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

Is Ann Coulter's real last name 'Stansberry'?… Buffett goes for democracy… New Century heading for bankruptcy… More bitter dividend grabbers(!)… Plus, notes from the drunks…

After a flat week in our portfolios, we finally have a new high to talk about – American Real Estate Partners (ACP). Once again, Dan Ferris is in the lead. Dan first picked ACP back in 2004. It's now up more than 560% – 42% this year alone.

Little-known fact about ACP – I picked it too, about a year after Dan. I was bullish on its out-of-bankruptcy purchase of WestPoint Stevens. In fact, ACP was the No. 1 stock in my July 2005 Report The Top Three Stocks to Buy Now.

Warren Buffett will give shareholders a chance to vote on the fate of Berkshire's holdings of PetroChina.

Buffett purchased 2.3 billion (yes, billion) shares of PetroChina – his largest per-share position of all time – in late 2002. He owns a little more than 1% of the company. The investment has appreciated (not including dividends) by 578%, making PetroChina the best-performing large Berkshire investment in the last decade. However, Berkshire is under pressure to sell the position from a pro bono legal group called The Sudan Divestment Task Force.

Interestingly, as Warren Buffett has explained to his shareholders, PetroChina has no operations in the Sudan. However, the divestiture group still argues the investment should be sold because another Chinese oil company that's also a shareholder of PetroChina does have operations in Sudan and revenues from these operations might be used to pay for the ongoing genocide in Darfur. (Note: Using the same logic, there's probably not an investment in the whole world that's safe to make… how could you possibly safeguard all of the potential actions of all of other current and future shareholders?)

Buffett is the largest holder of Berkshire stock (by far… he owns 3.1 million shares). None of the other shareholders have as much at stake or as much knowledge about the situation. In fact, it's far more likely that people's opinions about PetroChina will be manipulated by the orchestrated PR campaign against the company. Fortunately, Buffett has a very educated group of shareholders. Too bad the same isn't true of our government's elections...

While on the topic of Buffett, no word yet regarding Dan Ferris's application to become Berkshire's top investment manager. If you've got friends at Berkshire, put in a good word for our man.

We don't know what this means… but it probably isn't good news for General Motors (GM). During the first two months of 2007, China's passenger car sales soared 33%. China has overtaken Japan as the No. 2 automobile market, behind the U.S., and is the No. 3 market for passenger cars.

A new initiative being rolled out in school districts across the U.S. is paying students and teachers for good performance on Advanced Placement (AP) tests. In an effort to encourage careers in math and science, a group of private donors is paying cash to students who ace these tests and more cash to the teachers that help them prepare. Noble intentions. But I recall cheating being rampant during these and other tests back when I was a junior and senior in high school. If you begin to pay students and teachers for grades, you're creating a situation where teachers will make money by looking the other way. My prediction: Grades go up, learning goes down.

ConocoPhilips (COP) and Chevron (CVX) have both taken the fall in Venezuela, agreeing to hand over stakes in their businesses to Hugo Chavez by May 1. We've been watching Harvest Natural Resources (NYSE: HNR), a Venezuela-centric American oil and gas company, waiting for a bottom… which hasn't come yet.

Subprime lender New Century Financial (NEW) has stopped making new loans, amid pressure from its creditors. Analysts expect that the company will go bankrupt. Rising mortgage defaults are expected to add 500,000 homes to the U.S. inventory.

Dan Ferris points out that the mortgage bubble began at the same time the Treasury decided in May 2000 to stop issuing the 30-year bond. Global investors, seeking long maturities, sought out mortgages, which created a huge new funding source. That source began to dry up when the Treasury decided in August 2005 (the exact top of the housing market) to begin issuing 30-year paper again.

Oh, the Friday mailbag. It's always a dozy. Folks have had all week to get mad at us, to be baited by us… and now they're letting us have it. Interestingly too, there were quite a few "drunks" in the pile today. Long-time readers know, when we get compliments via e-mail we assume the author must be related to us… or drunk. After all, who takes the time to write something nice? We promise to read all of your letters, no matter how much venom you put in them: feedback@stansberryresearch.com.

"Is Ann Coulter Your Sister…? Your bashing of global climate change science and scientists demonstrates a mind that is hardened and closed to possibilities. Not a good trait, mind you, for a financial advisor… When you 'discover' things you have researched in the stock market, which is nothing more than a thinly veiled Las Vegas, you tend to believe that they are true. But I'd bet once in five or 10 years, you also question yourself to make sure your analysis was correct at first glance… Could you imagine if Louis Pasteur, Madame Curie, and many other pioneers in medicine and science would have only believed what they wanted to believe and showed no regard for scientific protocol?… You can believe there is no gravity as you jump out the window of your office, probably with some help from some willing staffers… Then it doesn't matter what you believe after that." – Paid-up subscriber Robert Pelant

Porter Comment: Robert, I’d argue that being skeptical of global warming is evidence of an open mind, and that Pasteur and Curie would be appalled by the arrogance and hubris of today’s "climatologists." But you made another comment I found much more interesting – your opinion of the stock market. While I’d agree with you that most people invest in crapshoots, how could anyone examine our "no risk" track record and conclude we’re gambling? Since 2002, Dan Ferris and I have been recommending stocks according to a strict value-driven methodology. All of Dan’s recommendations pass these hurdles and all of the stocks I put into my "no risk" portfolio pass, too. Since 2002, we’ve recommended 65 stocks. Only 7 have been sold at a loss. And the average gain from these recommendations is 49%. Find any casino with these odds, and I’ll pay for as much "gambling" as you want.

"You talk a great deal about the dividend grabs that work. However, I don't see much talk about the SMG dividend grab. From $57 to $41. Down much more than the dividend. What is up with that?" – Paid-up subscriber "Rick"

Porter Comment: You must not read the Digest very often. It was only three or four days ago we reviewed the entire dividend grab track record [link], including the current "red ink" on the SMG grab. Since you’ve not been reading closely, you might not realize we’ve recommended eight dividend grabs (for free) in these pages since November. Seven of them have gone up. SMG is now down all of 6.75% (including the dividend). Nevertheless, despite our 87.5% batting average (as of today), you want to badger us (incorrectly) about the one stock out of eight that’s gone down (by all of 6.75%)? What's up with that?

"You may not know the mind of God [link to previous Digest], but the Bible is his love letter to you that you might get to know him personally through Christ. I am praying for you." – Paid-up, unbigoted Christian Fundamentalist and Pentecostal subscriber Hal Flory

Porter Comment: Hal, I happily and modestly accept all prayers from all denominations and from all faiths. You never know who will end up being on the right side of the Lord.

"Porter, I am interested in the Penny Stock Letter, but would like to know about the exchanges the stock recommendations will trade on and will a typical online broker like Scottrade, Ameritrade, etc, accept a person trading in the below-$5 stocks? Could you supply more info on this new letter and how we can trade it?" – Paid-up subscriber William S. Brown

Porter Comment: Although I'm not personally familiar with all of the online firms' policies, I expect you will be able to easily buy any of the stocks Dan recommends in his new Penny Letter [link to promo] from any online broker.

"This is not bragging about how smart an options trader I am... Dumber than a shovel would describe me better... But JEFF CLARK is DA MAN.... Bought $3,000 worth of MER calls Tuesday, sold this morning, THURSDAY, for $1,100 profit after fees... Thanks to all the folks at stansberry research..." – Paid-up subscriber John Henry

Porter Comment: Put the booze down. It's not the weekend yet.

"Thanks for being back, do not let the morons get under your skin. An individual of your insights needs to run for president… You are among the most intelligent people I have ever had the pleasure of meeting… Your thoughts, ideas and plain old common every day horse sense. I really missed your insight last week." – Paid-up subscriber Bernie Krantz

Porter Comment: Bernie, you are far too kind. And if I ever run for office (don’t worry, I won’t) everyone will know you were wrong about my brains.

"I have been with Steve for ten years... I think he is brilliant. And after 25 years on Wall Street as a lawyer and a law school professor, I am not a pushover. He's not perfect, but his insights click with me and my experiences, and that makes me comfortable. I have never written in before, but I want to say, I think you guys do a great job, very nicely – even after a downturn! There are no golden eggs, but you sure help point us in their direction or give us ideas to find 'em on our own." – Paid-up subscriber Thatcher A. Stone

"After selling off 22 positions in the last two weeks I have a little cash to invest in new things like a new Ranger Bass boat.. I am always looking for stocks under $10. Dan's Penny letter will help me develop a portfolio of 10 to 12 stocks that will fall into this area, I have put $5,000 into each of Dan's Penny stocks and also included Jeff's latest Big Trend recommendations, which falls into my Penny stock Portfolio. A few years ago I had a Penny Stock Portfolio, which included stocks such as INT,LNG,KSU and LUFK. These stocks made me money. S&A stocks selections under $10 with a $5,000 investment will make anyone money. One of the keys is to invest the same amount of money into each stock. If you can profit in three of five you are in the green." – Paid-up subscriber "Oscar"

Regards,

Porter Stansberry

Baltimore, Maryland

March 9, 2007

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