Billionaire investor Warren Buffett tells investors to only buy companies they'd be happy owning if the stock market was going to close for the next 10 years...
So where would I (Porter) be happy placing a large sum of money, untouched, for the next decade?
I recently found this kind of investment… But it's outside of the stock market – which is near all-time highs.
As I discussed in a previous Digest Premium, I just bought a 100-acre estate outside Baltimore. I did so because I could get very low-cost fixed-rate financing, which made the purchase very inexpensive on a cash basis.
The production from the farm on the land should cover the interest expense. And owning 100 acres of productive ground that's close to a major city could prove to be valuable in the future...
Finally, the seller was very eager to sell. So I was able to get a great price. I purchased this land at a price I believe is a 70% discount from its future value (or from a reasonable private-market value).
When you can buy farmland where the production covers the financing cost, it's almost always a good investment.
The problem is that most farmland today offers very low yields... You have to be careful about the prices of farms. In my case, it was an unusual deal I was able to put together.
– Porter Stansberry with Sean Goldsmith
Where I'm happy to put my money for the next decade…
Despite his concerns about the future of our economy… Porter recently made a major purchase that he's happy holding for at least the next decade.
In today's Digest Premium, he explains what he bought and how you can make a similar purchase yourself...
To continue reading, scroll down or click here.
Where I'm happy to put my money for the next decade…
Despite his concerns about the future of our economy… Porter recently made a major purchase that he's happy holding for at least the next decade.
In today's Digest Premium, he explains what he bought and how you can make a similar purchase yourself...
To subscribe to Digest Premium and access today's analysis, click here.
Mr. Market was upset on Friday...
In particular, Mr. Market was down on the world's largest software company, Microsoft. Shares of the World Dominator fell nearly 12% after it reported its fourth-quarter earnings (which ended June 30)... The company missed analysts' expectations on both earnings and revenue. Sales of its Windows software disappointed. And Microsoft took a $900 million accounting charge related to its Surface tablet.
Mr. Market is the manic-depressive business partner that legendary value investor Ben Graham created in his book The Intelligent Investor. Graham said investors should think of the market like an erratic business partner who every day offers to either buy your stake in the business or sell you his share. When Mr. Market is happy, he's willing to overpay for your shares. But when he's sad, he'll sell at almost any price.
It's a simple way to remember that markets aren't rational... They're driven by emotion. And you can profit by taking advantage of the extreme optimism and pessimism.
We may have such an opportunity with Microsoft... I asked Extreme Value and 12% Letter editor Dan Ferris to comment on Microsoft's big drop – the biggest in more than four years. He holds Microsoft in the model portfolio of both publications. And he's followed the stock since 2006. Here's what Dan said…
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Extreme Value subscribers got Dan's full comments on Microsoft in today's weekly update.
Meanwhile, two of Dan's favorite World Dominators are currently trading for less than his buy-up-to price. And a third World Dominator, which yields close to 4%, is fast approaching its buy range.
You don't get many chances to add these world-class businesses to your portfolio at great prices. But we have that today. To learn more about subscribing to Extreme Value – which gives you access to Dan's current recommendation on Microsoft and which World Dominators to buy right now – click here...
Mr. Market has also been down on gold stocks lately...
The Market Vectors Gold Miners Fund (GDX) – which holds shares of most of the big publicly traded gold stocks – has fallen in half from its September 2012 highs... It's down nearly 60% from its all-time highs in September 2011.
Gold stocks are falling for a couple reasons...
First, Federal Reserve Chairman Ben Bernanke announced the Fed would start tapering its $85 billion of monthly bond purchases this year. This signals the economy is improving, so folks who bought gold for disaster insurance no longer think they need it.
Also, the price of gold has fallen from $1,900 an ounce (before today) to less than $1,300 an ounce. Meanwhile, input costs (like oil) are rising. So mining companies are getting less for their output, but they're paying more to produce.
But some bullish sentiment is returning to the sector...
As a group, the largest gold traders (like mining companies, banks, and dealers) have fewer cumulative "short positions" – trades that would profit on a fall in the gold price – than they have in a decade. The last time sentiment was this bullish was in 2008... And gold prices doubled.
According to the latest Commodity Futures Trading Commission (CFTC) Commitment of Traders data, almost 11% of short-gold positions closed in the last week... That's the largest weekly drop in net shorts in four months. The combined futures-and-options net long positions increased 13,287 contracts, up 48% and the biggest jump since November 2008.
Gold jumped 2.6% today to $1,327.60 an ounce – a one-month high. GDX is up more than 6%.
And our editor in chief, Brian Hunt, says gold stocks could be carving out a bottom. In particular, he's looking at the performance of gold royalty company Royal Gold.
Royalty companies don't actually mine any gold, so they don't have the huge costs associated with production. Instead, royalty companies finance early-stage mining companies and collect an income stream based on future production. It's a wonderful business model... and much safer than traditional gold mining.
In today's Growth Stock Wire, Brian wrote:
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If the stock can hold this level for a while... or even move into the mid-$40s... Brian says it would be a bullish sign for the sector. Traders can consider buying Royal Gold – or its fellow gold stocks.
If the recent lows hold, the upside for these cheap, hated stocks is substantial. If you use a "tight" stop – one that would lead you to exit the position before it fell too far – the downside is minimal.
Our friend Mebane Faber, founder of Cambria Investment Management, recently wrote a new book on dividend investing – Shareholder Yield: A Better Approach to Dividend Investing.
The book tells investors how to find outsized returns in today's low-interest-rate world. Meb looks at more than just dividend yields... He considers all the ways a company distributes its free cash flow (things like share repurchases, capital expenditures, or acquisitions).
It's similar to how Porter identifies the top "capital efficient" companies – those businesses that don't require much ongoing investment and shower cash on shareholders. These are the best stocks to buy and hold for compounding your wealth.
If you're interested in earning more, secure income, you should check out Meb's book... It's a quick and worthwhile read. And you can get the book for free, today only, through Amazon here.
Also, as you'll see in our list of new 52-week highs… the Cambria Shareholder Yield Fund – which Meb designed using the strategy outlined in his book – is trading at a new high. Steve Sjuggerud recommended it to his True Wealth subscribers in May… and the position is up 4% since then.
New 52-week highs (as of 7/19/13): American Financial Group (AFG), Becton-Dickinson (BDX), ProShares Ultra Biotechnology Fund (BIB), BLADEX (BLX), Berkshire Hathaway (BRK), Blackstone Group (BX), CVS Caremark (CVS), Chevron (CVX), Fission Uranium (FCU.V), Fidelity Select Medical Equipment & Systems Fund (FSMEX), Hershey (HSY), iShares Biotechnology Fund (IBB), Johnson & Johnson (JNJ), KLA-Tencor (KLAC), ProShares Ultra KBW Regional Banking Fund (KRU), Medtronic (MDT), 3M (MMM), PowerShares Buyback Achievers Fund (PKW), Qlik Technologies (QLIK), RPM International (RPM), ProShares Ultra Health Care Fund (RXL), ProShares Ultra S&P 500 Fund (SSO), Cambria Shareholder Yield Fund (SYLD), Sysco (SYY), Union Pacific (UNP), Wells Fargo (WFC), ExxonMobil (XOM), and Alleghany (Y).
Today's mailbag includes notes from subscribers describing how they've profited from our work… and one important warning. Send your notes to feedback@stansberryresarch.com.
"Brian and Sean thanks for sharing the S&A 16. It is good for me to see how much of it I have in my own. Also, what I chose not to include. The subscriptions that I have are of such great value to myself and my family. The reason I include my family is because if you enrich me you enrich my family.
"S&A has provided me with and education and resources that answer questions. One of the best things is that there are other sites where I read about what I own some of which aren't S&A picks. In the course of choosing those, I have found all of the resources that you all have provided for me allowed to make those picks with wisdom.
"For example, Porter recommended BOA, so I bought it every time it was below $7. At the moment I am relaxing at a 94% profit. But in the course of that I read an item about Key Bank. I compared the charts for them and looked at the numbers and decided it was a good move at the time. I bought at $9 and I am now looking at a 28% profit. Without the tools you all have provided that would not have happened. Thanks many times over." – Paid-up subscriber Jeff Spranger
"There has been lots of feedback about how well subscribers are doing. The mailbag has been absolutely gushing praise. This rising market floats almost all boats and even allows the turkeys to fly. Everyone thinks he's a general, but they will quickly be demoted to grunt, buck privates if they don't have an exit plan in place.
"One of the most important things I have learned from my subscriptions is how to sell. I'm still not real good at it yet, but I'm getting better and better. It is easy to buy, but much, much harder to sell. It's why I never made any money over the last 20 years. Thanks to all the writers for teaching me that along with lots of other stuff." – Paid-up subscriber Gary S.
Regards,
Where I'm happy to put my money for the next decade…