The S&A Digest

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

As of 07/01/2013

China crashes... Chavez bullies foreign oil companies... Icahn shakes up WCI... Freddie tightens up... Ferris strikes back... and quotes poetry...

 China's stock market plunged 8.8% Tuesday, its biggest loss in 10 years. Investors who led the Shanghai index to a record high on Monday dumped their stocks to lock in profits amid speculation that the Chinese government would take action to cool the economy.

 Venezuelan President Hugo Chavez yesterday decreed the nationalization of foreign oil projects in the country's Orinoco region. Venezuela will take at least 60% control of the projects, effective May 1. The affected companies have until then to relinquish control and negotiate payment. Chavez did not announce how he plans on paying for his portion of the projects, which is estimated at $17 billion.

 Freddie Mac will stop buying mortgages with "a high likelihood of excessive payment shock and possible foreclosure" as part of a new investment strategy that will be implemented September 1. The company said it will only buy mortgages that qualify buyers at the fully indexed and fully amortized rate. Freddie Mac also is developing new products to provide lenders with more choices for subprime borrowers.

 Activist investor Carl Icahn is causing a stir at Inside Strategist pick WCI Communities (WCI). After the stock rallied nearly 8% on the news of his involvement, it fell when Icahn announced that he plans to replace the company's entire board. Another Icahn play, Temple Inland (TIN), shot up 13% yesterday after it agreed to pursue a spinoff.

 Extreme Value pick American Real Estate Partners (ACP) is one of Carl Icahn's investment vehicles. Since our recommendation in June 2004, it's up 531%. Icahn recently used American Real Estate to bid on Lear Corp. (LEA). Against all reason, Lear agreed to his $36/share offer, with the caveat that it would be able to accept a better offer, should one come along. The market is justifiably in a state of disbelief about this, as the stock has traded above $36 a share the whole time Icahn's offer has been out. But so far, also against all reason, Icahn's the only one who seems to want it. Richard Pzena, who owns 11% of Lear, says it's worth $60/share. This is one reason why American Real Estate Partners has gone up so much lately. If Icahn gets Lear, ACP becomes a much more valuable entity. And Lear will likely generate a lot of cash for Icahn to deploy. Finally, remember that, as of right now, ACP is unleveraged, holding more cash than debt.

 New highs: Anglo American (AAUK), American Real Estate Partners (ACP), Ares Capital (ARCC), AutoZone (AZO), Cumberland Resources (CLG), Exelon (EXC), Gabelli Dividend & Income Trust (GDV), KLA-Tencor (KLAC), Kodiak Oil (KOG), Macquarie Global (MGU), Seabridge Gold (SA), Xcel Energy (XEL).

 Before I get to the mailbag, my publisher says I need to say something about the market falling today, or else it'll look like we're unaware. If we saw it and ignored it, it would mean that we're too smart to get distracted by a relatively meaningless event. But if we don't say something about it, we're in danger of losing readers. Writing about money is the strangest thing. What people most want to read about has nothing to do with making money in stocks.

 The mailbag runneth over. I don't know how Porter keeps up with it all. Many e-mails request specific money-management advice. We can't respond to these, so it's futile to send them. Several folks pointed out that my comments are at odds with those of other Stansberry editors. Each Stansberry editor is an island, in that regard. Each one does his own research and expresses only his own viewpoint.

I received more e-mails about global warming than anything else. This is so strange, because it's so uncontroversial (to me, anyway). Let me just say once and for all that my real problem is that my gag reflex is hypersensitive, especially when confronted with grown men and women who will tell you with a straight face that Hurricane Katrina was all Wal-Mart's fault because it sells more hair dryers than anyone else, or it was the power company's fault because it burned coal, or that it was your fault for driving an SUV, and the government really ought to do something about it. So you see, it's not my fault. I was born with a sensitive peristaltic reaction.

 "[I] would like to believe in you again and your work but need some help in bringing closure to the [PX Re] episode." – Alliance member David Mattson

Ferris comment: I've said this more than once, but I'll repeat it one more time. I made two mistakes with reinsurance: Recommending PX Re and letting go of the other stocks (IPC, Fairfax, and Arch Capital), all of which have performed very well. Otherwise, I was dead right about the catastrophe reinsurance pricing (admittedly, not a hard call). Also, if producing a better track record than most of the money managers on Earth isn't good enough for you, I don't know what will be enough.

 "Recently, you've been comparing pretax earnings yield versus a corporate bond yield. Are you comparing apples to oranges? I guess I don't quite get why the after-tax earnings yield wouldn't be the preferred measure." – Paid-up subscriber Jim Karlis

Ferris comment: Tax treatments vary so widely that it would make apples to apples comparisons difficult. I look at stocks as if you owned the whole business, and then I compare that to bonds. It's sort of like asking would you rather own the business or the bank that's financing it? Hope that helps.

 "Guys, you badly need a good fact checker: The minimum investment in the JP Morgan long/short fund is $1,000,000, not $ 1,000. Similarly at UBS, you need to be a qualified investor to invest." – Paid-up subscriber Thomas Szpesi

Goldsmith Comment: Here's the Bloomberg link where it says $1,000.

 "As for some of the people who seem to want to rant and rave in their e-mails, I wouldn't give them the e-mail space. I paid you folks thousands of $ and have no idea whether I will come out ahead or not. But I'm a big boy and also know that when I get in my car, some nutcase might decide to run into me. That doesn't mean I'll stop driving my car!... Your newsletters expose me to a ton of ideas that I would never know about on my own." – Paid-up subscriber Pete Lipke

Ferris comment: This is just about the right perspective for someone who's managing their money by reading newsletters.

 "Re the comment by subscriber Lee Hodges: The situation is much worse than you than detailed in the subject report. It is estimated that modern medical doctors in the U. S. alone are responsible for over 120,000 deaths per year from improperly prescribed and administered drugs. Most of this is because of pressures and/or gratuities from the pharmaceutical companies. As far as your exemption of antibiotics: I, and hundreds of thousands of others, suffer from colitis and irritable bowel syndrome as a direct result of antibiotics killing off the good bacteria in our digestive systems. While some of the bacteria can be restored, the damage in the form of ulcerative sores and other intestinal malfunctions is permanent." – Paid-up subscriber Ron Sarson

 "It's interesting how rotten these doctors are until you really need one. Say you are having a heart attack, you are bleeding to death, you have multiple fractures or other life-threatening conditions. Then, 'the good doctor' takes on an entirely different appearance." – Paid-up subscriber Jack Ford, M.D.

Ferris comment: Reminds me of two lines from Kipling's poem, Tommy:

For it's Tommy this, an' Tommy that, an' "Chuck him out, the brute!"

But it's "Saviour of 'is country" when the guns begin to shoot...

 "I keep getting invitations to SUBSCRIBE TO MORE SERVICES AND SPEND MORE MONEY!!! PERHAPS THE TIME HAS COME TO DELIVER ON EXISTING SUBSCRIPTIONS AND PROMISES AND ALSO TO RESPOND TO REPEATED E-MAILS FROM EXISTING CLIENTS WHO PAY YOUR BILLS NOW????? Own up to your screwups - publish a record - and stop hitting me for new higher fee services until you deliver on these!" – Paid-up subscriber Dan Peer

Ferris comment: You talkin' to me? You talkin' to me? You must be talkin' to me, 'cause I'm the only one here. But you couldn't be talkin' to me, cupcake, 'cause I've written more about my worst picks than I have about the millions of dollars my readers have made from my best ones.

Porter, please come home...

Until tomorrow,

Dan Ferris

February 27, 2007

Stansberry & Associates Top 10 Open Recommendations

Stansberry & Associates Hall of Fame