The Story of Our Unlikely Success... and What's Coming Next
Editor's note: A lot can happen in two decades...
Bill Clinton, George W. Bush, Barack Obama, and Donald Trump have all lived in the White House... The global population has soared from 6 billion to about 7.7 billion people today...
Mark Zuckerberg forever changed the way we communicate with each other, creating social media giant Facebook from his Harvard dorm room... Apple introduced hundreds of millions of folks to the iPod, as well as the iPhone, iPad, and AirPods in the years that followed...
The point is, the world has seen a lot of action since we started publishing our research in 1999. Something similar could be said about how we've evolved at Stansberry Research...
Today's Masters Series essay is an updated version of the February 15 Digest from Porter. It features a new introduction... and a new, urgent message for our subscribers. In it, he explains how far we've come over the past 20 years – and looks ahead to what's next...
The Story of Our Unlikely Success... and What's in Store for the Future
Dear friends, it's been a while... and quite a journey for me...
I hope you'll pour yourself something cold (or perhaps brown or red) and get comfortable. Yes, today's Digest is a little longer than normal. But today, I'm asking you to celebrate with me.
You see... Stansberry Research has now been around for 20 years. This is something I've spent my life working toward.
And now, as a result, big changes are coming for Stansberry Research... changes that mean great things for our subscribers.
Today, I want to tell you how we got here, and show you some of what we're doing now. But first, an introduction...
We have several thousand new subscribers who probably haven't ever read anything about (or from) me. Even longtime subscribers might not know the whole story...
So, for those of you who don't know me, my name is Porter Stansberry.
As you've probably guessed, I founded Stansberry Research and its parent company, Stansberry Holdings. Stansberry Holdings – which includes Stansberry Research, Legacy Research, TradeSmith, InvestorPlace, Altimetry, and Empire Financial Research – is one of the largest independent financial publishers in the world.
It might be the largest, but that depends on how you measure such things. Stansberry Holdings has about 1 million paid subscribers in more than 175 countries. Counting the readers of our many free "e-letters" and our online magazine American Consequences, we have several million readers around the world.
By "independent," we mean we only serve one customer – our subscribers...
We're not a traditional "mass media" company. Our business model isn't based around advertising... It's based on subscriptions. Likewise, we're not a money-management firm or an investment bank. We don't write about securities to broker them. We write about securities to educate our readers (and sometimes to amuse them).
And we never allow our analysts to buy or own the stocks they write about.
Why not? Because that would introduce the potential for a conflict of interest, which our business model is designed to strictly avoid. We only serve our subscribers. We are truly independent. Or as I explain to new employees, our job is to give investors the information we'd most want if our roles were reversed.
And every year, we've tried to make the information we provide just a little better, just a little more comprehensive, just a little more useful, and just a little more insightful than the year before.
While this formula has proven to work, when I suggested this model in the mid-1990s to older, far more established publishers in the financial-newsletter business, most folks laughed... One well-known writer (with one of the biggest newsletters in the world) told me conspiratorially, "Porter, I'm not interested in a fair game."
You see, back then virtually all newsletters were fronts for stock promotion or loss leaders for money managers. The New York Times wrote a wonderful article back in 1995 that accurately described the state of the industry back then – "compromising," the writer called it.
In short, our success in this industry couldn't have been more unlikely...
I started the company in 1999, when I was only 26 years old, using a borrowed laptop computer and sitting at my kitchen table. I didn't have any capital. I didn't have much experience. And my business plan – to treat our subscribers honestly and fairly – was woefully naïve.
I did, however, have one significant advantage. I knew a lot about the Internet...
I'd been using computer networks since the 1980s, back when websites were called "bulletin boards" and memory was stored on cassette tapes. And I grew up with some brilliant computer science engineers, who introduced me to things like Internet Protocol ("IP") telephony and e-mail back in the early 1990s. Long before anyone started getting AOL discs in the mail, I knew that the Internet was going to change the world significantly.
So, I wrote a letter (remember letters... with real envelopes and stamps?) to investors just like you, around the country – and later around the world. I told those folks there was a "new railroad being built across America," and that it would "make some people very rich."
The "new railroad" was, of course, the Internet and the fiber-optic cables being laid across the country...
And as unlikely as it might have seemed to some at the time, the Internet did change the world in vast and powerful ways. My newsletter followed these trends and helped investors make a lot of money in a few of that era's biggest winners.
But unlike many of the "tech gurus" of the Internet bubble, I wasn't only writing about risky, high-growth tech stocks...
I was also fascinated by how technology was eliminating long-entrenched, dominant U.S. companies. I could see that businesses based on old technologies – like Kodak and the original AT&T (the long-distance provider) – were doomed. And I advocated, just as I continue to do today, that investors "hedge" their risky tech-stock investments with short positions in these doomed companies. I called this approach to portfolio management "pirate investing."
I thought the metaphor helped explain how doomed companies were going to have their market share destroyed by technology...
Digital photography, for example, wasn't merely competitive with chemical film. It destroyed the market. Fiber-optic networks and IP telephony didn't merely offer better long-distance communication... they made distance irrelevant and destroyed the entire market for long-distance service. And they obliterated all of the demand for Lucent's big Class-5 telephone switches.
What happened to Lucent and Kodak? Within five years of missing its first earnings forecast (in January 2000), Lucent shares had fallen from more than $80 to around $2. One of America's strongest businesses (with 165,000 employees) was decimated by a technology – fiber-optic networking – that has produced huge amounts of wealth. And Kodak? It filed for bankruptcy protection in 2012.
I believed back then, and I still believe today, that the greatest risk most investors face is technological innovation...
In a free market, risk also means opportunity. Thus, innovation is also the best opportunity for investors.
That paradox is difficult for most investors to appreciate, but it has been one of our primary areas of focus since Day 1.
In fact, the first analyst I hired to help me build this business was Dave Lashmet. He was one of my professors in college. I thought he was one of the most brilliant and curious people I'd ever met. He knew more about the dynamics of technological innovation, in both medicine and computer science, than anyone else I'd ever met.
Watching Dave interact with Nobel Prize winners and the heads of research and development at major pharmaceutical companies (not to mention dozens of different start-up founders) is a hoot. By the time Dave has asked his third question, anyone else surrounding the "smart guy" might as well disappear. Dave will have completely captured the source's attention.
I can't tell you how many times Dave has been asked, "Who are you again?" The smartest folks in tech are routinely astonished that anyone outside of their narrow field of study could know so much about the long-term arc that describes the development of their new drug (or widget). But Dave often knows more about it than they do.
Of course, telling you about this isn't as effective as showing you...
For nearly 20 years, Dave has been giving our subscribers a massive advantage in some of the most lucrative investments possible...
Over the years, Dave has led investors into dozens of revolutionary new technologies, while the companies building them were still in their infancy. His discoveries have included Intuitive Surgical (recommended at $18 per share, sold for a 130% gain less than a year later), Illumina (recommended at about $5 per share, now trading for around $300), and Regeneron Pharmaceuticals (recommended at roughly $15 per share, now trading for roughly $300), just to name a few.
Here's one more example, if you don't mind, to show why I believe we've been successful in this business...
I want to show you what we did about bonds...
There's no question in my mind that most individual investors should only own corporate bonds, not corporate equities (stocks). Corporate bonds are less risky, less volatile, and less subject to horrible management decisions.
It surprises many subscribers when they hear me say that most of them shouldn't ever buy stocks, only bonds...
Most investors tend to greatly overestimate their future returns and their ability to weather volatility. These dear subscribers think that bonds are "boring."
But the reality is different... Few people can stomach the normal volatility of the stock market. And few people understand bonds well enough to know that you can make a lot of money in bonds – even more than most people make in stocks.
The trouble is, getting information about bonds is difficult...
Only a lawyer would consider the typical bond prospectus to be English. Everyone else would guess it was written in Greek. Heck, just figuring out what the symbol is for the bond you want to buy is hard.
CNBC doesn't run a ticker on the bottom of the screen showing you bond prices. And many brokers will require you to call them on the phone to buy a bond. If you don't know the symbol, they usually won't give it to you.
So... why do brokers make buying stocks so easy and buying bonds so hard?
Well, remember, the financial-services industry doesn't exist to provide you with wealth. It exists because it's efficient at siphoning away your wealth.
Knowing what bonds to buy, what prices to pay, which bonds are safe, and which bonds will pay their coupons on time... all of this information can be extraordinarily valuable, far more valuable than knowing what stocks will go up. And that's why nobody is making it easy for you to get information on bonds or to buy them.
Nobody, of course, except us.
We've invested hundreds of thousands of dollars over several years to build a proprietary database of all the major corporate issues that trade in substantial volume – about 4,000 different corporate bonds. We give each of these bonds our own proprietary credit rating, using our own computer models.
Then we compare our rating with the major credit-rating agencies. Most of the time – more than 90% of the time – our ratings match theirs. But a few outliers exist...
Those are the situations we try to understand completely. We have two experienced accountants (former auditors and corporate controllers) and an experienced lawyer on our staff. They look at all the numbers and study the terms of each bond, paying special attention to the bonds' place in the capital structure and the collateral of underlying each bond.
We then provide all of this research to our subscribers...
If you've never seen any bond analysis before – or if you doubt my contention that it's possible to make far more money in bonds than most people make in stocks... I'd urge you to look at just one issue of our monthly bond research, Stansberry's Credit Opportunities.
But I hope you'll understand...
Our business has been successful not because of anything I brought to the table back in 1999, but because of the things we've built since.
Whether it's Steve Sjuggerud's efforts to discover the best market-timing models that actually work and monitor almost every market in the world through his True Wealth Systems service...
Or Dr. David Eifrig's efforts to systematically compare and rate every type of income investment that's currently available in the stock market – from "muni bonds" to real estate investment trusts ("REITs") – in Income Intelligence...
Or any of the dozen or so other products we've launched in the last decade...
Through it all, we've consistently created new and far more comprehensive research products than were ever available from independent financial publishers before.
Just as important, we haven't only helped subscribers know what to buy... We've also been far better than most at helping people avoid some of the market's biggest catastrophes over the last 20 years. For instance, I wrote several detailed letters from the "Chairman of General Motors" explaining why GM's impending bankruptcy was inevitable, long before the financial crisis erupted.
But my most famous "short" recommendation was explaining why Fannie Mae and Freddie Mac (then the most powerful and largest mortgage banks in the world) were actually worth less than zero just a few months before they collapsed. Barron's picked up my work and published my conclusions in its lead column by the legendary financial writer Alan Abelson.
Here's my point... We've come a long way over the past 20 years. And of course, we're not content with only serving our subscribers with reports...
We've invested several million dollars into building our own research terminal.
Believe me when I say one thing: We designed this tool to be a game-changer for our readers.
It provides access to key stock metrics, our investment research, our Stansberry NewsWire service, and our incredible library of investment models and analytics... including our proprietary ratings... all in one place.
Plus, the Stansberry Terminal is accessed with a simple app. You can use it on your computer, your smartphone, or your tablet. There's no expensive hardware to buy and no complex system to learn. It's just point and click.
So... that's who I am and what we've done with this company over the last 20 years...
I owe a huge debt of gratitude to the people who have built this special place with me and to our Alliance members who have put their trust in our work.
Our Alliance members enabled us to do these things and have cemented the unique culture of our business. For those who don't know, our first Alliance subscription sale in 2003 promised essentially all of our financial research at Stansberry Research, both now and in the future, for an initiation fee of less than $3,000.
Today, the Stansberry Alliance costs $30,000 – but our original Alliance members never paid more as the price went up. Nor did any Alliance member who chose to subscribe as we continually grew our product offerings each year. The price they originally paid to join included all of Stansberry Research's future products, too.
Talk about a virtuous circle. Our Alliance members believed in us and profited from our work, allowing us to build more and better products to serve them. As we grew, they gained more and more from the relationship with us. And their support allowed us to invest heavily in building a better and better business.
That's the real secret to our success.
But no matter how much has changed about what we do, one thing has remained exactly the same: My goal today is the same as it was back in 1999.
No, I'm not using a borrowed laptop computer anymore, but I'm still working just as hard to give investors the information I'd want most if our roles were reversed.
In that spirit – and in the spirit of celebration – we've just announced something special to thank our subscribers for the past 20 years. (I'll spoil at least some of the surprise right now: part of it has to do with the brand-new Stansberry Terminal.)
I believe that in its own way, it might be an even better way to serve you than our original Alliance membership deal, back when we first started... So take a few minutes and learn all about it right here.
Regards,
Porter Stansberry
Editor's note: We wanted our subscribers to know what an honor it has been to serve you for the past two decades. So the biggest names in Stansberry Research history recently sat down to share our story... and to make two big announcements. Most of all, we hope what's coming will be an even better way for you to make money using our research. Learn more here.