nailing the bigger trends.

Well, this is one of them. So don't miss it. If you haven't seen their presentation, I recommend watching it.

True Wealth Real Estate: A+ 

We launched this service in 2020, so we'll use the "since inception" results for this year's Report Card.

We offer two ways to invest in real estate...

First is through the stock market. Steve, Brett, and their team recommend stocks that include homebuilders, home improvement businesses, and land plays.

Second is through private commercial real estate. The True Wealth Real Estate team researches commercial properties through the online marketplace CrowdStreet to help find high-quality investments across the country. They talk with the developers... and often go visit the properties in person before making a recommendation.

Naturally, these private deals don't trade on an exchange. So we can't measure the results until the deals close. Most investments take several years to play out. Given that we only launched the service a little more than two years ago, it's too early to measure results. Still, early indications look promising.

Only two of the deals recommended have closed. And both were big winners. The Lakes of Margate recommendation closed for a 40% return in just 14 months. That was well ahead of the expected five-year holding period on the apartment complex. The Cambridge Industrial Center led to a 25% internal rate of return, which was right in line with the initial expectation.

As for the stocks recommended, this team has done a great job navigating the past couple years' volatility. They booked a triple-digit winner on a homebuilder in early 2022 before the carnage hit, and several double-digit winners on other real estate related plays.

With a 59% win rate and 22% average gains, True Wealth Real Estate earns an A+ for this year's report card.

New 52-week highs (as of 2/7/23): Analog Devices (ADI), Fortive (FTV), W.W. Grainger (GWW), Hologic (HOLX), inTEST (INTT), iShares U.S. Aerospace & Defense Fund (ITA), Ryder System (R), RenaissanceRe (RNR), and TFI International (TFII).

In today's mailbag, some feedback on yesterday's Digest about Federal Reserve policy and the yield curve... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"The 10yr/3m yield curve is an indicator of recession because it tells you what the banks will be doing with their money, i.e. they won't be growing their assets (long term loans) because the spread over their liabilities (short term deposits) is now unprofitable. Therefore as no more new money gets put into the system, money supply decreases and so does economic activity as a result, i.e. recession.

"Add to this the facts that banks are increasing their loan loss provisions and the Fed heads are also decreasing the money supply. So a recession is inevitable – just as soon as Uncle Sam stops selling the SPR and inflating GDP." – Paid-up subscriber S.I.

"I am a bit more negative regarding the near-term market than you guys seem to be right now, primarily because I really don't see how anyone can justify any significant multiple expansion as long as interest rates remain as high as they are.

"Fed Chairman Powell has made it pretty clear that interest rates will be higher for longer, and I agree with him based upon the experiences of the 1970s and early 1980s combined with the strong job market we are currently experiencing.

"I sincerely do not think the sticky part of inflation is even close to being thoroughly dealt with, potentially requiring rates to go higher than anyone, including Fed Chair Powell, presently expects.

"In retrospect, I think Greg Diamond's recent article regarding profits from swings in prices of quality stocks is the best way to make money right now on the basis that we may very well be rangebound for several years." – Paid-up subscriber Charles L.

Regards,

Brett Aitken
Baltimore, Maryland
February 8, 2023