S&A Digest: Dodge & Cox smarter than Porter?

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

As of 06/19/2013

Dodge & Cox smarter than Porter?... Blackstone calling the bottom... American Express fumbles... Mobius buys Chindia... Einhorn hot on pubs...

 Shares of American Express, another beacon of American capitalism, fell as much as 12% today after the company reported a 37% drop in earnings. And, as expected, the credit-card business was hit the hardest. Profit in the U.S. card business dropped 96% to $21 million from $580 million a year ago. Provisions for losses more than doubled to $1.5 billion. Uncollectible debt rose to 5.3% from 2.9% last year. And according to CEO Ken Chenault, even historically high-spending, "affluent people" are "cutting back."

 Mark Mobius, manager of the $47 billion Templeton emerging-market equities fund, sees "good bargains" in China and India. "We've been rearranging the portfolio based on valuations, which have come down pretty dramatically in places like India and China... There've been big declines." Mobius joins Jim Rogers in buying China, as stocks have plunged 46% this year. China and India are the worst performers among the world's 20 largest stock markets this year.

 Nobody wanted to buy mortgage lender HBOS, but private-equity giant Blackstone may buy its competitor Paragon, a buy-to-let mortgage lender... The British company has a current market cap of $594 million, down 90% in one year. Blackstone's talks with the company come weeks after fellow U.S. private-equity investor TPG Capital, aborted a planned 23% investment in Bradford and Bingley, the leading British buy-to-let mortgage lender. Buy-to-let mortgages are mortgages for those who want to buy a property and rent it privately.

 David Einhorn of hedge fund Greenlight Capital is also looking to Britain for investments. He recently increased his stake in Punch Taverns, a British pub chain, to 21.5 million shares, or 8.07% of the company.

 New highs: Barr Pharmaceuticals (BRL), Royal Gold (RGLD).

 In the mailbag today, one against and one in support. Which side are you on? Tell us at feedback@stansberryresearch.com.

 "During the second quarter of 2008, Dodge and Cox stock fund accumulated a position of 29 million shares of GM. Now, there has to be at least 10 guys at Dodge and Cox who are smarter than you. Don't you wonder, at least a little bit, what they've figured out that you haven't figured out?" – Paid-up subscriber S. Hoff

Goldsmith comment: Even if Dodge & Cox bought GM at its lowest price of $17.47 in the first quarter, its holdings would be down 25%. Dodge & Cox also owns nearly 40 million Fannie Mae shares... They're down 66% year to date.

 "Unfortunately for subscriber Bill Matz in chastising you, it is he who has no idea what he's talking about, and is giving you s__t? Freddie and Fannie had guidelines as to the parameters of the loans they would/will buy, and Countrywide and Wells Fargo and all the other 'lenders' underwrote to those guidelines so that they could sell the package of garbage to Freddie and Fannie. No, it's not funny (or maybe it is), but Freddie and Fannie deserve to go broke, and China and Japan and Russia can then try collecting on the bonds from the mortgage servicing companies." – Paid-up subscriber John Allen

Regards,

Sean Goldsmith

Baltimore, Maryland

July 22, 2008

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