Editor's note: Porter's tending to business in Miami and can't write The Digest today. He should be back on Wednesday.
In its biggest takeover since acquiring Mobil in 1999, Extreme Value pick ExxonMobil (XOM) will buy the largest U.S. natural gas producer, XTO Energy, in an all-stock deal valued at $31 billion. Exxon is betting U.S. emissions restrictions will spur natural gas demand.
Will the fabled cap-and-trade legislation pass, proving ExxonMobil right? Probably not. The political movement is losing steam.
In the recent "Climategate" scandal, thousands of leaked e-mails from influential British scientists showed they omitted data that contradicted their global warming hypothesis and attempted to discredit anyone speaking against global warming. Climategate has shaken the foundations of avid global-warming supporters. And Obama, cap and trade's biggest cheerleader, is rapidly losing popularity.
But truthfully, that doesn't matter to ExxonMobil. It views XTO as a cheap hedge against the possibility that cap and trade does pass. Exxon is a $360 billion company. It earned nearly $60 billion in cash last year, it can borrow money cheaply, thanks to its triple-A credit rating, and it's using stock for this purchase. Plus, natural gas is still around 70% below its 2005 high.
XTO Energy has nothing on Matt Badiali's latest discovery... As Digest readers know, Badiali recently returned from a site visit at what could be the largest natural gas deposit in the world. Click here for an update from Matt and a photo from the site.
Porter, Steve Sjuggerud, and I were talking about this company last night in the pool in Miami. We all agreed, this stock is likely a 10-bagger. Badiali likes to say you can "add a zero" to its current market cap. While we don't know exactly how much this company's stock will increase, we know it will be huge. Badiali is still writing his report for this stock, and you're not going to want to miss it. To sign up for Badiali's Resource Report and be the first to own this little-known natural gas giant, click here...
Abu Dhabi swooped in today with a $10 billion bailout for Dubai World. The state-owned holding company will use the cash to cover debt from its real estate arm, Nakheel PJSC, which comes due today. Nakheel developed the manmade palm-tree-shaped islands off the coast of Dubai and "The World," another manmade island shaped like a globe, among many other high-profile developments.
If it's over-the-top and in Dubai, chances are Nakheel developed it. The rest of the money will cover Dubai World's interest and operating costs. An Abu Dhabi rescue was inevitable. Allowing these high-profile developments to default would send shockwaves through the local markets and discourage real estate investors and tourists.
The fixed-income investors we mentioned last week, who all jumped into emirate bonds, made a killing today. Nakheel bonds doubled in price. Emirate equity markets also soared.
The race to find the perfect inflation hedge is on. Investors are piling into gold, silver, agricultural commodities, and Treasury Inflation-Protected Securities (TIPS). But I assure you nobody has even thought about buying Porter's latest PSIA recommendation. At least not yet...
From January 1975 (when Americans could legally own gold again) through today, gold has returned just over 600%. The well-recognized product manufactured by Porter's recommended company is up 633% – a minor coup. But if you had bought the stock in 1980 (the earliest data available), you would have made more than 7,000%, or 15% per year. That's more than 10 times what you would have earned investing in gold.
The company Porter recommends has a huge amount of what Warren Buffett calls "economic goodwill." This secret asset allows the company to be incredibly capital-efficient: As prices for its product go up, more and more of the money ends up in the hands of shareholders. Porter says this company is "exactly the kind of business Buffett wants to own." And based on certain findings during his research, Porter says Buffett will make a large investment in this company next week.
The last time Porter made a claim like this, he recommended shares of railroad Burlington Northern Santa Fe. Months later, Buffett bought the company at a premium, leaving PSIA readers with a quick, 50% return. To access Porter's latest recommendation – before Buffett scoops it up – click here.
New highs: Verizon (VZ), Johnson & Johnson (JNJ), iShares High Yield Bond Fund (HYG), AmeriGas Partners (APU), Kinder Morgan Energy Partners (KMP), Enterprise Partners (EPD), Coca-Cola (KO), Altria (MO), POSCO (PKX).
In the mailbag... How have we ruined your Christmas? Let us know here: feedback@stansberryresearch.com.
"Wasn't Dansker recently sighted dating Tiger Woods?" – Paid-up subscriber Patrick
"With all your political opinions that seem to offend people, why are you telling me 'Happy Holidays,' its Merry Christmas! Without getting into a racist/religious debate, you seem pretty happy to rant on about your political opinions (of which I mostly agree!) but you can't even share your most joyous early childhood celebration with me... Christmas!!
"If I'm wrong and you are Jewish then say, 'Happy Honika' (don't be offended if I spelt that wrong!!)... if you worship the 'Tiny Yellow Teapot' aka Richard Dawkins, then fair play to you too! You can dream about whatever religious reality/fantasy you like as there is no proof either way! Please, keep telling me what you think and don't get 'PC' in this forum as I like your opinions too much." – Paid-up subscriber Craig Nugent
Goldsmith comment: Sorry to upset you, Craig. Merry Christmas.
Regards,
Sean Goldsmith
Miami, Florida
December 14, 2009