A Hall-of-Fame Pick for Doc Eifrig

A less-bullish picture... It's all about retail this week – and China... Sorry for losing $6 billion... Doc Eifrig makes the Hall of Fame... A nearly 1,200% gain on Microsoft... Buying quality at the right time...

We'll get to our Hall-of-Fame news in a moment...

But first, I (Corey McLaughlin) have a few brief market updates...

The slide in the major U.S. indexes that started at the start of the month softened toward the end of last week – and that story continued today.

The benchmark S&P 500 Index finished up slightly, the Dow Jones Industrial Average was about even, and the tech-heavy Nasdaq Composite Index was nearly 1% higher, powered by 5%-plus jumps from chipmakers Nvidia (NVDA) and Micron Technology (MU).

But more volatility could be afoot... The Nasdaq and the small-cap Russell 2000 Index, which was down today, are now trading right near their 50-day moving averages – a simple technical gauge of a short-term trend. Yet the S&P 500 and Dow remain above theirs.

Said another way, the trends right now aren't as strongly bullish as they were a month or two ago, but the market remains in the same uptrend ballpark. The longer-term trends for the major U.S. indexes, going back to last fall, are also in good shape.

A few things to watch the rest of this week...

It's a notable week for all things retail.

As our Stansberry NewsWire editor Kevin Sanford wrote this morning, big-box stores like Walmart (WMT), Target (TGT), Home Depot (HD), and TJX Companies (TJX) all report their quarterly financials this week... which will bring earnings season to its near completion.

What these companies show in their earnings and what their CEOs say about consumers' spending habits could influence some market moves this week. Also, on Tuesday, the U.S. government will publish its latest monthly update on retail sales.

A strong report would align with the case for the Federal Reserve raising rates again at its next meeting in mid-September. Conversely, a weak report would support the case for a "pause," which is the betting favorite in the market today.

Aside from all that, I'll be keeping a close eye on the latest economic data out of China.

You can debate whether any numbers from China are real or are always manipulated by its communist government leaders... But as with the numbers from the U.S., enough folks in the market follow what's reported out of the world's second-largest economy, so here we are...

Chinese economic weakness is popular again...

Last week, a bunch of further data made the case for deflation occurring in China... And we were reminded that "zombie" companies aren't limited to the U.S., either.

Credit numbers on Friday showed a major slump in demand for Chinese business and consumer borrowing. New local-currency bank loans plunged by nearly 90% in July from June to the lowest level since 2009.

What's more... the country's top private property developer, Country Garden, is reportedly close to defaulting.

The company, a household name in China that has built more than 3,000 housing projects in smaller Chinese cities, suspended trading of its bonds on the Shenzhen Stock Exchange on Saturday. It said on Friday that it expects to lose at least $6 billion in the first half of this year.

The company's management literally apologized to shareholders on Friday for its bad performance this year but said the company would do whatever was necessary to stay afloat and "think of every possible way to rescue itself." Don't hold your breath.

This is all part of cratering economic sentiment in China. This is significant given the country's place in the global economic picture and its government's aspirations, as well as the hits that its real estate sector has already taken over the past few years.

Remember Evergrande's plight in 2021 and the images of ghost cities being demolished – empty residential real estate that people never moved into? As Kevin wrote today...

Additional economic data from China will provide insights into the country's domestic economic situation amidst the ongoing deflationary trend. Two critical indicators – retail sales and industrial production data – will garner the most attention and shed light on consumer spending and manufacturing activity.

We'll report back with more this week. But for now, let's move on to the fun stuff...

Doc, welcome to the Hall of Fame...

At the bottom of every Digest, we list the top 10 all-time highest-returning closed positions across all Stansberry Research portfolios, dating back to the start of the company. You'll notice a new name on that "Hall of Fame" today...

This past Wednesday, Doc recommended that his Retirement Millionaire subscribers should sell half of their Microsoft (MSFT) position. This resulted in a gain of 1,185%.

And yes, you read that right... 1,185%.

Doc first bought Microsoft on November 11, 2010 – a time when no one was eager to buy stocks thanks to the financial crisis. The buy recommendation of Microsoft was also one of Doc's very first official recommendations at Stansberry Research...

And he has held the stock ever since. Think about all the different things that have happened since 2010 and the last few years alone, but Doc was steadfast in holding onto Microsoft shares.

The return Doc notched last week works out to nearly 24% a year with dividends reinvested. Compare that with the benchmark S&P 500, which has returned just 13% a year in the same span.

This newly minted Hall-of-Fame position, good for No. 2 all time on our list, also serves as a healthy reminder for all investors.

1,000% gains are possible investing in strong, quality businesses...

You don't need to go betting on wild, unprofitable startups or a similar speculation...

Doc's original thesis back in 2010 for Microsoft was that it was a dependable cash cow trading at a cheap valuation. That made it worth holding through various circumstances that may have wrecked another company.

Microsoft's path from steady value stock to a Hall-of-Fame winner began in 2014. That's when the company replaced CEO Steve Ballmer with Satya Nadella... a visionary who moved the company beyond mere software sales into the fast-growing cloud-computing industry.

Doc has been so bullish on Microsoft over the years that he even re-recommended shares in 2019. Since that re-recommendation, the stock is up 120%, compared with just 52% for the S&P 500.

So why sell now? Well, Microsoft has gotten another big bump lately thanks to traders obsessed with anything related to artificial intelligence ("AI"). Here's what Doc wrote in the latest issue of Retirement Millionaire...

We don't know what will happen with AI as it pertains to Microsoft. The software giant has a key relationship with OpenAI – the privately held leader in large language models.

We see a lot of hype in the prices of AI-related stocks. And we worry that will deflate.

At the same time, even if some of the AI dreams don't come to fruition, we're fairly certain that the technology – implemented on even a fraction of its apparent potential – will lead to lots of computing power being employed by Microsoft's cloud data centers. That could be a big boon for its business.

If you know Doc, you know he's a conservative investor...

He doesn't aim for a 1,200% gain. In fact, if you were to tell him a stock could go up 1,200%, he'd likely consider that a strike against it.

That approach pays off... Doc has one of the best long-term track records at Stansberry Research (need we remind you about his "playoff beard"?) – and he has put his record together without taking big risks.

Things like cash flow and valuation matter to him more than riding the next hot trend. While Doc sees the potential of AI, and in particular Microsoft, he prefers an investment thesis that everyone else isn't already chasing. More from Doc...

We're not the only ones to see [the company's possible AI-related growth]. And that has driven Microsoft's valuation to $2.4 trillion, which is 11 times sales and 33 times earnings.

In the end, there's big potential here... but also risk.

By selling half of the position now, Doc and his subscribers lock in profits at a massive gain but still keep some exposure to the potential upside in AI... plus still own shares of a great underlying business.

Congrats to Doc and the rest of his Retirement Millionaire team.

And we suspect we'll see Doc's name on the Hall-of-Fame list again soon... He also has three positions in the Stansberry Research Top 10 Open Recommendations – including the other half of the position in Microsoft that's sitting at No. 1.

New 52-week highs (as of 8/11/23): CBOE Global Markets (CBOE), Fortive (FTV), ICON (ICLR), Eli Lilly (LLY), VanEck Oil Services Fund (OIH), Phillips 66 (PSX), Construction Partners (ROAD), SLB (SLB), and Walmart (WMT).

In today's mailbag, feedback on Dan Ferris' latest Friday essay... Do you have a comment or question for us? As always, send your notes to feedback@stansberryresearch.com.

"Dan, Another great Digest on Friday, and a very timely reminder of what may be on the horizon. Your pieces are always thought provokingly useful in keeping my head on straight... The best educator is also entertaining. I used to wonder how you could come up with such timely and germane subjects each week. Of late, I only wonder how you choose which subject matter to skewer out of so many presenting themselves." – Stansberry Alliance member Robert H.

"Dan, As you know, the problem with cheap credit is that many businesses that have no business being in business will find a way to exist with cheap credit. Too many of those will not survive the first raise of interest rates. And that is what we are witnessing today.

"As Warren Buffett said so eloquently, 'You only know who's swimming naked when the tide rolls out.' And that clown that was in charge of WeWork was as naked as a jaybird." – Subscriber Kevin B.

"Hi, What a statement from Mr. Ferris. It's tight, right, and potent... deserving of being added to my quote list: 'Cheap money is like a financial pandemic.'" – Subscriber Richard T.

All the best,

Corey McLaughlin with Jeff Havenstein
Baltimore, Maryland
August 14, 2023