Wrapping Up Our Report Card

Returning to Peter Cundill... A time for deep research and opportunistic investments... Wrapping up our Report Card... How did our Cundill-like services fare?...

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We return today to Peter Cundill...

We're wrapping up our annual Report Card by evaluating some of our newsletters that I (Brett Aitken) would like to think Cundill would like most...

I introduced you to the legendary investor last Friday. Cundill was among the most successful disciples of the Benjamin Graham school of value investing.

As you recall, Cundill launched his career in the 1970s – an era defined by high inflation, rising interest rates, and a volatile stock market – with an investment in the French banking firm Crédit Foncier.

While most of the market saw a big, boring dividend-paying stock, Cundill dug into its books and discovered buried treasure. The bank owned vast tracts of Canadian farmland. But the market completely ignored the value of the mineral rights attached to them... vastly undervaluing its worth.

Cundill made the stock the early centerpiece of his fund's portfolio. And the portfolio returned more than 35% to its investors after just two years.

That kind of deep research and opportunistic investing helped Cundill build one of the best track records in modern investing history. He racked up more than 15% annualized gains over the following 32 years. That turned every $10,000 invested in 1975 into more than $1 million.

With markets and the economy behaving a lot like they did in the '70s, we think a "Cundill like" approach is going to be critical to successful investing in the coming months and years.

So today, we're going to start the final installment of our annual Report Card by looking at several of our Cundill-like newsletters... ones that pride themselves on deep research... ones that find hidden value... and ones that make opportunistic long-term investments. Then, we'll also check in on the performance of some of our more speculative services.

(If you missed the second installment of our Report Card on Wednesday, we urge you to read it. In that issue, you'll find our detailed explanation of our grading criteria. You can find that issue here.)

Let's get started...

Income Intelligence: A

Income investing is back...

As I mentioned in last Friday's installment of the Report Card, finding yield over the past decade has been difficult thanks to the near-zero-interest-rate environment.

But despite those conditions, Dr. David "Doc" Eifrig and his team have always managed to find safe and steady income for their subscribers.

Browsing through the five-year track record, you'll find a slew of solid double-digit gains from some of your favorite companies. No outrageous triple- or quadruple-digit gains... but nothing that has hurt subscribers, either. It looks like plain sailing – a dream for retirees.

That doesn't mean big gains aren't possible. They booked a 74% gain early last year on Swiss luxury-goods firm Richemont... and a 93% gain on private-equity and real estate giant Blackstone in 2020.

Aside from the reliability and safety of their recommendations, Doc and his team provide subscribers with invaluable information by the way of their Income Investor Dashboard. Their market overview makes it easy to monitor available yields, inflation, and the best places to park your money.

For the five-year period, Income Intelligence shows a 52% win rate and average gains of 6.6% – beating the benchmark result of 3.7%. And that performance earns Doc an A for this publication in this year's Report Card.

Extreme Value: B-

Here is what I wrote about Extreme Value a year ago...

Growth stocks have crushed value stocks over the past five years.

Yes, I know that the past three months tell a different story. And the debate remains open as to whether the tide has turned... or whether it's temporary, and that growth has just hit a speed bump.

Fast forward to today, and the verdict – at least for 2022 – is in.

Growth stocks, as measured by the S&P 500 Growth Index, ended the year down 30%.

And while it wasn't exactly a picnic for value stocks, either... they lost a lot less. The S&P 500 Value Index ended the year down just 7%.

I understand that no one likes losing money. But as I've mentioned in the previous Report Card installments, the winners last year were often those who lost the least.

While our Report Card is based over the five-year period, you should know that editor Dan Ferris' 2022 recommendations did well by the one-year measure. They were down just 4.8%.

As I'm sure most of you know, Dan is a value guy.

Like Peter Cundill, Dan discovered the Benjamin Graham approach to investing early in his career. He has cited some of the lessons from the excellent book Security Analysis that Graham wrote with David Dodd. I'm certain Dan rereads the book every year – at least his favorite chapters – as a reminder to stay loyal to his strategy.

He's looking for mispriced securities in the market – much like Cundill did throughout his career. For example, when Starbucks (SBUX) had no stock market friends back in 2018, Dan highlighted the disconnect between value and price. Subscribers who followed his advice booked a 50% gain for their troubles.

He did the same with a transport company that remains an open position and today is up more than 200%. And he did it again on a leading alcoholic-beverage maker that's currently up more than 60%.

Importantly, Dan has managed risk by not letting anything blow up his portfolio.

Over the past five years, Dan has made 54 recommendations with 29 winners as of December 31, 2022 – a 54% win rate. Average gains are a steady 12.5%, which should thrill most investors.

However, the portfolio did underperform the benchmark over the five-year period. And for that reason, Extreme Value earns a B- for this year's Report Card.

10x Investor: F

We launched 10x Investor in December 2021. So like a few other publications, it doesn't have a full five-year period to review. However, since it has a little more than a year under its belt, we wanted to share the results.

As the name suggests, the goal of this service is to find stocks that can make 10 times your investment.

Mike Barrett – who works closely with Dan Ferris – had found these stocks for his own personal account. And at the end of 2021, he decided it was time to share his methodology and strategy with subscribers.

Unfortunately, like other growth-strategy services... Mike faced the wrong side of a heavy sell-off in 2022. By now, you know the story...

Changing market conditions (like inflation and rising interest rates, not to mention a war in Europe and supply-chain issues) hurt all stocks. It was tough for most investors. And it crushed anything speculative.

A couple of positions in the 10x Investor portfolio are showing triple-digit gains. But overall, it has been a difficult year for this service, with most positions suffering heavy losses.

Cycles come and go. And over time, some of these positions may pan out. But the 2022 performance of this portfolio was poor. We need to do a better job of managing risk.

So for this year's Report Card... 10x Investor earns an F.

Stansberry Venture Value: C

Editor Bryan Beach provides one of the most in-depth and comprehensive research services that money can buy... especially for small caps.

He focuses on small companies with long runways ahead of them. They often have some catalyst pending... or some "hidden gem" sitting on the balance sheet that no one notices – much like Cundill found with Crédit Foncier.

Also like Cundill, Bryan will often take some of the profits off the table when the stock doubles or more. And he'll let the rest run its course for higher profits.

This is a good way to manage risk when using wider stops.

Because most of these stocks fly under the radar of big fund managers, small retail investors like us have a great opportunity to get in before the large institutional money pours into the stock.

But as we've said before...

You need patience, the mental fortitude, and pure guts to handle the violent price swings that come with the territory. If you can handle that... the financial rewards can be life changing.

Over the five-year reporting period, Bryan racked up several triple-digit winners, including a 112% gain in a building supplier... a 116% gain in a medical company... and a 107% gain in a tiny sporting company.

But again, a tough 2022 weighed down Venture Value's long-term performance. And ultimately, the publication earns a C for this year's Report Card.

While I'm sure Bryan will be disappointed with these results, I believe his strategy is profitable over longer periods. Plus, I know Bryan will work even harder to ensure he improves on these results for his readers.

Like all our editors, Bryan is competitive. He hates to lose. I bet he'll maximize the recent sell-off to find the best bargains in the market – the opportunities with the most upside in the years ahead.

Stansberry Venture Technology: B

The biotech sector is full of hope. Yet most investors who try to profit from it suffer pain and disappointment.

For example, the SPDR S&P Biotech Fund (XBI) has soared and plummeted five times over the past decade alone.

It tripled from its 2013 levels in two years... only to fall in half by 2016. It doubled again over the next two and a half years... only to plummet 30% in a few months. It then soared 50%... to drop 30% again in the space of weeks. Then, in 2020, it skyrocketed 140% in less than a year... then plunged by 60% over the next 15 months.

Even though the gains – if you can get on the right side of a bull run – can be colossal... few can stomach the volatility.

Fortunately for us, editor Dave Lashmet excels at it. And it's important to understand how...

When it comes to biotech research, it's not about sitting behind a Bloomberg terminal, crunching financials, and watching stock charts.

Instead, Dave studies medical journals, trial reports, and more. He attends medical conferences. And with more than two decades in the sector, Dave has developed an incredible network of industry experts he can lean on to support his research. With this knowledge, he has developed a unique approach to investing in biotech with incredible success.

If you look at the Stansberry Research Hall of Fame list at the bottom of every Digest, you will find three stocks he recommended that went on to climb 1,466%, 1,139%, and 777%.

Out of respect for his paying subscribers, I don't want to give too much away today. But just know that in the biotech space he has written extensively about treatments for Alzheimer's... cancer... obesity... depression... and heart disease... just to name a few.

Of course, Dave also covers niche areas in the tech industry. Among his recommendations, he has covered video games... laser vision... medical devices... semiconductors... military equipment... and 5G/6G technology.

Since launching this service in 2014, Dave has recommended more than 20 stocks that went on to rise by more than 100% – including some by more than 1,000%. That means that one in every three recommendations has soared by hundreds of percent.

That's an extraordinary track record for any investor. And it's especially incredible since Dave works in tech and biotech. If anyone can pull a rabbit out of the hat in this market... it's Dave.

Given a roughly 16% average gain over the five-year period, you might be asking, "Why not give him an A?"

Well, while Dave's picks from 2022 did well – up an average 13% and beating the benchmark by a wide margin at the end of the period... 2018 and 2021 weren't as kind. And those results dragged a little on the five-year track record.

While the nominal numbers are impressive, they came in under the benchmark. And therefore, Dave earns a solid B for this year's Report Card.

Matt McCall's MegaTrend Investor: F

Speaking of growth strategies, editor Matt McCall had a tough year with his service...

Like his macro-level publication, The McCall Report, the overarching theme in Matt McCall's MegaTrend Investor is to find stocks that benefit from megatrends that are primed to last years – if not decades. Only here, he's looking for smaller-cap companies that will become giants over the coming years. You can think of it like investing in Apple (AAPL), Amazon (AMZN), or Alphabet (GOOGL) when they were just getting started.

Of course, the heavy headwinds of 2022 hurt all stocks. But small-cap stocks and anything speculative got hammered last year. And Matt's portfolio didn't escape the carnage.

Speculative services like this one are prone to wild swings in the markets. You have heard us use examples like Amazon – which is up 172,953% since 1997, when it traded for $18 per share. Yet those early investors who still hold the stock today have had to stomach several huge drawdowns – including an 80% sell-off.

If you're going to invest in these stocks, you must manage risk. You can do that by adjusting position size... using stop losses... and by taking some money off the table for profitable positions.

Matt closed several losing positions last December. And he has been diversifying the strategy over recent months. But just as I have with all our editors, I urge Matt to do a better job of managing risk moving forward.

As I mentioned on Wednesday, despite the 2022 results, Matt has a history of finding big winners. Prior to launching MegaTrend Investor, he wrote a research publication with a similar strategy – and produced outstanding results.

Again, I'm not factoring these results into his Report Card grade. But you should know that between 2018 and 2020, he produced 73% average gains with a win rate of 70%. And he recommended 13 triple-digit winners in that period.

As mentioned, this service doesn't have a full five years to review. So we're using the results since its inception in October 2021.

Some of his positions that are currently down may play out over the long term. But 2022 was a poor performance. And therefore, MegaTrend Investor earns an F for this year's Report Card.

I know Matt will be disappointed with these results. But I also know how hard he works to uncover great opportunities for his subscribers – and how competitive he is. My bet is that it's only a matter of time before he bounces back to outperform again.

Crypto Capital: A+

Wild price swings are an understatement when it comes to cryptos...

These assets can soar hundreds – or even thousands – of percent. And they can do it in a matter of days or weeks, sometimes less. But they can fall just as fast. And some go to zero.

Despite the pain I'm sure the sector has inflicted on many who speculated too much... the industry will be better off for the sell-off. The bad businesses with no real prospects will be wiped out... and those that have real applications and businesses will thrive.

Anyone who experienced the dot-com era will recognize the pattern...

Back then, names like Pets.com rose to stardom in 1998. Eventually the market realized the pet-supply website would likely never turn a profit. And by the end of 2000, it was wiped from the face of the Earth.

Fortunately for us, editor Eric Wade has proved that he knows how to find the real businesses among all the cryptos out there. His background in finance and entrepreneurial talents combined with his experience mining cryptos gives him a unique edge in identifying the winners from the losers.

He's one of the few people on the planet who has proved he can navigate this volatile sector better than most. His track record is extraordinary.

Eric has four Stansberry Research Hall of Famers. After his recommendation, Band Protocol soared 1,169%, Terra went up 1,164%, and Frontier rose 978% within months. And finally, Binance Coin rose 963% in less than two years.

Because Eric's track record was so good during the crypto boom, he occupied most of the spots on the Top 10 open positions. So we opened a separate ranking for the Top 5 Crypto Capital Open Recommendations. You can find these at the bottom of our daily Digest.

I know many of you will want to know how he did last year as well as over the longer-term five-year period.

Well, Eric didn't escape the carnage either. But he endured it far better than most. If you look at a chart of bitcoin in 2022... you can see it was down nearly 70% at one point from its high of more than $40,000 during the year.

His 2022 recommendations suffered average returns of -14.6%, compared with the -37.7% loss for the benchmark. Given the year in the markets – especially considering the volatility in cryptos – that's a solid result. And I'm sure many of these positions that fell in 2022 will bounce back to become winners over time.

Like all services we publish, the long-term track record is most important to us...

This is where Eric's service really shines. Over the five-year period, he produced 246% average gains compared with a roughly 169% return for the benchmark (bitcoin).

As a result, Eric earns an A+ for this year's Report Card.

Crypto Cashflow: D-

We launched Crypto Cashflow in 2021. So like other services with less than five years of track record, we will measure from its "since inception" date.

In Crypto Cashflow, Eric focuses on the part of the sector where cryptos have become a real business or application with real growth prospects. And they're offering passive returns of 5%, 10%, or even 20%. Some of these cryptos still offer tremendous upside – meaning you can earn a passive return, yet still have the potential to make huge triple-digit capital gains.

Eric has found several winners... and the 63% win rate since inception is promising. But the big losing positions hurt his overall performance. It resulted in an average return of -8.9%, compared with the benchmark's -9.1%.

Given Eric's talent and experience in the sector, I believe many of the down positions will recover. But for now, Crypto Cashflow earns a D- in the 2022 Report Card.

You've heard me say that several editors will be disappointed with their grades. You've also heard me say how competitive they are.

Historically, these motivated editors tend to bounce back with a vengeance after a down year. Knowing Eric... I'm sure we will see that here as well.

Stansberry's Credit Opportunities: A+

This service is unique at Stansberry Research. And as far as I am aware... there's nothing like it on the planet.

The results are outstanding. And yet, most people won't even try it.

I remember when we launched Stansberry's Credit Opportunities in 2015... I vividly recall thinking how great this service would be – and how successful our subscribers would become if they followed our advice.

However, most people won't even test out the strategy – let alone add it to their investing arsenals.

The only thing I can think of is that they don't believe these returns are possible. Or maybe the word "bonds" scares people away or puts them to sleep. My own friends and family tune me out when they hear the word "bonds." Even some of our own staff members give me strange looks when I mention them.

Yet here I am again... talking about "boring" bonds.

If you're looking for the thrill of buying a stock (or crypto) – hoping for a moonshot... this service is not for you. But if the idea of making steady double-digit gains – that won't keep you awake at night – sounds appealing... you might want to consider this service.

Finding mispriced bonds is the heart of this service. Editors Mike DiBiase and Bill McGilton scour the entire corporate bond market every month... starting with about 40,000 bonds... and narrow it down to a handful that meet their criteria. Then, they dive deep into the financials of each company and the details of each bond.

If you're new to bonds, here's the gist...

Most companies issue bonds at a "par value" of $1,000. And they pay interest (normally twice per year) to the bondholders through maturity when they pay back the bond at the par value of $1,000.

But here's the thing...

While bonds don't trade in the same way that stocks do, they do trade. And like stocks, their prices can rise and fall. Sometimes, they rise above par. And others can fall well below par. You can think of it as paying $0.90 or $0.80 to receive a dollar later on.

The best part is that you know exactly when you'll be paid back... and how much.

So if you buy the bond at a discount... and hold through maturity (or until the price returns to par)... you book a capital gain. And you also earn interest along the way for your trouble.

The only way you can lose is if the bond defaults.

We launched this product with the belief that we could earn double-digit gains every year. And as you can see from the results... that's exactly what Mike and Bill have done.

Mike and Bill do an outstanding job. They booked a 27% gain on U.S. Steel... a 23% on mining firm Coeur Mining... and a 20% gain on Comstock... just to name a few.

Because of the binary nature of these investments – meaning some bonds might trade below our entry level before maturity, when the bond is paid in full – we only consider the closed positions for the Report Card.

Over the past five years, Mike and Bill closed a total of 34 bonds. And 28 of them were winners. That's an impressive 82% win rate. The average gain was 12.4% with an average holding period of 257 days, which resulted in a roughly 18% annualized gain. That more than doubled the benchmark. And it earns them an A+ for this year's Report Card.

If you're making these kinds of gains – consistently – in stocks... congratulations. You're in good company. Remember, Peter Cundill averaged 15% over a three-decade span. Few investors manage that type of performance for long periods. So I'm thrilled that Stansberry's Credit Opportunities is living up to the promise we made when we launched the service.

This is why we often say that once you try this strategy you might find yourself asking why you would ever buy another stock in your lifetime.

Well, dear subscriber... we've finished this year's Report Card.

You'll notice that we didn't mention Prosperity Investor or The Ferris Report. Since those two newsletters recently launched, their track records aren't yet long enough for a meaningful grade. We'll plan to include them in future Report Cards.

I hope this year's Report Card gave you some perspective on our services and strategies. Even if you don't agree with our evaluations, you have the numbers to make your own determinations.

Let me know what you think... what you liked and didn't like. Most important, let us know how your investments are going and what you would like to see more of.

And most of all... thank you once again for joining us.

We always strive to add value to your membership. Your continued trust and support mean the world to all of us here at Stansberry Research. We love what we do, and I promise you we will never take the trust you place in us for granted.

New 52-week highs (as of 2/9/23): Arafura Rare Earths (ARAFF), RenaissanceRe (RNR), and TFI International (TFII).

In today's mailbag, a couple subscribers write in about yesterday's Digest, in which we quoted a billionaire's bullish case for gold. Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"The influence of the dollar on gold has been watched along with an unusual accumulation by global central banks. If we see a disconnect between the slight rise in the dollar from rate hikes, that would be another bullish sign for gold. The current price decline may be a buying opportunity. I'm surprised that gold didn't hold at higher levels while the dollar came down so much.

"Perhaps the overall movement in certain global currencies played a role, with the pound and euro rising while the dollar was falling. With that said, a disconnect for gold spot from all global currencies would be an even more bullish indicator for gold, which is tethered by currencies still." – Paid-up subscriber Rodger G.

"... I don't know what gold is going to do. The miners don't know, either, but they want to convince you it will increase so you buy their gold. Likely gold bounces around for another 5-8 years before doing something, probably surging up. So you have to have long-term faith that an asset that pays no dividends and no interest is going to make you money." – Paid-up subscriber Mark P.

Regards,

Brett Aitken
Baltimore, Maryland
February 10, 2023