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

Ogres in Naples... Ian's walk-off homerun... OMI gets bought (as we predicted)... Nokia's market share grows... JP Morgan's profits soar... Hedge funds dive into railroads... Interested in joining our board of advisors?...

Tony, our newest editorial hire, leaned over to pick up yet another bad tee shot. He had already lost 10 balls to the watery Gold Course at Tiburon, the golf complex adjacent to the Ritz-Carlton hotel in Naples, Florida. You could see the frustration building on his face. But suddenly, as he stood up after picking up his ball, he had a new expression: shock.

"Did I just split my pants?"

"Why yes, Tony. You sure did. And there are still another six holes to play."

We had an absurdly good time at our annual Spring Editors' Conference.

I'll share a few of the best new ideas below. But the real fun of these events is watching what happens when 30 or so hypercompetitive men are isolated at a luxury golf resort. Everything turns into a competition. I can hit my ball farther... I can do more push ups... I know more about the wine list... My track record last year was better than yours.

"Goldsmith... what in the world happened to your forehead?"

There, in the exact middle of young Goldsmith's forehead, was what we used to call a "strawberry." It looked like someone had taken sandpaper and scratched off about a quarter-sized hole in Goldsmith's head. Nothing about our conference should have required a face down, head first, Pete Rose slide.

"Well, you know those push ups we were doing last night? Apparently, I hit my head a few times on the way down. I didn't feel it though, not until this morning."

By the way, several bright young women work on our editorial staff, too... but they don't immediately act like ogres let out of their cages when you take them to the Ritz-Carlton in Naples.

Among the highlights of this year's Spring Editors' Conference was undoubtedly the appearance of our old friend Rick Rule. Rick is the smartest man we know in the resources business and one of the very smartest investors you will ever meet. The richest people we know tell us that Rick Rule has made more money for them than anyone else they've ever invested with... which is incredibly high praise coming from these sources, who have access to the world's most elite hedge funds.

Interestingly, Rick's No. 1 investment idea right now is the exact same small British merchant bank we were talking about a few days ago. Its valuation is exceptionally cheap: It's essentially trading for one year's worth of cash earnings because the value of its investments have swelled its balance sheet in a way that's not recorded by Bloomberg.

And there's also the prospect of a partnership with Sun Hung Kai, the only Hong Kong brokerage that's fully licensed to deal stocks in mainland China. It's probably the best stock idea I've heard about all year, and it's going to be the subject of a Phase 1 conference call scheduled for April 26. If you've been considering joining Phase 1, now is the time. You want to be in on this deal.

Phase 1 readers, be on the lookout for a full write-up of this company next week.

We wrote it. Did you buy it?

I recommend you BUY shares of OMI Corp. (NYSE: OMM, $27.00) using a 25% trailing stop... The market is currently pricing in a steep drop in rental rates and income; I believe we'll see strong capital gains as OMI manages the cycle and continues to buy back shares. I also think there's a 75% chance that we'll see a very quick gain in this stock. The company has hired an investment bank (Perella Weinberg) to pursue 'strategic options,' which normally means the company is up for sale. – PSIA, April 6, 2007

On April 17, Teekay Shipping and D/S Tom agreed to buy OMI for $2 billion ($29.25 per share) in cash. Assuming a $27 entry price, readers should have made 8.3% in about two weeks. Or... as some readers insist is more appropriate... you would have made about 1,300% on an annualized basis. We don't normally publish annualized returns, because, as you can see, doing so greatly exaggerates the average return figure. Or, as I like to say, "you can't eat annualized returns."

PSIA pick Nokia (NOK) reported a 6.6% first-quarter loss in profits due to lower-priced handsets in China and India. However, news of increased margins and a 36% global market share more than made up for the bad news. Shares gained up to 4.3% after the announcement. Subscribers have made 70% since 2004.

Surprise, surprise... China's economy grew more than expected, 11.4% in the first quarter, up from 10.4% last year. How did we know? See the price of copper.

Private equity's latest target... Thomas H. Lee Partners and Bain Capital Partners are offering $18.65 billion for radio company Clear Channel Communications (CCU). The $39 a share bid, a 9% premium, was accepted by the board, but is expected to meet resistance from shareholders.

Extreme Value pick JP Morgan Chase (JPM) saw record performance from its investment bank division as the company increased net income by 55% in the first quarter. JP Morgan also increased its dividend by 12%, the first such increase in six years. Shares gained 3.8% on the news, and our readers have gained 30% on the recommendation.

Signs of a market top... The commodity markets are growing so fast that the U.S. regulator does not have the funds to keep up with the increased policing needs.

On Buffett's heels... UK Hedge fund TCI Fund Management has taken a "significant" stake in CSX (CSX), the third-largest U.S. railroad. The company filed to buy more than $500 million of the company's stock. On April 7, Berkshire Hathaway bought a $3.2 billion, 10% stake in railroad Burlington Northern Santa Fe (BNI).

New highs: Coca-Cola (KO), Telstra (TLS), Exelon (EXC), Alexander & Baldwin (ALEX), Banco Latinoamericano de Exportaciones (BLX), JP Morgan Chase (JPM).

Well, we successfully upset one guy, who is paying $1.1 million in taxes due to our recommendations. Hopefully you all were equally "unfortunate". For the most part, the love-fest continues. Keep em coming to feedback@stansberryresearch.com.

"Please tell Joeseph Avantario he got off light concerning taxes. You bums 😉 at Stansberry Research caused me to pay $1.1 mil. this year! Shame on you!" – Paid-up subscriber Ronald L. Tourville

"I am real disappointed not getting an invite to your Naples outing. Living in Fort Myers makes getting there real easy. Golf is a great way to even out stress and make some good connections. Hope you have a great time here in paradise." – Paid-up subscriber Ron Ceurvels

Porter comment: Our Spring Editors' Conference is only for my staff and our best contacts. However, one thing we're considering is forming an S&A Advisory Board, which would be made up of six to eight subscribers. We'd pay you a small retainer (maybe $10,000) and invite you to our private meetings. We'd expect you to have expertise in an industry or in finance and to help us make contacts in the industries we're following as investors. Interested? Send us a resume.

"I just made a 600-mile drive through the California farm lands. Well, the naval orange crop may have been lost, but the up coming Valencia crop should be good. What I was expecting to see, and didn't, was more corn planting. For those of you who are wine drinkers, this should be an exceptional vintage year. Better get your reservations in now for a case from your favorite vintner. Along with grapes, the fruit and nut crop looks like a good one." – Paid-up subscriber Larry

"I recently subscribed to [S&A] Dividend Grabber and have been very pleased with the Dean Foods returns. In looking over your web site, I notice a few products that I cannot find out anything about. Specifically, I cannot find out anything about S&A Alliance and True Wealth Alliance newsletters and memberships. Can you provide some insight into these and if there is a package deal for all of your products." – Paid-up subscriber Phil Smith

Porter comment: Yes, we have three packages that we offer from time to time. For more information, just call our customer service team.

"I don't like those seemingly inflated claims of gains in most of your marketing letters... Offering free trials is a better baits than those inflated numbers which cannot be verified." – Paid-up subscriber Larry

Porter comment: We test our marketing rigorously, and we use the advertising that works. We also have lawyers audit every single claim we make in our packages. I can't vouch for any other newsletter's marketing, but ours is scrupulously honest. In addition, because we have money-back guarantees on every single one of our products, you can think of your subscription as a trial offer. If you're not happy, let us know, and we'll give you your money back. What could be fairer? Try asking for your commissions back from your broker if you're not happy with his recommendations.

"You guys are hilarious in taking on the hogers, polos and muckrakers in Washington plus the commenters that try to imply they know what is going on in the real world without being fully informed in spreading their hogwash. The dichotomous approach you take provides the reader with the irony of what is real as opposed to the blarney that is running our country." – Paid-up subscriber Jerry

The Highlight of the Conference

It was the financial equivalent of a game-ending, walk-off homerun...

For those of you unfamiliar with baseball (we have several thousand international subscribers), the game ends immediately if the home team scores more runs than the visiting team in the bottom of the last inning. They call it a "walk off" homerun, because the players literally walk off the field as the ball soars over the outfield wall. Game over.

Ian Davis, our quantitative analyst, delivered the "walk off" presentation at our Spring Editors' Conference on Tuesday. He has discovered (with a bit of help from me, Steve Sjuggerud, and our friend Chris Weber) a simple and truly foolproof way to make more than 30% a year in stocks – safely.

Using only one financial metric and applying it to a universe of 51 stock markets, Ian found that buying the whole market (through an index fund or an ETF) and selling it four years later would have produced an average compounded annual return of 33.8% over the last 37 years, which is as far back as it's possible to get reliable data.

Our friend Chris Weber has done something similar using currencies since the 1970s. Using one metric (interest rates), Chris recommends buying and holding short-term government bonds for one year, then rolling the amount over the next year into whichever major currency is paying you the most. He calls his strategy "Max Yield." It's worked to produce double-digit compound annual returns. Ian has taken a variation of this strategy, applied it to the world's stock markets, and gotten an even better result.

Imagine if all you had to do as an investor was make one decision every four years. Imagine if you knew the exact right criteria to select the best place in the world for your money for those four years. And imagine if, by making only one decision every four years, you grew your wealth by more than 30% per year.

That's what Ian has discovered. And it's probably the best idea I've ever heard for a financial strategy.

We're preparing a special report about Ian's 'Max Value' strategy. In the meantime, if you want to learn more about Ian's Quant Trader service, and the Max Value strategy, contact our sales team at 410-854-1709.

Regards,

Porter Stansberry

Baltimore, Maryland

April 19, 2007

Stansberry & Associates Top 10 Open Recommendations

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