Another Great Way to Buy Porter's 'Forever' Stocks

When should you buy?... Another great way to buy Porter's 'forever' stocks... The smartest way to get into the market today... We haven't seen 'peak bad' yet... Get the stocks you want – with downside protection...

'When should I buy?'

It's always a big question on every investor's mind...

And that question is especially relevant today... The major U.S. indexes have rallied roughly 10% off their March lows.

Is "this" the start of a "V-shaped recovery" that so many people are talking about or an extended run higher in stocks? Or is more downside ahead?

At this moment in the current bear market, we think most investors fall into two categories...

The first investor, let's call him an eternal pessimist, wants nothing to do with the stock market...

He has already sold most of his stocks and is happy sitting in cash right now. He thinks the market will make new lows sometime in the next couple months. And by nature, he's conservative.

He doesn't want to see his life savings fall another 20% thanks to the COVID-19 pandemic and the economic slowdown we're in today...

The second investor is a bit more optimistic...

He's not a full-fledged bull just yet, but he understands there are tremendous buying opportunities. He sees blue-chip stocks – companies he loves – that have fallen 15%, 20%, even 25%, in just a few weeks.

He knows there have only been a few buying opportunities like this in his lifetime and doesn't want to miss out... These are the kinds of opportunities that our founder Porter Stansberry talked about recently with his list of "forever" stocks.

This investor knows stocks aren't going to soar back to new all-time highs tomorrow... and that maybe the bottom hasn't hit yet either...

So he's hesitant to put all of his money to work in the market just yet... but he feels like he's willing to take some risk to buy "something."

Whether you're the pessimist or the semi-optimist, today's Digest is for you. (And if you're the third possible type of investor that ONLY sees blue skies ahead... well, best of luck to you.)

Today, I (Jeff Havenstein) am going to show you the smartest way to get back into the market today...

This is a strategy that I think every investor should consider using right now. It's a way to make money with virtually no risk... and don't think my boss, Retirement Trader and Retirement Millionaire editor Dr. David "Doc" Eifrig, lets me say that lightly.

But don't just take my word for it. Here's a note we received recently from Stansberry Alliance member Stu G. after we recommended a pair of trades using this strategy in last Friday's issue of Retirement Trader...

Doc and team,

Thank you for the brilliant and timely recommendations...

After listening to Porter's Forever Portfolio event and receiving many opinions that we should still expect another 10% to 20% correction after the 3-day Congressional rally, my big decision was how was I going to buy into the new portfolio...

Your recommendations were brilliant.

Before I explain more, let's go over why I believe today is NOT the time to go 'all in' on stocks...

Last week, the benchmark S&P 500 Index rallied an absurd 17% in just a few days. The Dow Jones Industrial Average surged more than 1,300 points... its biggest three-day move since 1931.

Some selling returned to the market in the first couple of days this week. But again, the major indexes are currently roughly 10% off their recent lows. And stocks are up again today after President Donald Trump told news outlet CNBC that Russia and Saudi Arabia have reached an agreement to cut oil production.

However, I'm here to tell you... the volatility that we're seeing won't go away anytime soon. And this market rally won't last long.

There's an old investing saying that giant "up" days don't happen in good times. And that's usually true. When rallies like these happen, it's what's called a "bear market rally."

Consider the last bear market we experienced, back in 2008 and 2009...

My colleague and Stansberry NewsWire editor C. Scott Garliss did some digging and found that last week's monster move up was nothing too far out of the ordinary... as it would seem on the surface.

In the table below, you can see that from the time investment bank Lehman Brothers filed bankruptcy in the heart of the financial crisis in September 2008 to the market bottom in March 2009, there were plenty of big market rallies...

The S&P 500 gained 9% or more seven times over this period... and each time the rallies happened in about a week or less. Those are big market moves. But remember, these rallies occurred while the index fell 43% in the longer term from September 2008 to March 2009...

Bear market rallies give investors the notion that the bad times are over. Investors see the market up sharply and the "FOMO" – "fear of missing out" – kicks in. They end up buying only to watch stocks plummet shortly after.

And then worse, they decide to sell them at that point, which could be the true "bottom." My colleague Thomas Carroll wrote about this concept in the March 24 Digest.

That's why if you're the second type of investor I mentioned earlier, I urge caution. It's possible the market has not bottomed yet.

As Thomas wrote last week, the majority of Stansberry Research editors are pretty bearish.

A few editors thought the market had as much as 25% to 35% more downside left. I agreed that there was likely more selling to come, though I thought the downside was less than that.

The consensus was that this market rally will be short-lived.

There's no doubt in my mind, things are not 'peak bad' yet. It's going to get worse...

Some investors think all the bad news is priced in. And you can make a case for that.

After all, stocks finished 6% higher after one of the worst pieces of economic news was delivered last Thursday... when more than 3 million Americans filed for unemployment claims.

The recession that we're already in – yes, we're effectively in one already – is going to be sharp and it's going to get ugly.

Some economists and health professionals are even predicting that the shutdown will last two or three more months. For these reasons, I don't think everything is priced into the market just yet.

Just as an example, we're going to see a spike in delinquency rates for people who can't pay their bills. Here's the Google search frequency for the phrase "can't pay"...

Households are struggling. They're starting to tap their home equity lines of credit...

According to a recent survey by market research company YouGov, 11% of U.S. adults in the survey said they could not pay their rent or mortgage for April. And 7% said they were unsure if they could. Here's a scary headline from the New York Times...

Indicators like these guide my advice: Don't get fooled by this bear market rally. It will likely get worse.

People are expecting bad economic numbers in the weeks ahead, but I believe they will still be shocking...

Just this morning, we learned U.S. weekly jobless claims doubled to 6.6 million. That brings the two-week total to about 10 million due to the coronavirus-induced economic shutdown...

Trust me, we're not going to see a perfect "V" shaped recovery that many are hoping for.

If you've followed our advice here at Stansberry Research, you likely have a lot of your portfolio sitting in cash...

You've followed your stop losses and sold when they were triggered. You probably still own a few stocks that haven't hit their stop or some gold. But for the most part, you're in cash.

And it's just sitting there. Earning you nothing. But maybe you are ready to redeploy your cash...

Let's go over your choices...

1. You could buy your favorite stocks today, with the knowledge that they will likely go down in the short term.

2. You could try to time the market bottom. You'd buy stocks the day they are cheapest and hold on for the ride up.

3. Or you could agree to potentially buy your favorite stocks at a lower price than they are trading for now... and receive a big cash payment because of it.

Unless you're some sort of market wizard, I think the third option sounds the best. Here's why...

Let's use one of my favorite stocks as an example – Waste Management (WM)...

Waste Management is the largest company in waste removal, hauling away, storing, and recycling trash for companies and municipalities.

You might recognize their yellow and green logo or their sponsorship of the annual pro golf tournament in Arizona.

But Waste Management's business is boring and dirty. And that's why I love it.

Recently minted MBAs are not fighting over the opportunity to disrupt the industry. Who wants to innovate trash? That means Waste Management enjoys a large market share.

And even in times of recession, people still need their trash hauled away...

Waste Management's returns show that it's a recession-resistant stock. Since 1990, you would have earned a total return of 16.4% a year as a shareholder. Meanwhile, the S&P 500 only returned 9% a year.

Right now, WM trades for around $90. Back in February, WM traded for $126. The stock is down 29% even though it's a business that shouldn't be too impacted by the virus outbreak.

I consider myself the second type of investor I mentioned earlier... So I think that I would probably do OK if I bought WM today and held for the next decade... since we're somewhat close to a bottom.

But WM could easily fall another 5%, 10%, or more from its lows in the months ahead. And nobody knows for sure how long it will be before the market fully recovers...

The point is, you can do better than simply buying stocks today...

There's a better way that will reduce your risk AND pay you cash up front.

If the market does drop another 15% from here, it's likely WM would fall 10% or so given its low "beta"... meaning that it's usually less volatile than the broader market. If WM fell 11%, shares would be around $80.

I'd be happy to own WM if it falls to $80 a share sometime soon. In fact, I'd be thrilled.

So here's what I want to do... I want to tell my broker that I'm willing to buy 100 shares of WM for $80 a share anytime in the next month and a half. And I set aside the money to buy the shares.

I feel comfortable buying WM at $80 a share because that's close to a two-year low for the stock, and I would bet that it recovers in no time at all.

Here's the crazy part... I'll get $250 right now just because I agreed to potentially buy the stock for $80 from someone else. Again, that's an 11% discount to where shares are trading today.

There's no small print or any trickery in this trade. I'll get paid $250 today... and get to keep that $250 no matter what.

Now, let's talk about what could happen over the next month and a half...

First, let's say the market falls from here. And WM falls to about $79 a share – a drop of 12%.

In this case, the way this trade works, I'll have to make good on my promise and buy shares of WM for $80 a share. So my loss would be $1 ($80 minus $79). On 100 shares, that's a loss of $100.

But remember, I collected $250 at the beginning of the trade. So my gain on the trade is actually $150...

Meanwhile, shareholders would have lost $1,100 if they simply bought and held on to their shares...

That's a lot of numbers involved – and if you're interested in learning more I'll tell you how at the end of this Digest – but the main point is that you can collect $250 today... all because you agreed to potentially buy shares of WM for much less than they are trading for.

You wouldn't actually lose money on this particular trade until WM trades for $77.50 – a drop of 14% for the stock. I think that's unlikely after shares are already down 29%, so...

In the worst-case scenario, you'd own shares of WM for 14% less than what it's trading for now!

And mind you, WM is a world-class company. It's a stock I want to own anyway. I'd be ecstatic if I could buy it for $80 a share. And I'm willing to bet that 10 years from now I'd be a happy shareholder.

I can't think of any other strategy that covers your downside by 14%... all while paying cash to you up front.

Now, let's talk about what will happen if shares fall just a little, stay flat, or even rise over the next month and a half...

It's simple... I'll keep the $250 that I received at the beginning of the trade and walk away. That's the end of the trade.

I'm not on the hook for anything. I simply keep the $250 and move on to the next trade.

If you're contemplating buying back some of your favorite stocks, why not agree to potentially buy them at a cheap price and get paid cash because of it. That's valuable income, especially while things like U.S. Treasury bonds are paying less than 1%.

This type of trade may seem too good to be true, but it's real.

There are very few times in history when this special trading strategy will work, but today is one of them...

That's because of the record amounts of fear in the market...

We track fear by looking at the CBOE Volatility Index, or "VIX." The VIX measures the expected volatility in the S&P 500. As you can see, this "fear index" has recently hit peaks even greater than the financial crisis in 2008 and 2009...

This is important because when investors are fearful, they are willing to pay for portfolio "protection." Specifically, they pay up for option protection.

Right now, options are extremely expensive... And that makes it the perfect time to sell them.

By selling options, we get to collect massive payments upfront and the only risk we take is the potential obligation to buy stocks we want to own for much less than they are worth.

We basically take advantage of the extreme amounts of fear in the market.

But as you can see in the chart above, fear doesn't remain this elevated for too long. Today, the VIX is near 52, for instance... That's why now is the perfect time to take advantage of this strategy.

You can collect $515 for agreeing to buy Microsoft (MSFT) for a 12% discount... $325 by agreeing to buy Johnson and Johnson (JNJ) for a 13% discount... $510 by agreeing to buy Home Depot (HD) for a 16% discount... The list goes on.

Almost any stock you want to own, you can get paid cash by agreeing to potentially buy its shares for a lower price.

This is by far the best way to get back into the market right now...

You'll have downside protection and can collect hundreds of dollars of income in the process.

But again, this strategy only works in times of unprecedented fear. And I expect we'll see plenty of fear over the next month or two.

So how exactly do you do this? Does the word "options" make you turn off the computer and decide to go do something else? It shouldn't, so long as you have a good guide...

Last Friday, in Dr. David Eifrig's Retirement Trader, he showed readers exactly how to execute the strategy I've described today.

Specifically, he told subscribers how to earn $650 and $385 upfront by agreeing to buy two high-quality companies in the future. These trades gave subscribers 22% and 20% downside protection at the same time.

Like I said, this strategy is simple to learn and anyone can use it. Options trading may sound complicated, but it doesn't have to be. In Retirement Trader, we offer what we think is the best options trading educational material out there.

Click here to learn all the details right now and get started today.

New 52-week highs (as of 4/1/20): none.

In today's mailbag, we share a concern and a question about yesterday's Digest... Do you have a question or comment? As always, shoot us an e-mail at feedback@stansberryresearch.com.

"'Though China is the birthplace of COVID-19, it was able – through social control that is impossible in other more freewheeling and democratic countries – to stamp the coronavirus out relatively quickly.'

"I dispute this claim. Watching the world statistics of the virus, it is obvious that the Chinese figures are grossly inaccurate. They underestimate the number of positives for SARS-CoV-2. You may more accurately state 'Though China is the birthplace of COVID-19, it was able – through false reporting that is impossible in other more freewheeling and democratic countries – to make it appear that the coronavirus was stamped out relatively quickly.'" – Paid-up subscriber Neil R.

"Thanks for all you do. You save me from my ignorance and greed.

"Also, [I] didn't realize that Mumbai was so populated... with 32,000 people per square meter, quoted from the featured article. I'm sure they meant square km or square mile." – Paid-up subscriber Bruce F.

"Really? "square meter"? Someone there really does not understand the metric system. But, I really did get a great laugh out of it. Made my day. Thanks." – Paid-up subscriber J.D.

Corey McLaughlin comment: Good thing yesterday was April Fools' Day. Thanks to all the folks who wrote in about the error.

Regards,

Jeff Havenstein
Baltimore, Maryland
April 2, 2020