Porter Was Right Again
Devon Energy finally takes our advice – just five years too late... Porter was right again... What you should know about 'Big Tech' and the government... Don't miss Doc Eifrig's first-ever trading 'Master Class'...
Late last month, oil and gas producer Devon Energy (DVN) made a stunning announcement...
The company said it was selling off its Canadian oil-sands assets to focus entirely on its U.S. oil business. From the company's May 29 press release...
Devon Energy today announced that it has entered into a definitive agreement to sell its Canadian business to Canadian Natural Resources Limited for C$3.8 billion, or $2.8 billion...
"The sale of Canada is an important step in executing Devon's transformation to a U.S. oil growth business," said Dave Hager, president and CEO. "This transaction creates value for our shareholders by achieving a clean and timely exit from Canada, while accelerating efforts to focus exclusively on our high-return U.S. oil portfolio.
We hope longtime readers were as amused by Hager's 'timely exit' comment as we were...
After all, it's been nearly five years since Porter first urged the company to do exactly that.
In his July 2014 issue of Stansberry's Investment Advisory – titled "Sell Canada: An Open Letter to Devon Energy" – he practically begged the company to sell its Canadian assets and focus solely on developing its U.S. shale assets in Texas.
A few months later, he devoted an entire Friday Digest to the subject... and even encouraged Stansberry Research readers to send their own letters to the company's board.
Unfortunately for Devon shareholders, the company did not heed this advice...
Earlier this month, in the June issue of Stansberry's Investment Advisory, senior analyst Alan Gula shared the research team's thoughts on the announcement...
In our July 2014 issue... we pointed out that Devon was pouring money – nearly $2 billion a year – into its Canadian projects that use natural gas to produce a heavy, sour form of crude oil, called bitumen. Bitumen is used mainly to make roof tar, asphalt, and paint. We explained that Devon was likely to get a tiny return on that investment at best. It costs nearly twice as much to produce a barrel of oil in Canada as it does in Texas.
It made no sense that Devon – which acquired a company in 2001 that was the pioneer of horizontal drilling and hydraulic fracturing ("fracking") – continued to invest in low-margin Canadian oil when it could instead invest in high-margin projects in the booming Permian and Eagle Ford Shale plays in Texas.
Almost five years later, Devon finally took the advice. Unfortunately for shareholders, it's a little too late...
When we published the letter in 2014, Devon was worth $32 billion. Today, it's worth nearly 70% less, around $11 billion. Fortunately, we didn't wait for Devon to take our advice. We exited our position in Devon in October 2014 with a small 3% loss.
But this wasn't the only bold call Porter and his team revisited this month...
Way back in the October 2011 issue of Stansberry's Investment Advisory, Porter recognized the massive growth potential of the video-game industry. As he explained at the time...
Technology is making video games into active, online communities where people spend hours of leisure time. These communities are growing. And they are powerful, allowing publishers to increase prices and fees. That's a trend I believe will continue at the same time technology allows richer experiences and lower connectivity costs.
Technology will also allow these publishers to adopt higher-margin distribution models, where players are able to pay the publisher directly, buying the game through subscription, instead of through a retail outlet.
These trends are why I'm extremely bullish on the long-term future of the video game business.
Porter was exactly right...
Physical media has given way to digital downloads. Game discs and cartridges are obsolete. You no longer have to drive to the store to buy games... or have them shipped to you. You can do it all at home, directly over the Internet, and – increasingly – using cloud and streaming technology.
Of course, if you're like most of our readers, you probably don't play video games too often. But we'd wager you probably know someone who does... An estimated 2.4 billion people now play them regularly.
That's nearly one-third of the global population, with more folks joining every day. And the average age of a U.S. gamer is 35. This isn't just kids' stuff anymore.
What's more, competitive video gaming – or "esports" – continues to generate growing mainstream interest for the industry as a whole. Coca-Cola (KO) is the official beverage sponsor of the Overwatch League, a professional league for the team-based, first-person-shooter game called Overwatch. High-profile names like Dallas Mavericks owner Mark Cuban and basketball Hall of Famer Michael Jordan have invested in esports teams and leagues.
In short, the future looks brighter than ever for gaming.
In October 2011, Porter recommended shares of video-game publisher Activision Blizzard (ATVI)...
Stansberry's Investment Advisory subscribers who took his advice had the opportunity to make as much as 129% before shares hit their trailing stop loss in early 2016.
And in this month's issue, Porter and his team have identified what they believe is an even better opportunity to profit from this long-term trend.
It's one of the top video-game publishers in the world. It owns long-established game franchises that adoring fans buy new releases of every year, including one of the hottest new games around. It's at the forefront of the breakthroughs in the gaming industry.
And maybe most important, the company is a model of capital efficiency... a highly profitable and scalable business that doesn't require a lot of large investments to grow. Better yet, shares are trading at a remarkably cheap valuation today.
You can get all the details on this opportunity in the June issue of Stansberry's Investment Advisory. If you're not yet a subscriber, get started with a 100% risk-free trial right here.
In other news, regular readers know 'Big Tech' is suddenly in the U.S. government's crosshairs...
As we noted earlier this month, the U.S. government's top two antitrust enforcers have teamed up to investigate several leading technology firms.
The Department of Justice is reportedly probing Alphabet's (GOOGL) Google and Apple (AAPL) for potential "anticompetitive" business practices. Meanwhile, the Federal Trade Commission is leading similar probes into Amazon (AMZN) and Facebook (FB).
Now, if you own shares of one or more of these firms, you might be concerned...
If the government finds that these companies violated antitrust laws, it could punish them. It might levy severe fines or issue tough new regulations. It might even decide to break them up into several smaller companies.
Surely, any of these outcomes would be bad news for shareholders... right?
Not so fast...
As our colleague Dr. David "Doc" Eifrig explained in the latest issue of Retirement Millionaire, out last Wednesday, history suggests this isn't necessarily the case. He cited the example of tech giant Microsoft (MSFT), which came under similar government scrutiny in the 1990s...
The government spent years trying to break up Microsoft. The company even tried to resolve the issue by reaching a settlement four years earlier with the U.S. Department of Justice. But the government kept coming after it...
In the end, the judge found Microsoft had engaged in anticompetitive practices, and the company was punished for it. But as Doc showed, this "sentence" was anything but bearish for Microsoft's business or share price...
An antitrust proceeding means the government thinks you've got a monopoly. It means your business is just too darn good to be beaten by any competitor. And even with heavy-handed government intervention, businesses like that tend to reward shareholders.
If you had bought Microsoft shares just before the Justice Department first began investigating the company in 1993, you'd have absolutely annihilated the S&P 500 – and even the high-flying Nasdaq – over the next five years.
In fact, history suggests even the worst-case scenario isn't necessarily the bearish omen it might initially appear...
Take case of the original AT&T, which the government broke up 35 years ago. More from Doc...
This was a tried-and-true monopoly. AT&T owned most of the phone lines and could charge customers an exorbitant amount for phone service.
The government broke up the company into AT&T's long-distance service and the "Baby Bells." If you bought AT&T on the day the deal was finalized, you'd have earned more than 10 times your money over the next two decades.
Microsoft's and AT&T's performances don't mean you should always buy businesses going through antitrust investigations. Rather, you should judge the business on its own merits and consider antitrust a reason to keep owning – not a reason to sell.
Speaking of Doc, if you're a fan of his research, you don't want to miss what he has planned this week...
In short, Doc is holding his first-ever trading "Master Class" to demonstrate a strategy that is tailor-made for today's volatile markets.
It's a way to make up to 10 times greater returns from some of the same stocks you're probably already buying, while risking less of your hard-earned money. Better yet, this strategy works in bull or bear markets alike. Doc says it can help you profit when stocks go up... when stocks go down... and even when stocks are flat and don't go anywhere at all.
It all kicks off this Wednesday, June 19, at 8 p.m. Eastern time... and it's absolutely free for all interested Stansberry Research readers. Click here to get the details and reserve your spot now.
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In today's mailbag, another reader shares his thoughts on Steve Sjuggerud's feature-length documentary, New Money. As always, send your comments and questions to feedback@stansberryresearch.com.
"To all of you, the movie was incredible! The production was awesome, like a good book I didn't want to miss a moment. Honestly, I watched it twice already.
"Regarding China, you have to give credit... they can copy anything, but what they have accomplished is beyond words. It showed how mired we are in our politics...
"Only a fool would turn his head away from this ballooning giant. I felt the life of this growth through all my senses. It was exhilarating. I want to go there one day, it's just a monumental achievement for all the people of China.
"One note from the movie lingered in my mind, 'The U.S. lost a lot when they quit making things.' The decaying pride was a result unforeseen. Praise to you for making this film, I'm lucky to have been able to view it." – Paid-up subscriber Mark W.
Regards,
Justin Brill and Corey McLaughlin
Baltimore, Maryland
June 17, 2019