"It will be important to show our mettle and see the Nikkei reach the 13,000 mark by the end of the fiscal year [March 31]," Japan's economic and fiscal policy minister Akira Amari said in a speech over the weekend.
Regular Digest readers know our colleague Steve Sjuggerud is bullish on Japan. Steve says new Japanese Prime Minister Shinzo Abe is ready to do whatever it takes (including cutting interest rates below zero and buying up assets worth trillions of yen) to boost the Japanese market. Steve has labeled these inflationary policies "Abe's Revenge." You can read a full summary of his investment thesis here…
And to date, his policies are working. When we wrote about the situation on Wednesday, Masaaki Shirakawa, the head of the country's central bank – the Bank of Japan – announced he would step down three weeks earlier than planned. The market took the move as Shirakawa bowing to pressure from Abe. The Nikkei jumped 4% on the news. And it finished the week at 11,153.16, its highest level since September 2008.
But Abe wants more... And Amari said Japan would "continue taking steps to help stock prices rise." If the government is successful in its efforts to boost the market, Japanese equities could take off.
When it comes to data demand, HD Voice is just getting started. Mobile video is just getting started. Photo storage (think Facebook), video chat (Skype and FaceTime), and Internet TV are all technologies in "ramp-up" mode. And that's not all... many other technologies haven't even gotten off the ground yet: mobile Internet TV... peer-to-peer mobile gaming...
All of these technologies are "data-intensive." Compared with our future data demand... our current data usage is just a drop in the bucket. We're going to need infrastructure to move a lot more data around.
Technically, this (new infrastructure) is called "Single Carrier Frequency Division Multiple Access." To investors, though, this boils down to one word: Ericsson.
Ericsson (Nasdaq: ERIC) is the market leader in LTE cell phone tower equipment and service. It holds roughly 60% of the market. We believe the best way to invest in any technology "gold rush" is to buy the "picks and shovels" companies – the firms that provide equipment and services to all of the competitors. When it comes to LTE, that's Ericsson.
Ericsson invented the LTE transmitters. Ericsson builds and services the network. Ericsson runs the network. And in many cases, Ericsson bills the end user. In other words, most service providers that want to offer LTE/HD Voice technology will end up going through Ericsson. – Stansberry's Investment Advisory, October 2012
The world's exploding need for bandwidth and data storage is one of the clearest trends in the market today... And Ericsson is reaping the rewards. The company recently announced the fastest sales growth in more than a year, led by a 51% increase in North America (as the popularity of smartphones and tablets spurred wireless companies to invest in networks).
Ericsson's gross profit margins also beat estimates, and the company announced more projects to increase network capacity that will help its business in the second half of this year.
Today, the stock is trading for more than $12, near its 52-week high. Porter's subscribers are up 41%.
In addition to identifying the need for more data storage, Porter and his research team also made a prescient call regarding Ericsson's Chinese competitor, Huawei. Also from the October issue of Stansberry's Investment Advisory:
If you were planning to spend billions on equipment and service over a long-term contract... would you go with Ericsson or Alcatel? Would you go with the company that's earning plenty of cash every year, paying shareholders a healthy dividend (4%), and holding $6 billion in net cash, after all the debt on its balance sheet? That's Ericsson.
Meanwhile, you may have noticed another Ericsson competitor in the headlines lately. The U.S. House Intelligence Committee recently identified leading Chinese information and communications technology provider Huawei as a national security threat. The U.S. also accused Huawei of blatantly ripping off the technologies and patents of competitors, a sentiment that has long prevailed in the industry.
Bloomberg reported on January 31 that the U.S. House Intelligence Committee recommended U.S. companies avoid products from Huawei, "whose founder served in the Chinese military." The committee's recommendation cited "concerns the communist nation could install malicious hardware or software in U.S. networks."
The world's growing need for bandwidth and storage is one of the biggest trends in the market today... Porter and his research team will continue updating subscribers on this trend and the companies that will benefit from it.
Three of the smartest men in natural resources are hosting a live conference call tomorrow to discuss their views on precious metals. And they've invited all Stansberry & Associates subscribers to listen in.
As longtime readers know, Rick Rule is one of our most trusted sources in the natural resource space. He's made a fortune for himself and his clients taking advantage of the cyclicality of the sector... and buying undervalued assets when they're cheap and ignored.
Rick recently partnered with another heavyweight in the resource industry, the billionaire founder of Sprott Resources, Eric Sprott. We've covered Sprott's views on the market many times in these pages… in particular, his thesis that the world is out of silver. We quoted him in the February 24, 2011 Digest: "There's $22 billion of silver available in the world, of which the ETFs already own half, and between you guys and us we probably own the other half... Which means there's nothing left."
Rick and Eric will be joined on tomorrow's call by John Embry, the chief investment strategist for Sprott Asset Management.
At a time when precious metals play a crucial role in your portfolio (to counteract the government's efforts to debase our currency) and metals stocks are dirt-cheap, this call is more important than ever. To listen as these three experts espouse their views tomorrow at 2 p.m. Eastern time, simply register here.
In his annual Report Card, which we published here, Porter gave Jeff Clark's Advanced Income an "A++" – the highest grade he's ever given an advisory service. (Dr. David Eifrig's Retirement Trader also earned an "A++.")
Jeff's performance in 2012 was astounding... Of the 20 trades he recommended, 17 were winners – an 85% win rate. And the average return per trade was more than 20%.
In Advanced Income, Jeff uses a "covered call" strategy to show subscribers how to generate safe and consistent income.
His strategy is simple... He buys an undervalued stock and sells call options against that stock to collect immediate income. (The income is the premium you receive from selling the call option.)
Jeff described the benefits of this strategy to his Advanced Income subscribers in a video tutorial:
[T]o tell you the truth, if you can only do one thing with options, selling covered calls against stocks makes the most sense. In fact, it's probably one of the most conservative strategies you can use, but it's one of the most consistently profitable strategies.
In the Report Card, Porter outlined a typical trade Jeff would recommend in Advanced Income... And why the strategy is so safe and consistent:
A typical trade for Jeff last year was buying blue-chip casino operator MGM in August for just under $10 and then immediately selling a $10 call against his position, picking up $0.95 in call premium. His effective entry price (the cost of the stock minus the premium he collected) was just $8.82. The stock was "called away" in December, generating a profit of more than 13% in less than half a year.
It's important to realize that in many cases with these trades, you could have earned more by simply buying the stock outright. By December, MGM was trading around $11.50. Investors could have made slightly more by not selling the option.
But... Jeff's trades are very profitable and his winning percentage is outrageous – 85% winners. That's because if the stock remains flat or even declines a little, selling the call can still make the position profitable. Giving up some of the upside allows him to greatly increase his odds of making a profit on each trade. And by trading frequently (he made 20 recommendations with an average holding period of 131 days), he can overcome the disadvantage of giving away some of his upside.
And Jeff enjoyed some of his greatest success trading mining stocks...
The first trade he made last year was Paramount Gold. The stock was flat for the year, but Advanced Income readers made 43% over about seven months selling covered calls.
And they made 19% in just five months selling calls against Aurizon Mines. (The stock actually fell in value last year.)
Silver Standard Resources also fell in value last year, but Jeff's readers made 11% in six months selling covered calls.
Jeff believes there's still a huge opportunity to sell covered calls against mining stocks... They're still dirt-cheap. Just take a look at the Market Vectors Gold Miners Fund (GDX), a basket of gold-mining stocks... It's trading near its lowest point in two years.
.png)
New 52-week highs (as of 2/8/13): Fidelity Select Medical Equipment & Systems Fund (FSMEX), PowerShares Buyback Achievers Fund (PKW), ProShares Ultra Health Care Fund (RXL), Sequoia Fund (SEQUX), ProShares Ultra S&P 500 Fund (SSO), Targa Resources (TRGP), Johnson & Johnson (JNJ), Prestige Brands Holdings (PBH), Calpine (CPN), Alleghany (Y), Brookfield Asset Management (BAM), Kohlberg Kravis Roberts (KKR), Becton-Dickinson (BDX), Medtronic (MDT), BLADEX (BLX), Cheniere (LNG), C&J Energy Services (CJES), and Activision Blizzard (ATVI).
Lots of reader support for our "editor and boar-killing machine," Porter Stansberry. It seems we have some sportsmen as readers... Send your feedback to feedback@stansberryresearch.com.
"I couldn't help but laugh, I mean out loud, belly rolling laughs reading Irena B's email about your hunting and fishing. Mankind has been on this planet for 400,000 years, or something like that, I hear so many different numbers, and our first ancestors ate everything from ants and greens to Wooly Mammoths to survive and that is why mankind is still on this planet. You should be proud to wear a pin on your lapel that says, 'Your editor & boar killing machine.'
"Tonight I will have a nice thick hamburger with bacon and cheese, a tossed mixed salad with fruits and vegetables added and some fries all washed down with an ice cold beer. I didn't kill any of it, but I certainly paid people to do it for me (conspirator). And yep, I'm waiting for my son to bring home a nice big sturgeon for a fish fry some night." – Paid-up subscriber C Brown
"If some of those people that think hunting is so vile lived in South Georgia and see firsthand the damage done to the crops of our farmers it might change their minds, but I really doubt it. These Imported wild hogs do a lot of damage in my area, and each sow can have as many as twelve or more pigs several time a year. Come on down to Wilcox County anytime you want to and kill a few more." – Paid-up subscriber Don
"Porter! I have never met you, but feel some kinship with the abuse heaped on you by Irena B. I too, am a paid-up subscriber. I am also, a 4th generation farmer from Canada. I fear for your country and ours as well, because of the mentality of the 'socio-economic elites' like Irena B.
"My family has never taken from the land, more than it could produce sustainably – that includes domestic livestock, big game, upland game, fish, and vermin. Our farms are the ecological envy of most of the country, because they have been managed with the aforementioned philosophy in mind. Yet there are those like Irena B. who would tell us from their surreal vantage points in cities full of filth, rot, and moral decay, how to manage our lives, our properties, and our rights to own property, including guns, and call us disgusting for enjoying and defending those philosophies and rights.
"My son is an avid fisherman, hunter, sportsman, athlete, and exceptional at animal husbandry. He currently is studying in your country to become a doctor, to relieve pain and suffering for his fellow man. I take great offence to the likes of Irena B. who would call my son a barbaric, dirtball, lowlife, because he chooses to hunt and fish! I hope for Irena B.'s sake, that when the civil unrest hits the fan on her street, that she has neighbors that have moral codes like yours, and my son's!
"Keep up the great work, Porter! We need your wisdom in Canada too!" – Paid-up subscriber D. Foat
Regards,
Sean Goldsmith
Miami Beach, Florida
February 11, 2013
Last week, I (Sean Goldsmith) visited Porter in South Florida. Over dinner at our favorite Miami steakhouse – Prime 112 – he posed that important question to me.
While I know buying and holding these stocks would be the simplest and safest road to riches... I still enjoy trading options and speculating in the junior-mining sector.
"Here's what you should do, Sean," Porter said. "Every year, take any extra money you have and buy one business. Buy it for less than 10 times earnings. Make sure it has a history of consistently raising dividends. And make sure it's a business you think will still be around when you have kids.
In the '60s and '70s, banks followed a similar investing regimen, known as "Nifty Fifty" investing. The goal of this style of investing was to focus on the 50 stocks with the largest market caps and try to identify those with the best outlook for growth over the long term. These were the ultimate "buy and hold" stocks... and included names like IBM, Coca-Cola, Polaroid, Hewlett-Packard, Motorola, Eli Lilly, Merck, Xerox, Kodak, and Philip Morris.
Over the years (decades), some of these companies – like film makers Kodak and Polaroid – failed. Others, like electronics maker Motorola and PC company Hewlett-Packard, while still in existence today, have become less competitive due to advances in technology.
Now, Porter's challenge is a bit different... He's not just looking for stocks with growth potential over the long term. He's looking to buy businesses with a history of increasing dividends that he believes will be around forever. And he wants to buy those businesses at low prices. The point is, the winners will more than make up for the losers.
.png)