THE S&A DIGEST

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

As of 07/05/2013

Google’s worried about its share price… Mortgage refi heats up… What happened to Fortune’s best 10 stocks… Wynn’s dividend grab worked… Van Tharp and Michael Masterson on marriage… A golf book you’ve got to read… More demeaning than "Congressman"?

More signs of a top in stocks: Google is setting up an auction system to allow its employees to sell vested options that are "underwater." Makes me think the company doesn’t expect its share price to move higher.

Another indication our contrarian bet on homebuilders is working: Last week, mortgage applications in the U.S. jumped to the highest point in a year. The Mortgage Bankers Association’s index of applications to buy a new home or refinance a loan rose 11.4% to 721.2, the highest since October 2005.

Got a note late last night from Matt Badiali, who is touring mining companies in Vancouver with Sjuggerud. "We met a guy who is going to mine gravel, put it on a ship, and sell it California. He says his all-in costs are $10 a ton and he can sell it for $20! Now tell me, how messed up is California, when you can’t dig gravel cheaper than you can ship it from Canada?"

Chris Browne, in his book, The Little Book of Value Investing, reminds us once again of the importance of valuation by reprinting an article from the August 2000 issue of Fortune magazine: "10 Stocks to Last a Decade." The magazine claimed that, if you bought these stocks, you could forget about them and "retire when ready." The recommended stocks were: Broadcom, Charles Schwab, Enron, Genentech, Morgan Stanley, Nokia, Nortel Networks, Oracle, Univision, and Viacom. By the end of 2002, these stocks had suffered an average loss of 80%. Even after the rebound in 2003, the average loss was still 50%.

We wrote it, did you buy it? "Keep your eye on shares of Wynn Resorts (WYNN). The company announced it will pay a big special dividend ($6 per share, $660 million) on December 4 to shareholders of record on November 23." Financial theory says it’s impossible for investors to "grab" the dividend… But we’ve studied dozens of these situations over the last five years, and in almost every case, companies issuing a special dividend see their stock prices reach new highs quickly after dipping on the day the dividend is paid. This suggests it is possible to "grab" dividends safely. On the dividend news, Wynn traded up as high as $94.75. After paying out $6 per share, it dropped to $89.96. On December 11, Wynn Resorts closed at $97.57. You could have grabbed the dividend… or you could have made a quick 8.5% gain buying after the dividend was paid.

Van Tharp has recently released a new edition of his classic book, Trade Your Way to Financial Freedom. I understand that one of the chapters in his book details the investment track records and stock-selection strategies of our newsletters. I haven’t read the new edition yet, but I will as soon as I can get a copy. Van is the kind of person who collects great, powerful ideas.

That reminds me… Before I began dating my wife, I was living in South Beach, Miami. Van came to town with four tickets to the Green Bay Packers/Dolphins NFL game. He invited me a friend to join him and his business partner (Van is a diehard Packers fan). The night before the game, I took Van out to dinner. During our dinner conversation, I asked Van why he’d chosen his wife, who is from Singapore. He told me the most important factor in a healthy marriage was to pick a partner who was committed to constant self-improvement. He’s right. My wife is constantly involved in things – yoga, healthy diets, education, etc. – that make her a better person. And it rubs off on me. I find myself more involved in self-improvement than I have ever been before in my life.

The other very wise thing I know about marriage, I learned from Michael Masterson. Masterson has been married (to the same woman) since he was in his early 20s – more than 30 years. His wife is gorgeous, and they seem very happy. Masterson told me to spend one hour a day of uninterrupted time listening to my wife. This works – like magic. Anytime things aren’t going well at home, I realize I’ve been too busy to spend uninterrupted time with my wife. I start doing it again and, almost instantly, things are better at home.

New Highs from across the S&A recommended portfolios: Telstra (TLS), Akamai (AKAM), MCG Capital (MCGC), Coke (KO), and Tejon Ranch (TRC).

Before we get to the mailbag, I have two important announcements from our office. First, I’ve decided to give our entire staff an extra week’s vacation, allowing them to take off the week between Christmas and New Year’s Day. Thus, our offices will be closed, our customer service phones will not be operational, and... sadly... The Digest will not be published. I hope you’ll understand that, at this time of the year, I want my people to focus on their families instead of our customers. We’ll be back to work on January 2.

Secondly, if there’s a golfer in your life, I urge you to spend a few dollars buying a new book – Secrets of the Irish Links. Mike Palmer, a member of my staff, took a month off from work in 2004 to play all 44 links golf courses in Ireland. He’s written an incredible book… it’s not just about playing golf in Ireland… it’s about the spirit of the game. You won’t find a better golf book anywhere. See for yourself.

And now… the screeds. Send yours here: feedback@stansberryresearch.com.

"How exactly does the garbage about Nancy Pelosi, Alcee Hastings, et al, have relevance in an investment letter? I wish I could find a way to charge people to get my newsletter and then dump on them with my political rants. Must be fun." – Paid-up subscriber Don Smith

"A Christmas holiday in Vancouver is a lot of fun, so don’t let Matt & Steve give you the ‘business.’ The Edgewater Beach Hotel is very nice, and you can see the lighted night skiing area across the bay." – Paid-up subscriber Mac McDaniel

Porter Comment: Some holiday. Our contact picks them up at their hotel at 6:30 every morning. They’re meeting with companies all day, including through dinner.

"So here’s my first letter, and it’s a drunken one: Thanks for the Santa Ema reco! I bought two reserve bottles, one Merlot and one Cabernet Sauvignon. They were so good, I can hardly type this e-mail. Did I spell the wine names right? Keep up the good writing. Investment reading is by nature boring, so I appreciate the humor and stories, not to mention the wine recommendations." – Paid-up subscriber James Trevor Matt

"Your description of ‘former border guard’ and ‘semiliterate border guard’ is demeaning, in addition to the fact he has been re-elected several times by his district in Texas as its Representative to U.S. Congress." – Paid-up subscriber Curt Whitney

Porter Comment: Nothing I could say about the man is more demeaning than the fact that he’s a member of Congress.

Best Regards,

Porter Stansberry

Cockeysville, Maryland

December 13, 2006

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