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

SEC investigates NYSE trading floor… John Meriwether won't get fooled again… Warren Buffett speaks… David Neeleman takes it like a man…

Reminder: Porter Stansberry is on vacation until next week. At least that's what he says, but he seems to have plenty of time to e-mail me and tell me everything I'm doing wrong. I remain at the helm until he returns. When appropriate, I'm asking the indefatigable Sean Goldsmith, Porter's aide-de-camp, to chime in. – Dan Ferris

 Shares of PSIA pick Valhi (VHI) surged today, up as high as 45% in midday trading. Valhi announced it will distribute 56.8 million shares of Titanium Metals (TIE), which the company owns. Shareholders of Valhi will receive 0.48 shares of TIE for each share of Valhi that they own. The dividend is payable on March 26 to shareholders of record on March 12. Readers were up as much as 100% today since Porter's recommendation in March 2005.

 American Real Estate Partners (ACP) has fallen about 19% since Monday. The news says there are six lawsuits opposing the Lear acquisition. ACP bid $36 a share for Lear. Lear shareholder and hedge-fund manager Richard Pzena says it's worth $60 a share. ACP's stock took off when Lear accepted the bid and peaked on Monday at $127. It closed yesterday at $106.25. ACP was recommended in Extreme Value in June 2004 at around $20. Extreme Value readers are up about 470%.

 The SEC is launching an investigation to see if the consolidation of the trading floor at the NYSE aided the market downturn. The NYSE has been making the switch from the big board to computerized trading, allowing for faster trades and necessitating fewer floor traders. The SEC thinks that the existing traders were unable to handle the surge of orders, although the NYSE denies the claim.

 Surprisingly, no disastrous hedge-fund crashes have accompanied the sudden dip in the market… yet. The most affected funds were in emerging markets and computer-driven futures funds. On average, hedge funds lost, in one day, two-thirds of their gains for the month of February.

 Remember John Meriwether? He was in charge of Long Term Capital Management when it blew up and nearly crashed the global financial system back in the summer of 1998. JM, as he's known to colleagues, was one of the few investors to make a profit on Tuesday. Proving that there are indeed second acts in America, JM now runs a $2.6 billion fund, JWM Partners. Meriwether's bullishness on the yen and Japan led him to profit, while others tumbled.

 The Dow Jones was down 200 points in early morning trading. Hopefully you were at your computer snatching up some bargains.

 Warren Buffett is released his annual letter to shareholders today. It is available at www.berkshirehathaway.com. If you don't read everything Buffett puts out, you're missing essential material. And it doesn't cost you anything, either. We recommended Berkshire class-A shares (BRK-A) to Extreme Value readers in July 2005, and readers have made 25%.

 Yesterday, I said Merrill Lynch missed an opportunity to build credibility when it failed to downgrade itself along with the other large investment banks. Several readers pointed out quite correctly that Merrill Lynch, like every other brokerage firm, does not publish research on itself, so it couldn't possibly have downgraded itself. I was wrong to suggest that there would be sniggering at ML. There would obviously be more of that if it covered itself as a research target. But still… ML should comment briefly somewhere, somehow, that it, too, is in as much danger of doing as poorly as it expects the rest of the industry to do. I care more about what they ought to do than what the rules say they're allowed to get away with.

 If you want an example of what I want from corporate managers, check out how JetBlue CEO and founder David Neeleman handled what was easily the worst week in his company's history. You've probably seen the stories, but the gist of it is that JetBlue stranded passengers when ice storms grounded flights. Some people sat in airplanes on the tarmac for 10 hours.

Neeleman issued an apology, which you can see here. He also created a customer bill of rights, which you can read here. The bill of rights says, among other things, that customers who are involuntarily denied boarding due to overbooking will receive $1,000. There are various awards for ground delays of 30 minutes or more, from $25 up to the full round-trip fare paid. The ice storm incident cost JetBlue $16 million in vouchers for future travel.

BusinessWeek cut JetBlue from its list of Customer Service Champs due to the incident. That's a mistake. Up until the ice storm, JetBlue has been incredibly good compared with other airlines, which mostly are incredibly bad at customer service. If this happened to another airline, it would have been a back-page story.

 New high: Kodiak Oil (KOG).

 On to everyone's favorite repository of venom and ire: the mailbag. Make your contribution at feedback@stansberryresearch.com.

 "I finally took the plunge on your 'dividend capture' strategy. I had hesitated as it seemed too good to be true. Bought HMA, captured the dividend, and sold HMA as soon as I captured the dividend. Stock price stayed close to the purchase price despite paying the dividend. I made over 40% on my money in just a couple weeks. Thanks and keep up the good work." – Paid-up subscriber Don D.

Ferris comment: Just wanted to let everyone know that some of our readers are using the dividend grabber strategy to capture big short-term profits. Still, Sean Goldsmith is working to make the strategy easier to use. We'll write to you about his progress in those efforts as it occurs. Until then, maybe those of you who've done well could write to us at feedback@stansberryresearch.com with any tips.

 "I'm just curious about the synergy of continuing to make stock recommendations, while simultaneously warning us about a forthcoming correction in the market." – Paid-up subscriber Al Walters

Ferris comment: I can only speak for myself, Al. But I don't care about the market. It's only there to serve me, never to advise me. But our readers like us to say something about the market, or so I'm told. The other day, I said the drop didn't matter. The very next day, unbeknownst to me, Ian Davis produced a study that said pretty much the same thing, specifically, that a 3% drop in the S&P is not a bearish event. Of course, even if it were a bearish event, it still wouldn't matter to me. All I care about is value in relation to price. Over the long term, that trumps all. Peter Lynch says if he thinks about the market 15 minutes a year, he's wasted 15 minutes. He's fully invested at the top and the bottom.

 "Congratulations to Steve on moving to No. 1, though who knows how long that will last. But I want to thank him for recommending a stock that will probably be my best performer in my whole life. I have never had a stock perform like this and I don't expect I ever will again, but who knows?… Thanks to Steve for the help I have been given with the True Wealth Alliance." – Paid-up subscriber Peter Krippner

Ferris comment: No doubt about it, Peter. Sjuggerud is the mack daddy.

 "The day of the big 'pullback,' I was up at the crack of dawn reading about the Greenspan recession quote, China's tumble and Cheney's near miss… hmmm. I threw all this information in a pot and 'Sjuggerud' it with the fact that we need a daggone correction. After a little mixing, I came up with the following concoction before the market opened: 'Sell most of your stuff, wait a day or so, and spend all the money you didn't lose buying all the goodies that Stansberry and Associates makes you lust for, at about 4% to 8% less than it was a day or so ago.' All I can say is, 'Don't you wish your boyfriend was smart like me…' Thanks guys, for giving me all the information I needed to invest in the right stocks, minerals, trees, ancient coins, gold mines, diamonds, nanotechnology… with all the money I saved by getting up a little early and being so darn smart. I am sure most of the wiser investors wouldn't be impressed or wouldn't approve. So what, I had a blast and am richer to boot!" – Paid-up subscriber Dr. T Howell

Ferris comment: That's some concoction you've come up with, Doc. Where can I score some?

 "Hey Dan, I have been investing and trading futures since 1987, including being a futures broker for 8 of those years. I have subscribed to numerous letters and trading services over the years and no one has given me more for my money than you! Your incredible insight into undervalued situations is uncanny. I purchased ACP and BAM after reading your in-depth reviews of them, and, in both cases, they have been incredible investments. I purchased CUZ & HRP as well and those, too, have been excellent. I purchased LEV, which has tanked, but you have continued to provide guidance as to why you think it's still a good investment so I will stick with it. You are batting 80% with me and that's much better than most newsletters I've subscribed to." – Paid-up subscriber Mike Peterson

Ferris comment: I've made some real bloopers, and LEV is certainly one of them. But I'm glad things have mostly worked out for you.

 "Gentlemen, have you considered an options letter? I am sure quite a few of your readers trade options. True Wealth has provided some nice returns using covered calls, but a letter specially targeted at option trades would be great." – Paid-up subscriber David Hardesty

Ferris comment: S&A offers two weekly subscription services that recommend options trades. Jeff Clark's S&A Short Report, in particular, caters to the traders out there. Also, Graham Summers' Inside Strategist regularly pairs options trades with his stock recommendations.

 "A month ago you wrote your Report Card of your individual newsletters. Steve Sjuggerud's Confidential was incomplete. When will we receive the final grading? Thank you!" – Paid-up subscriber B. Berbotto.

Ferris comment: Porter does the Report Card. He'll be back next week, but I think he's just waiting for a sufficient amount of time to pass so that he's not assessing a short-term result, which could easily misrepresent the long-term effectiveness of Steve's strategy.

Regards,

Dan Ferris

Medford, Oregon

March 1, 2007

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