Hedge Fund Blues

Stansberry & Associates Top 10 Open Recommendations
(Top 10 highest-returning open positions across all S&A portfolios)

As of 07/08/2013

Baltimore, Maryland

* * * Let’s update a few trends we’ve been following…

* * * First, telecom is back. Verizon’s revenues were up 25.8% over last year’s third quarter. Leading the growth was data revenue, which doubled on the MCI acquisition. Filling the pipes are the company’s broadband customers, which grew 45% over last year to reach 6.6 million subscribers.

* * * Next, another one bites the dust: Monster Worldwide cofounder Andrew McKelvey resigned after refusing to cooperate with a special committee probing options grants. McKelvey reportedly has said he didn’t understand that manipulating the dates on options grants was improper.

* * * Matt Badiali’s African gold pick hasn’t been bought out… yet. But the company recently announced, "A result of interest expressed by a number of mining companies, [we] have conducted, and expect to continue to conduct, visits for these companies to [our] projects in the Democratic Republic of the Congo."

* * * And finally… the first of what will surely be many new "global warming" taxes. Wooing the schleps, Belgian Prime Minister Guy Verhofstadt said, "We must take Al Gore seriously," before introducing the "Gore Tax." The measure will charge Belgians for purchasing materials believed to be responsible for global warming… and generate an extra $750 million for the politicians to spend. Earlier, Gore visited Belgium while promoting his new film and told the Belgians, "Our planet has a fever… it is in fact a full-scale planetary emergency."

Porter comment: I rest my case.

* * * It rained. And rained. The wind nearly blew our tent away. But… only minutes before the start of our Bull and Oyster roast on Saturday, the sky cleared, the sun came out, the breeze calmed to a moderate gale, and the temperatures rose to almost 70 degrees.

You would have found me next to the oyster shucker, Vern, most of the night. Vern is a third-generation shucker. He works down at the Cross Street Market on Thursdays. He found a tiny, translucent crab inside one of the oysters. "Try it," he told me. "It eats the same thing the oyster does and lives inside the shell for safety. It’s delicious." I could see the red innards of the crab. But, what could I do? I didn’t want to disappoint Vern. I put the tiny crab in my mouth and felt the little red dot of its guts squoosh over my tongue.

Vern was right. It was delicious.

* * * We got a few letters over the weekend…

* * * "I am 84 years old. I graduated Phi Beta Kappa from Rice at the age of 19." Paid-up subscriber Aubrey Farb was getting warmed up. "I am a survivor of the Battle for Iwo Jima having served as a Japanese Language Officer for the 3rd Marine Division." On a roll now, he let us have it. "I do not pay to read about your personal life, you [sic] personal likes and dislikes, your personal opinions about anything and anyone whether it is government, politics or whatever else you sometimes rant about… You sell investment advice. Stick to it."

* * * Savvy subscriber Robert Dunning has us figured out. "If you want to send me the Digest as an added bonus you can pretty well say what you want and I’m not going to complain… Most of us realize the Digest is a marketing tool for your products and not an investment newsletter per se. But even the Digest has great nuggets of information sometimes… "

Porter comment: I hope it’s more often than not, Robert.

* * * "Couldn’t help but notice Porter is writing from Cockeysville, MD," wrote the observant Perry Jensen. "And now he has a ‘Hall of Fame’ list dominated by his picks. A little bit of cockiness?"

* * * * * * * * * * * * * * * * *

"…When confronted with a can’t-miss opportunity to earn 15%-20% a year in the world’s safest stocks… most investors (and especially the wealthiest) have turned to bonds, bond hybrids, asset management firms, private equity, and, worst of all, hedge funds. Let the rich get soaked. Trust me: you’ll have great returns for years and years to come if you begin to purchase blue chip stocks now."

– Porter Stansberry, "The Best Opportunity You’ll Ever Have in Blue Chip Stocks Is Right Now," PSIA, July 2006

On Friday, Bloomberg news reported the world’s elite hedge-fund managers – George Soros, Louis Bacon, and Paul Jones – "would have made more money this year buying shares of a stock-index mutual fund."

Overall, so-called "macro" hedge funds are up, on average, 1.8% this year. Hedge funds, as an asset class, are up 5.6% this year, according to Hedge Fund Research Inc.

How would you feel about paying 2% of your assets annually and 20% of any gains, all in order to make 5.6% a year?

Consider Paul Jones’ Tudor Investment Corp. His flagship fund, Tudor BVI, holds $5.6 billion in assets. It’s up 5.5% this year, according to Bloomberg and investors in the fund. Tudor Investment will earn $112 million for generating this return – not including its performance fee, which may not come into play because of the weak numbers.

Over the last 10 months, I’ve recommended eight certified blue-chip stocks. All of them were near all-time lows in terms of cash earnings per share. It was inconceivable that you could lose money buying stocks of this caliber at such low prices. In only a few months’ time, the average gain of these eight stocks is already 18%. By the end of this year, I’m certain the average gain will be more than 20%. All eight recommendations are in the black and seven of the eight are up by double-digit percentage points. The biggest winner? My first blue-chip pick of the year, Lexmark (LXK), which I recommended in January. It’s up almost 40%.

And… the best is yet to come. I bought these stocks because I know they’ll be able to grow their earnings and dividends for years and years to come. Buying now, at very attractive prices, has set us up to enjoy 15%-20% annual compound gains for the next dozen years, at least.

If you bought blue chips this summer, your safe retirement is probably assured. If you haven’t yet – don’t wait. Now is the time to build a "legacy" portfolio that will generate enough income for you live on comfortably in 10 years’ time.

Good investing,

Porter Stansberry

P.S. I lost hundreds of readers this year because of my decision to recommend blue chips. Folks wrote in, telling me they didn’t need my help to buy Microsoft (MSFT). They wanted me to find "the next Microsoft." What they don’t realize is, when Microsoft is trading for 11 times cash flow, it is the next Microsoft.

Stansberry & Associates Top 10 Open Recommendations

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