It has been an incredible week for the editors and copywriters of Stansberry Research. Once a year – usually in the spring – we all gather together at a quiet resort to discuss our top ideas. We invite a small number of outsiders to join us. These are business contacts or sources directly involved in interesting new investments. This year, about 40 of us got together. It's not cheap to entertain 40 folks for three or four days at a five-star resort. I typically spend around $100,000 on the retreat... It's the very best investment I make all year long.
What did we talk about? Here are a few of the ideas. You'll see these ideas developed more fully in the days and weeks to come. Let's start at the very top...
Rick Rule brought to our attention a new way to take the government to the cleaners. Right now, our dear old Uncle Sam wants entrepreneurs to invest in "carbon-free" energy. Never mind that so-called carbon science is nothing more than the latest Malthusian nonsense, Uncle Sam has opened his checkbook. He wants all kinds of new alternative power built. In fact, he is offering tax incentives that will cover 30% of all project costs. And he is offering to guarantee project debt up to 80% of the total cost. Try adding those two numbers together: 30% plus 80% equals... yep, that's right. Developers can now earn more than 100% of the capital needed for their projects, just in exchange for building them.
How can you profit from this anomaly? Rick thinks the best way to do it is with geothermal companies, which have huge upfront capital costs – and they have access to nearly free energy. We can let Uncle Sam pay for all of the upfront expenses... and we'll keep all of the long-term revenues for ourselves. Sounds good to me. Again, look for more about this next week.
Tom Dyson delivered an outstanding presentation on the best way for common stock investors to profit from the banking crisis. Right now, the FDIC is auctioning off bad mortgages. It's getting hundreds of millions worth of this paper each quarter, thanks to all of the small banks that are failing. It's selling mortgages for 25 cents on the dollar. These mortgages can typically be restructured as a performing loan that's worth more than 50 cents – that's a 100% return on investment over a period of usually less than a year. It's hard for small investors to participate in these auctions. But there's a publicly traded company formed purely for this purpose... and it's yielding 16% right now. Another way to participate is to find high-quality local banks in a position to take over their failing competitors. Tom has already told his readers a few of his best ideas in this sector. To learn more, just subscribe to our 12% Letter.
One final idea I want to share with you... Check out this website: www.mebanefaber.com. The man behind the website – Mebane Faber – is perhaps the single most thoughtful quantitative investment analyst I've ever met. His book, The Ivy Portfolio, is a must-read for any professional money manager and any serious individual investor. Just a few of the things Meb told us about last week could make you a wealthy man, including what sectors of the market perform best given any particular yield curve, how to rebalance your portfolio to take advantage of relative strength, and which professional managers are profitable to follow using SEC form 13-F. You'll find all of this stuff – and a lot more – on his website.
We wrote it, did you buy it?
Because of its performance, speed, and capacity, Akamai's proprietary server network will also become critical as streaming high definition video becomes more widely adopted. No other company is better positioned to help with this transition. Over the next two years, the growth in Akamai's revenues from this business will be dramatic. From here, if shares return to anywhere near historical multiple levels, we could see gains over 300%. In the next 18 months alone, shares of Akamai could easily double. – Braden Copeland, August 12, 2009, Inside Strategist
Akamai yesterday announced profits rose 10% from a year ago. Revenue increased 14% to $230 million. Both numbers beat analyst expectations. And shares soared more than 19%. Braden's predicted double came a few months early. His readers are now sitting on a nearly 120% gain in Akamai in eight months.
I've been saying this for quite a long time: Inside Strategist is both the best value we offer (each pick costs you less than $5) and our most consistent investment publication. (It made money for readers in 2008, a feat unmatched by just about any other newsletter or mutual fund.) If you're not a subscriber, you're making a huge mistake. Click here for more information.
New highs: Washington REIT (WRE), Dorchester Minerals (DMLP), ConocoPhillips (COP), San Juan Basin (SJT), McDonald's (MCD), St. Joe Company (JOE), Prestige Brands (PBH), Portfolio Recovery Associates (PRAA), Home Federal (HOME), Akamai (AKAM), Brady Corp. (BRC), A. Schulman (SHLM), Entegris (ENTG), HMS Holdings (HMSY), Applied Micro Circuits (AMCC), Silvercorp Metals (SVM), Silver Wheaton (SLW), Eldorado Gold (EGO), Westmoreland Coal (WLB), United American Indemnity (INDM).
In the mailbag, questions about the future – inflation and worse. Send your e-mails to feedback@stansberryresearch.com.
I personally think you guys pushing the inflation thing are going to get kicked in the teeth. I have gold and silver, had slv and gld, road kinross and freeport up in the bounce (by the way remember they all got thumped too, will again in a crash). But dumped them to get prepared for the next downturn. I know there trying to keep it from happening. I don't think inflation is coming because all indications from the many people that I do business with on a daily basis is that few are 'well-healed' with actual greenbacks. The people who are saving are doing it exclusively with electronic U.S. currency in accounts and such. This makes the great re-set (prices of things we buy) that many forecast that much easier.
"I think when it happens the greatest value will be placed on the very thing people use to buy the stuff (greenbacks) as opposed to the actual stuff. Inflation down the road sure. But the money isn't circulating an inflationary must, people are not flush with cash. In reality their major means of saving and gaining wealth just got turned upside down over the last 2 years. Most people forget that pain and still think it was a fluke and that things will be exactly the same sometime soon. So I guess you all expect the masses will be able to use there houses as an ATM to buy cars and college educations again soon.
"Dyson will come out on top, even though I hope I am wrong. You writers just might not be out there rubbing elbows with enough people!! Get your mouth pieces." – Paid-up Subscriber Eddie Chevalier
Porter comment: Eddie... you need a lesson in basic physics. You can print money a lot faster than bankers can destroy it. Watch what happens with Greece: The U.S. will bail it out via the IMF. The Fed spent $1.75 trillion on mortgages last year. The U.S. government spent more than $3 trillion in deficits in the last two years. And we're about to send Europe another trillion via the IMF. Trust me, deflation won't be a problem. Sooner or later, even Dufus Americanus will realize the dollars he's collecting through unemployment insurance aren't worth the paper they're printed on. He'll start going to the coin dealer twice a month instead of to the liquor store.
"If you were a kid starting out today, and you didn't have very much money, but were interested in investing for your future (if any) what would you do? Or is the situation hopeless? The book Aftershocks is predicting a 20-year Second Depression, with 50%-60% unemployment, starting in the very near future. Some will say it's already started. What saith Ye to this, Ye of the Twenty-First Century?" – Paid-up subscriber JS
Porter comment: I'd recommend learning how to sell. Spend time going door to door selling knives. Or paint jobs. Or anything. Learn to sell, and you'll never be poor. From a macro perspective, I'd recommend moving to either Singapore or Hong Kong. I think these economies offer the most economic opportunity and the greatest respect for private wealth.
Regards,
Porter Stansberry and Sean Goldsmith
Baltimore, Maryland
April 30, 2010