Superpowers of the World's Greatest Investors
A guest essay from Austin Root... Lessons from four investing gurus... Don't settle... Investing is seasonal... Never lose money... Understand the why... A free interview with Porter Stansberry...
Editor's note: Today, we're bringing you a guest essay from Stansberry Asset Management Chief Investment Officer Austin Root...
As many of you may know, Austin worked for Stansberry Research for nearly four years. He served as our director of research from 2019 to 2021 and managed our Portfolio Solutions products, among other responsibilities.
In 2021, he joined the staff at Stansberry Asset Management ("SAM"), a money-management firm – separate from our publishing business – that uses our research and ideas, plus other sources, to help manage individual client portfolios.
Today, Austin shares some lessons he has learned over his 20-plus-year career in the markets – from four of the biggest names in the investment world. That includes Stansberry Research founder Porter Stansberry, who, as Austin explains in this essay, he recently sat down with for an unscripted video interview that is free to watch...
In a professional investing career that spans more than two decades...
I (Austin Root) have had the chance to work with and learn from some of the greatest investors on the planet.
In today's Digest, as we reflect on 2023 and look ahead to 2024, I thought I'd talk about a few of those gurus and share some of the most valuable lessons I've learned from each.
Let's get right to it...
Steve Schwarzman – Don't settle for less than your best...
Early in my career, I worked for investment powerhouse Blackstone. On my very first day – and in my very first meeting – Blackstone's founder and CEO Steve Schwarzman taught me to never accept or produce "A- work" when you are able to produce A+ work.
He explained that success is cumulative, and you can only see the true power of demanding excellence when you stack great performance on top of great performance on top of great performance.
And sure enough, Blackstone itself is a perfect example of this power of compounding success. Back in the late 1990s when I started working there, Blackstone employed about 200 people and managed assets of around $7 billion.
Today, Blackstone has nearly 5,000 employees and has built itself into the world's largest alternative asset manager, with more than $1 trillion in assets under management.
Steve Cohen – Do NOT 'set it and forget it'...
After graduating from Stanford Graduate School of Business, I worked as a portfolio manager for a large and wildly successful hedge fund, SAC Capital Advisors, founded and run by billionaire Steve Cohen. (Steve might be better known now as the owner of the New York Mets, but he still runs a wildly successful hedge fund that is now called Point72.)
During my time at SAC, I had the opportunity to work directly with Steve Cohen, pitch my investment ideas to him, and watch others do the same. I learned a great many lessons from Steve, including that investing is seasonal.
In other words, investment performance in different asset classes changes over time. And so you should not always be fully invested in the same, static mix of assets and markets. It's far better to be tactical with investing and pick your spots when conditions favor that type of investment.
At Stansberry Asset Management ("SAM"), we always strive to put this lesson to work on behalf of our clients. Consider, for example, investing in bonds or fixed income, which in my view is a particularly "seasonal" asset class. Specifically, investors should not consider bonds a "set it and forget it" type of investment.
In fact, during times when you expect interest rates or default rates to rise materially, most investors should avoid bonds altogether. Why? Because rises in either will significantly impair the value of what is supposed to be a "safe" instrument.
(Now, to be clear, when the opposite is true – when interest and default rates are falling – bonds are incredibly attractive investments.)
Thus, as we entered 2022, with a near certainty that the Federal Reserve was going to begin dramatically raising rates, we at SAM did not own a single bond in any of our client investment strategies.
One more note about bonds to illustrate the value of being tactical with your investing: At the end of 2021, had you done the opposite of what we did at SAM and bought a 30-year U.S. Treasury bond, that bond would now be worth 40% less today given the increase in rates.
Julian Robertson – Invest in quality and never lose money...
I also learned an incredible amount from legendary investor and founder of Tiger Management Julian Robertson. After working with him for a couple of years, Julian and Tiger Management provided a strategic investment to help me start my own hedge fund, North Oak Capital Advisors, which I ran with a partner for five years.
Among the many lessons I learned from Julian over that period, two stand out.
First, like fellow investment legend Warren Buffett, Julian taught me the significance of investing in high-quality businesses that were capable of generating solid profits through good times and bad. And when you were right about them, these types of world-class businesses tended to produce much higher returns for investors over the long run.
On the flip side, and also similar to Buffett, Julian also taught me the paramount importance of not losing money. Julian knew this lesson from experience, and routinely reminded me that it's much easier to grow your wealth in the good times when you've adequately protected it during the bad times.
Over the course of North Oak's five years, I'm happy to share that our returns meaningfully exceeded hedge fund benchmarks. And equally important to Julian and to our investor clients, we produced positive returns every year and for every investor despite a volatile market.
Porter Stansberry – Understand what matters most and why...
I've known Porter for about 15 years now, and along the way we've traded investment ideas and philosophies as friends, colleagues, and business partners. Over that time frame, I've learned a lot from the Big Guy, and I know many of you have as well.
For instance, his understanding of the property and casualty (P&C) insurance industry is truly top-notch. And his ability to explain it to others is without equal. I already knew P&C insurance was a good business. But Porter showed me that, with profitable underwriting and sturdy investment of float income, P&C insurance is a great business.
He has had the same great illuminating effect in explaining the attractiveness of capital-efficient businesses and addictive "sin" stocks. (You may not want to indulge in tobacco, alcohol, chocolate, or caffeine, but after reading Porter's explanations of their virtues, you will want to fill your portfolio up with the makers of these products.)
But I think the most useful lesson I've learned from Porter is to understand what matters most in a particular situation, and why.
Frankly, in my mind, this is Porter's greatest superpower. He has an incredible ability to cut through all the noise and identify what truly matters most.
This skill makes him a great investor. He can quickly identify what factor is most important to a company's stock price. And it also makes him a great writer about investments. He might write about a topic that others have covered before, but they'll never do it quite like he does... never cutting right to the essence of the matter, and never quite in such an illuminating way.
That's why I'm thrilled that Porter has been back speaking out on the markets lately.
And I'm especially excited to have had the opportunity recently to sit down with him, one on one, for a very special, exclusive interview.
Now look, I know you've read a lot about Porter recently. And I know he talked about his new research service, Porter & Co., to Stansberry Research subscribers just last week. But if you're like me, you tend to always find something of value in what he says (and perhaps also be shocked at something else he says).
Still, why is this interview different? Why is this worth your time and interest? I'll give you four compelling reasons...
- This video event is totally unscripted and free flowing.
That's right, except for a quick introduction, the entire event is an unfiltered, keep-the-cameras-rolling discussion between Porter and me about all the things that are going on in the world and what to do about it to protect and build your wealth.
This is Porter at his best. This is the Porter that makes compliance officers and CEOs alike nervous. This is the Stansberry version of must-see TV.
- We get to the why.
During our talk we cover a lot of ground. We discuss what Porter's worried about in the world, including the labor market, inflation, and how some of the world's biggest banks could be in major financial trouble.
To be sure, there was a lot that Porter and I agreed about... and also plenty of areas where we weren't in complete agreement. But in either case, I made sure to push him and understand the whys behind his strong views. That's what you really want to hear... Explain why and how, Porter, you think unemployment will hit 10% next year?
I'll give you two more "whys" that we delve into. And I think these two are incredibly valuable for you to understand. Specifically, I get Porter to answer:
- If Porter is so bearish on the economy in 2024, why own equities at all?
- Why exactly does Porter recommend that all his research subscribers also hire an investment adviser?
I'm certain you'll want to hear the answers to those questions and more.
- This event is actionable.
This is not just a theoretical conversation. Porter and I talk about specific companies, both admirable and shameful ones. We go into actionable recommendations depending on your investment goals.
And perhaps most importantly, we provide a detailed blueprint for how best to build generational wealth in 2024 and beyond. This includes four specific things you should do – and three specific things not to do – to help in that pursuit.
- Porter provides opinions that will shock you.
You may think you know how Porter feels about certain subjects, but I'll bet you'll be surprised by what he reveals in our uncut, unscripted interview.
Here's just one example: Porter's somewhat negative thoughts on gold...
Gold is not a productive asset. Gold stands still... You can't hide out in gold.
This exclusive video interview is available to you now, free of charge...
That's right. You don't have to buy anything. And you don't have to first be a client of SAM, either.
We're providing this video to you now because we think you'll likely find this information incredibly valuable.
And yes, we do talk a bit about what we do at Stansberry Asset Management and why we could be a great help to you and your family as you endeavor on your own financial journey.
Yes, we explain how we utilize and optimize Stansberry Research and Porter & Co. to build our investment strategies. And we explain how we uniquely marry holistic financial planning with informed, active, sophisticated investment management in a way that few others do, and even fewer do well.
Yes, we give Porter a chance to explain what's unique about Porter & Co. and tease what he'll be writing about next.
But mostly, I want to share with you what I think is a truly informative and entertaining back-and-forth conversation.
So just click the link here to access.
One more thing that I want to mention...
While Porter and I are good friends, we work for and run different businesses. I work for Stansberry Asset Management, which is a wholly separate business from Stansberry Research and Porter & Co. Our businesses are run independently of each other.
Porter's views are his own, and mine are my own.
But in my mind, that independence is what makes this interview so interesting.
Again, click here to access the interview now, and may your 2024 be prosperous.
New 52-week highs (as of 12/27/23): ABB (ABBNY), Autodesk (ADSK), Advanced Micro Devices (AMD), A.O. Smith (AOS), ASML (ASML), American Express (AXP), CBRE Group (CBRE), Canadian National Railway (CNI), Cencora (COR), Cintas (CTAS), Commvault Systems (CVLT), CyberArk Software (CYBR), Dell Technologies (DELL), Dimensional International Small Cap Value Fund (DISV), iShares MSCI Emerging Markets ex China Fund (EMXC), Fidelity National Financial (FNF), SPDR Gold Shares (GLD), Huntington Ingalls Industries (HII), Intercontinental Exchange (ICE), iShares Convertible Bond Fund (ICVT), iShares Core S&P Small-Cap Fund (IJR), Intel (INTC), Ingersoll Rand (IR), Iron Mountain (IRM), iShares U.S. Aerospace & Defense Fund (ITA), JPMorgan Chase (JPM), KraneShares MSCI Emerging Markets ex China Index Fund (KEMX), Kinross Gold (KGC), London Stock Exchange Group (LNSTY), NVR (NVR), Parker-Hannifin (PH), ProShares Ultra QQQ (QLD), Sherwin-Williams (SHW), VanEck Semiconductor Fund (SMH), S&P Global (SPGI), SPDR Portfolio S&P 500 Value Fund (SPYV), ProShares Ultra S&P 500 (SSO), Stellantis (STLA), StoneCo (STNE), Cambria Shareholder Yield Fund (SYLD), TFI International (TFII), Trane Technologies (TT), Sprott Physical Uranium Trust (U-U.TO), and Advanced Drainage Systems (WMS).
In today's mailbag, more feedback on Dr. David "Doc" Eifrig's options-trading strategy in Retirement Trader, which he wrote about here on Tuesday and Wednesday... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"I've been trading options (selling) mostly, with an occasional credit spread for a while now. I've done very well, and totally agree with your strategy." – Subscriber Mark G.
Good investing,
Austin Root
Towson, Maryland
December 28, 2023
Disclosure: Stansberry Asset Management ("SAM") is a Registered Investment Advisor with the United States Securities and Exchange Commission. File number: 801-107061. Such registration does not imply any level of skill or training.
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