The nation's biggest landlord is getting bigger...

Most investors think this stock is expensive, but they're wrong...

Over the past decade, one blue-chip company's shares are up more than 360%, causing many investors to overlook it.

But in today's Digest Premium, Bryan Beach, lead analyst for Stansberry's Investment Advisory, shows why shares are actually cheaper than they were back in 2004...

To subscribe to Digest Premium and receive a free hardback copy of Jim Rogers' latest book, click here.

The nation's biggest landlord is getting bigger... Blackstone is now buying hedge funds... Bad news is good news today... Gold crosses $1,300... One gold miner to avoid... Apple's run higher... Emerging markets are still falling... Frank Curzio interviews Jim Cramer... Doc Eifrig's latest research...

 The biggest landlord in the United States is moving into different states...

Private-equity giant Blackstone Group has spent more than $8 billion buying more than 43,000 homes around the U.S. It has taken the rents from its tenants around the country, bundled them, and sold them on Wall Street.

 But Blackstone isn't the only institutional firm in the space... Colony Capital, Silver Bay Realty Trust, and Stansberry's Investment Advisory holding American Homes 4 Rent have spent more than $20 billion buying as many as 200,000 properties.

 Mom-and-Pop investors have historically dominated the residential real-estate business... So this huge infusion of institutional cash has helped real-estate prices soar. According to the S&P/Case-Shiller housing index – comprised of data from 20 metropolitan U.S. cities – home prices rose 13.7% in November from the same period a year earlier.

Today, the most beaten-down post-crisis areas – like Las Vegas and Phoenix – are no longer the screaming values they once were... So the institutional cash is branching out...

 Bloomberg reports that Blackstone and other investors are moving into new areas, like Chicago. Chicago trailed other markets in the housing recovery because Illinois is a judicial foreclosure state... Home repossessions require state approval, which slows down the process. And these private-equity firms couldn't buy in bulk like they usually do.

With prices recovering in other parts of the country, Chicago is becoming more popular... Prices rose 11% in November from the same period a year earlier. It was the biggest increase in nearly 25 years.

 Geoff Smith, executive director of the Institute for Housing Studies at DePaul University, says big investors accounted for around 20% of Chicago home purchases in the first half of 2013. "Those hard-hit areas are seeing some improvement recently," Smith said. "But they have a ways to go and they're in a really big hole."

 Chicago real estate was less volatile than other places around the country... Area home prices fell 39% from peak to trough in March 2012. (They're up 23% since then.)

For comparison, Phoenix home prices fell 56% peak to trough. (They have since risen 45%.) Las Vegas prices dropped 62% (and have since risen 42%).

 As we've discussed many times in the Digest, the government's loose-money policy is a boon to private equity (for example, consider Blackstone's latest earnings). With more money in circulation, these asset managers can gather more assets and use more leverage, leading to larger, more frequent acquisitions.

 Continuing its quest to own everything, Blackstone is also raising $3 billion to buy stakes in hedge funds. It has raised $1.4 billion so far. Vice chairman Tom Hill said Blackstone can buy stakes at valuations between 4.5 and five times cash flow.

"You have an opportunity not only to benefit from their growth but also to look down the road at creating a public vehicle for that," Hill said at Credit Suisse's financial forum in Boca Raton. "We will, in our mind, dominate that space the way we have dominated the seeding space."

 Blackstone already holds $56 billion in "funds of funds" – a portfolio of investment funds. And that already seeds new managers with $100 million to $200 million in initial capital. The new strategy will focus on existing managers that Blackstone believes will perform well into the future.

The move is another way for Blackstone to diversify and create new buckets for its ever-growing capital.

 The S&P 500 started in the red today, then recovered into positive territory by 11 a.m...

The market opened lower on news that January retail sales unexpectedly fell 0.4%... And that initial jobless claims rose to a seasonally adjusted 339,000.

 Gold stocks are once again the market's big winner... The Market Vectors Gold Miners Fund (GDX) – which holds a basket of major gold-mining stocks – was up 4.4%. Junior miners – as measured by the Market Vectors Junior Gold Miners Fund (GDXJ) – were up 6.2%.

Meanwhile, physical gold rose to more than $1,300 an ounce for the first time since November.

 Despite the rally in gold and gold stocks, S&A Resource Report editor Matt Badiali says there's one miner you should avoid: Newmont Mining (NEM). The company fell 71% from its November 2011 high... and has lagged other mining stocks this year.

But Matt says Newmont is heading even lower. As he wrote in the February 5 Growth Stock Wire...

 Shares of consumer-electronics giant Apple were up more than 1.5% today. They're up nine of the last 10 days... jumping from around $497 two weeks ago to nearly $545 today – a 9% gain.

But Jim Cramer – a former hedge-fund manager and host of CNBC's Mad Money – isn't bullish on the blue-chip company's growth prospects. In an exclusive interview with S&A Investor Radio host Frank Curzio, Cramer explained why Apple is transitioning from a growth stock to a value stock... and what he thinks the company should do with its $150 billion cash hoard to boost its earnings. Cramer's opinion is one we haven't heard anywhere else.

We're thrilled Frank got the chance to speak with Cramer on S&A Investor Radio. Cramer doesn't often speak to the media (except for mass media outlets like The Today Show). But because of his personal relationship with Frank, he agreed to do a 20-minute segment on S&A Investor Radio. We think it's one of the best interviews you'll hear all year.

 Frank details Cramer's argument in tomorrow's Growth Stock Wire. You can also listen to Frank's 20-minute segment with Cramer on S&A Investor Radio by clicking here.

 Emerging-market equities are down yet again...

Emerging-market stocks are trading at the biggest valuation discount to developed nations since 2006. But the selling continues...

Investors have pulled $10.6 billion from emerging-market funds so far this year, despite some of the biggest money managers in the world turning bullish. We previously outlined how Goldman Sachs CEO Lloyd Blankfein and Templeton Emerging Market Group manager Mark Mobius think emerging-market equities are attractive. The two men together control $7.7 trillion of capital.

And Steve Sjuggerud says buying emerging markets after this rout will be a "once-in-a-lifetime opportunity."

 The public is scared and selling. We're sitting tight, and waiting for a solid, confirmed uptrend before buying.

 "I can't even recall a bargain this good."

Dr. David Eifrig's latest issue of Retirement Millionaire hit subscriber inboxes last night. In it, he highlighted a brand-new stock recommendation. As you can tell from the quote above, Doc thinks it's a great opportunity.

Without sharing all the details, I can tell you the company has raised its dividend for 46 straight years and currently yields more than 3%. Plus, shares are down 20%-plus over the past six months due to irrational market fears, which Doc addresses.

This stock is one of the few non-speculative values in the market today... It's a super-safe household name.

 Doc also shared his nine best tips for preserving wealth. If you follow these nine rules, you are guaranteed to save more money and compound your wealth.

Finally, Doc arranged for a special deal on wine from two of his friends in California... The deal is exclusive to Retirement Millionaire subscribers.

You can immediately access all this information with a 100% risk-free subscription to Retirement Millionaire. It's only $39 a year. Click here to learn about a subscription.

 New 52-week highs (as of 2/12/14): Becton-Dickinson (BDX), ProShares Ultra Biotechnology Fund (BIB), C&J Energy Services (CJES), Comstock Resources (CRK), Dominion Resources (D), Express Scripts (ESRX), Energy Transfer Equity (ETE), Corning (GLW), iShares Biotechnology Fund (IBB), Integrated Device Technologies (IDTI), SPDR International Health Care Fund (IRY), Penn Virginia (PVA), Sanchez Energy (SN), Skyworks Solutions (SWKS), Targa Resources (TRGP), Union Pacific (UNP), and Walgreens (WAG).

 In today's mailbag, one reader applauds Steve Sjuggerud's analysis... and another writes in to show why firearms can make for great investments. Send your notes to feedback@stansberryresearch.com.

 "Steve's insight has been very profitable for me. Love his 'bad to less bad' philosophy. I got in late on BIB and AA but still am up 75% and 21% respectively. Stopped out on X with a 38% profit. Followed his recommendation on SYLD having read O'Shaughnessy's book. Think that's a long-term keeper. Thanks so much to all of your contributor's ideas. It is truly an educational journey no investor or trader should miss." – Paid-up subscriber GSB

 "I've enjoyed your discussion [in Digest Premium] of valuable firearms. As a young man in the late 1960s, I was a great example of having more money than sense. I inherited a modest sum from an uncle and put it all into dealing in fine firearms. I doubled my money ($3,500) on a Purdey double with 2 sets of barrels, made a few hundred on a 7E Ithaca single barrel trap, several model 32 Remingtons, an Olympian grade Browning .338 new in the box, paid for my wedding and honeymoon (about $2,500) with a CHE 20gauge Parker, and the list of fine firearms goes on and on. Every one of the firearms I owned is now worth 10 to 50 times what I sold them for. I've since learned to recognize and appreciate quality in all aspects of life including friends and especially my wife." – Paid-up subscriber Dan Timm

Goldsmith comment: Thanks, Dan... Collectibles expert Van Simmons knows more – and has more stories – than anyone I've ever met. So it's always a pleasure to pick his brain.

As Digest Premium subscribers know, I recently spoke with Van about his experience at the Las Vegas Gun Show, the largest show of its kind. He discussed different guns selling for hundreds of thousands of dollars... explained why he thought the market was getting out of hand... and shared an entertaining anecdote.

Digest Premium subscribers can read these pieces here, here, and here. And if you'd like to sign up for Digest Premium for only $10 a month – and gain access to Van's priceless insight – click here.

Regards,

Sean Goldsmith

Miami Beach, Florida
February 13, 2014

Most investors think this stock is expensive, but they're wrong...

Editor's note: Over the past decade, McDonald's shares have more than tripled, causing the investment herd to ignore it. But as Stansberry's Investment Advisory lead analyst Bryan Beach points out in today's Digest Premium, investors have it all wrong... Today, McDonald's is actually cheaper at $95 per share than it was 10 years ago at around $25 per share...

 McDonald's (MCD) has more than doubled its return on assets over the past 25 years. You can't pull that off unless you have serious "economic goodwill" – unless you have a great brand and tremendous customer loyalty.

You might imagine a business like this would be expensive to acquire. And at first glance, that's undoubtedly what most investors believe. After all... anyone who pulls up a stock chart can see that McDonald's is a LOT more expensive than it used to be.

MCD shares were trading for less than $60 in late 2007. Now, they're more than $95 per share. We've missed the boat, right? No, we haven't...

And no, McDonald's shares aren't expensive. In fact, they're almost never expensive, which is another reason this stock is so good for long-term compounding.

 How can we write that McDonald's shares aren't expensive? How can we say they're very stable in price? Hasn't the nominal price of the shares increased a lot over the last decade? Have we lost our minds?

No. You can't evaluate the relative value of any stock by looking only at the nominal price of its shares. All normal operating companies are valued on the basis of their earnings. Five years ago, McDonald's enterprise value (market cap + debt – cash) was around $77 billion. It was earning around $7 billion annually. So you would have to pay $11 for every dollar of McDonald's earnings. Or – as we'd say around the office – back in 2011, McDonald's was trading at an 11-multiple.

Today, buying McDonald's would cost you a lot more money in nominal terms, around $100 billion. But McDonald's currently earns about $10 billion annually. So now you're only paying $10 for every dollar of earnings – a 10-multiple. McDonald's is actually cheaper, in terms of its earnings multiple, than it was in 2007.

 The following chart compares MCD's valuation with its stock price. You can see the stock's nominal price has increased – a lot. But the shares' value remains roughly the same, right around 10-times earnings.

And here's the really interesting thing...

If you go back 20 years... you'll find that McDonald's shares have almost always changed hands for around 10 times earnings. There was a brief period during the big stock market bubble in the late 1990s where investors lost their minds. McDonald's traded all the way up to a 16-multiple then. But besides that brief period, McDonald's shares have always been available at a reasonable price.

That stable value is a great attribute for long-term investors, because it means reinvesting your dividends won't happen at punitive prices. And it means you can be fairly certain that when you want to sell in 20 or 30 years, you'll find a fair and ready market for your stock.

– Bryan Beach

Most investors think this stock is expensive, but they're wrong...

Over the past decade, one blue-chip company's shares are up more than 360%, causing many investors to overlook it.

But in today's Digest Premium, Bryan Beach, lead analyst for Stansberry's Investment Advisory, shows why shares are actually cheaper than they were back in 2004...

To continue reading, scroll down or click here.

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(Top 10 highest-returning open positions across all S&A portfolios)

As of 02/12/2014

Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any S&A publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.

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