The Secret to Finding the Market's Next 1,000%-Plus Winner

 
Back in the fall, my team ran a screen for the best-performing stocks from 1996 to 2016.
 
Our goal was simple: Identify what factors can lead a stock to stupendous financial success, at a level that goes beyond virtually every other investment opportunity in the entire world.
 
These opportunities are every investor's ultimate goal. But most people have no idea how they work… or that they can be predicted at all.
 
We now believe they can…
 
As I studied the 100 best-performing stocks of the last 20 years, I saw three common factors come up over and over again.
 
Not only that, but if you had invested in one of these stocks – assuming you reinvested your dividends – every single one delivered returns of at least 1,000% over that time frame.
 
Today, I'm going to tell you what these stocks had in common. And I'll show you that these traits point to a group of stocks that can dramatically increase your returns… without increasing your level of risk.
 
Some of the companies on our list were in hyper-growth mode, while others were more established.
 
But despite covering a wide range of industries – including homebuilding, technology, retail, and even a railroad – these companies all had three things in common…
 
1.   All of these companies had serious revenue growth in the years leading up to 1996.
On average, these companies increased their revenues by nearly 35% per year.
 
2.  These companies all had strong operating margins.
The market's best performers averaged margins of more than 37% from 1996 through 2016.
 
3.  All of these companies were tiny.
It should come as no surprise that these companies were small-cap stocks in 1996, with an average market cap of less than $700 million… Once a company reaches a certain size, doubling its revenues and stock price every two or three years is no longer possible. Solid small companies are capable of scaling up revenues more quickly, and they tend to outperform over the long haul.
 
The point is, you don't have to take a lot of risk to make a lot of money in small-cap stocks.
 
The famous Fama-French studies at the University of Chicago have thoroughly tracked how different segments of the stock market performed. They found that small-cap growth stocks are the best-performing investments you can make… and that investing in an index of these stocks would have brought in nearly 15% annualized total returns from 1927 to 2012.
 
In fact, just $1 invested in a "small-cap value" index back in 1927 would be worth around $140,000 today. (Meanwhile, $1 invested in the S&P 500 back in 1927 would be worth around $3,500 now.)
 
So… how do you find the best small caps?
 
My research team wanted an answer… so we built a hypothetical index. We wanted to see what would happen if you bought every small-cap stock trading at a reasonable valuation, with strong annual revenue growth and not too much debt.
 
In other words – we wanted to see if our three traits pointed to the best small-cap stocks.
 
What we found was that if you bought all of these stocks and rebalanced your portfolio every quarter, you would have returned around 3,400% over the last 25 years. As you can see in the following chart, the benchmark Russell 2000 small-cap index returned just 640% in the same time frame…
 
Of course, it's not practical to buy every single small-cap stock and rebalance your whole portfolio every quarter. This is totally hypothetical.
 
The point is, if you're looking to shoot fish in a barrel, you want to start in a barrel that's chock-full of fish. That barrel is small-cap value stocks… And tracking them can be a fantastic way to generate huge returns.
 
There's more to this system than I can cover here today. But it's clear that focusing on small-cap value stocks can dramatically increase your returns… And you don't have to take big risks to do it.
 
And if you invest in the right small caps, you might even end up with a 1,000%-plus winner…
 
Regards,
 
Porter Stansberry
 
Editor's note: Tonight, Porter is going on air to make a major announcement about a secret project he has been working on for the past year. During this live event, he'll reveal the key to safely making 1,000% gains in the market. Reserve your spot here.

Source: DailyWealth

Uncertainty Is at a Record High… And That's Good for Stocks

 
No one is sure of anything anymore – in investing or otherwise…
 
Last week, Bloomberg reported that "uncertainty is at record highs." But who says uncertainty is a bad thing? History sure doesn't…
 
Buying stocks when uncertainty is high is a smart move. And that means right now is the time to own stocks.
 
Let me explain…
 
Measuring uncertainty isn't easy.
 
What does "uncertainty" even mean? It's a feeling, not a number.
 
The folks at Bloomberg came up with one way to track it – news mentions. Here's what they wrote last week…
 
The number of news stories that contain the word "uncertainty" has reached a record, according to Bloomberg data, which include stories published from multiple sources.
Yep… According to Bloomberg, news stories are using the word "uncertainty" more than ever. And the data goes all the way back to 1992. Take a look…
 
This might not be a perfect measure of market uncertainty. It's not specific to markets… just news in general. But it helps prove a simple point about investing:
 
We want to buy when others are fearful… when there's uncertainty in the market.
 
Just look at a few points on the chart above…
 
First, uncertainty hit a new all-time high in mid-1998. That was during the Asian financial crisis when many Asian currencies collapsed. It was an uncertain time, and it caused a quick fall in U.S. stocks.
 
But the U.S. market then entered an 18-month bull run – leading to roughly 50% gains.
 
Next, we saw peak uncertainty in the early 2000s as stocks fell from their highs in the dot-com bubble.
 
This set the stage for the mid-2000s boom. Stocks nearly doubled in five years.
 
We've also seen uncertainty rise in recent years… It peaked in 2012 just after stocks corrected due to the debt-ceiling debacle. Stocks have soared by more than 60% since then.
 
I hope you see the pattern here. Uncertainty isn't a bad thing for stocks.
 
We want to own stocks when things are uncertain. And based on this measure, uncertainty is at a record high.
 
So for now, the message is clear: We want to own U.S. stocks today.
 
Good investing,
 
Brett Eversole
 

Source: DailyWealth

The Age-Old, Old-Age Problem in Bull Markets

 
If you are going to succeed in investing in 2017, you need to get over one simple thought.
 
This should be simple. But it will be far more difficult than you can imagine.
 
You see, NOBODY will believe you. EVERYONE else will believe down to their toes that it's wrong. So you will have to stand alone among your friends and colleagues.
 
This thought will be like religion or politics – you're not going to change people's minds. So I suggest that you don't even bother.
 
Here's the big thing you need to know:
 
Stock bull markets do not die of old age.
 
Please, read that sentence again. Say it out loud. Repeat it. Do whatever it takes to sear it into your brain.
 
It sounds so simple… But it will be harder to stick with this idea than you think. Everyone around you will tell you differently. But they don't know the truth…
 
Why do people think bull markets die of old age? Because dying of old age seems natural. People assume that stocks are like the seasons – that we have winter (the bad times) and summer (the good times).
 
There is some truth to that thought – stocks DO move from good times to bad times. But stock market booms and busts are not based on the calendar… There isn't a reliable schedule for up moves and down moves.
 
Booms and busts are NOT based on known dates or the speed the earth travels around the sun.
 
You might think I'm making too big a deal about this simple point. But it is important. Here's why…
 
The stock market bottomed out in March 2009. This bull market is about to be eight years old. So you are going to hear about this – all year.
 
Eight years! Wow! Is that old?
 
If you have learned my lesson today, the correct answer is, "It doesn't matter. Bull markets don't die of old age."
 
I learned this lesson in the 1990s. And I am so glad I did. It has served me well over the last couple of decades.
 
Here's how I learned it…
 
The last long bull market lasted for almost the entire decade of the 1990s.
 
I looked up to the stock market analysts who were doing their homework back then, crunching the numbers to see what worked in investing. Two of the biggest names were Martin Zweig and Vic Sperandeo. (They both wrote best-selling books on analyzing the markets, and I recommend reading them.)
 
They got A LOT RIGHT back then. They helped steer my education toward what really works in investing – the numbers, not people's opinions.
 
But they didn't get everything right…
 
Both of them believed bull markets die of old age. Both of them calculated the average length of a bull or bear market… And they used that in their trading, betting on the demise of the 1990s bull market.
 
I don't know their results, or how much they used this strategy in their investing. But if they relied on this idea heavily in the last years of the boom, they would have missed out on the bull market's biggest gains…
 
The overall stock market went up for the entire decade of the 1990s. Take a look…
 
Year
S&P 500
Nasdaq
1990
-3.1%
1991
30.5%
1992
7.6%
1993
10.1%
1994
1.3%
1995
37.6%
39.9%
1996
23.0%
22.7%
1997
33.4%
21.6%
1998
28.6%
39.6%
1999
21.0%
85.6%
2000
-9.1%
-39.3%
More importantly, the 1990s bull market seemed to gather momentum… resulting in a spectacular "fireworks display" in the final years. (Yes, YEARS.) The Nasdaq went up 40% and 86%, respectively, in the last two years of the bull market.
 
If you got out of the market in 1997 – or even earlier – because you thought the boom was simply getting too old… you would have missed out on the fireworks.
 
Now, it IS typical for bull markets to end in a fit of unbridled optimism, like we saw in the late 1990s (though that was an extreme case).
 
Unbridled optimism is a much better indicator of a market peak than old age.
 
So let me ask you this… Have we experienced years of unbridled optimism about stocks like we saw in the late 1990s?
 
No way. Not a chance.
 
Could the unbridled optimism in stocks be starting right now? It could be.
 
Does that mean today is the end? No.
 
My friend, you will hear – over and over again this year – how old this bull market is, and how it's about to die of old age.
 
But stock market booms don't die of old age.
 
The faster you commit to this idea, the better chance you have of making big money investing in 2017 (and possibly 2018) as this market heads toward its peak.
 
And you will likely become far wealthier through investing in 2017 (and possibly 2018) than anyone you know.
 
People will ask you how you did it. They'll say, "How did you know??" Even then, you still can't tell 'em – they won't believe you.
 
Let's repeat this together, one last time…
 
Bull markets don't die of old age.
 
When you hesitate in 2017 (and you will!), repeat that to yourself. Again. And again.
 
Got it? Good!!!
 
Good investing,

Steve

 

Source: DailyWealth

How to Safely Earn 50% a Year in the Market

The Weekend Edition is pulled from the daily Stansberry Digest. The Digest comes free with a subscription to any of our premium products.
 
 Today, I will show you how to take our very best investment ideas and make them 10 times better
 
That's right. Using this simple strategy, I believe every individual investor managing less than $10 million can earn 50% a year in safe stocks. Returns at this level can transform your retirement… or even build generational wealth.
 
But this doesn't mean you have to buy risky stocks. And I'm not talking about anything expensive, difficult, or complex. I'm just talking about taking our best, safest ideas… and making one tiny adjustment.
 
It's something anyone can do. And it's easy.
 
 Can you really make 50% a year?
 
Yes. In fact, it's almost certain that you will. I'm not talking about generating a little extra income. I'm talking about a way to turn our best ideas into absolute home runs. I'm talking about the best way to make a fortune in the stock market.
 
Let's be very clear… I'm not talking about options. Or junk bonds. Or anything risky. I'm talking about making plain-vanilla investments into regular stocks.
 
These are the same kind of stocks that we normally recommend in our newsletters, in the same types of businesses. In fact, as I'll show you, the best way to do these trades is to buy exactly the kind of stocks we've been recommending for years and years.
 
But… you just make one simple change. We've dubbed this the "10x Project." You're still in our best and safest ideas… but with one minor twist. And the results will shock you. They're enormous, up to 10 times larger.
 
What you're going to read below will be hard to believe. And I don't blame you for doubting that any of this could be true. I don't blame you for being skeptical – you should be. It's hard to even conceive of gains this big.
 
But keep reading. As you'll discover, there's a very simple explanation for why the returns can be – almost have to be – so much bigger.
 
 In fact, this approach is so certain that even investing legend Warren Buffett has personally endorsed it…
 
Here's what Buffett has famously said about this kind of investing:
 
It's a huge structural advantage… I think I could make 50% a year… No, I know I could. I guarantee that… It would even be easier to make that much money in today's environment because information is easier to access.
 Of course, you can always count on me to fully explain everything…
 
I'm going to give you the entire secret, for free. Once you've read this, I'm going to urge you to try it for yourself. I know… if you do… you'll never invest the same way again.
 
Let's start with a real-life example…
 
Back in December 2012, we recommended shares of fast-food giant McDonald's (MCD) in my Investment Advisory.
 
McDonald's is an incredibly capital-efficient business (most of its restaurants are franchised, so it mainly just collects royalties). It has a strong track record of increasing dividends, a dominant, global position in fast food, and, at the time, it was cheap.
 
We expected the investment would earn us between 10% and 15% a year. And since we recommended buying at less than $90 per share, that's basically what has happened.
 
Investors following our recommendation have collected more than $13 per share in dividends, and seen total returns of 55% in a little more than four years, for annualized returns of about 13% so far.
 
This investment was so safe and sound, I even urged the crew of my boat to buy McDonald's. As I explained to them…
 
Look, the guy who owns the boat next to us in the marina… He's a major hedge-fund manager. He's going to use leverage to juice his returns, but I'm willing to bet you that on an unleveraged basis, he can't beat the return from simply owning McDonald's over the next 10 years.
 

When you find a stock this good, trading at a price this low, you buy it. You're virtually guaranteed to end up with world-class investment returns.

 I'm proud of our work recognizing the value in McDonald's and companies like it…
 
And I'm proud of the returns we've helped our subscribers achieve. But I also know it's possible to earn much bigger returns – in exactly the same kind of businesses. And yes, I mean MUCH BIGGER returns.
 
Like 50%-a-year returns. "10x Project" returns.
 
How? Well, like I said, it's not hard. It's so simple, in fact, that I bet a lot of subscribers will ignore this advice because it just seems too easy.
 
What's the key to the strategy?
 
The secret is to find the same type of capital-efficient business – the more similar, the better – with the ability to grow its sales and revenues by 10 times in the short term.
 
 Last fall, I described this project in detail at our Alliance Conference in Las Vegas…
 
I gave all the numbers behind our research. As an example, I talked about one stock in particular. It's the "10x Project" version of McDonald's. It's in the fast-food business. It has lots of locations. And it's a safe and stable business.
 
But unlike McDonald's – which is already the world's largest restaurant business, with $25 billion in revenue – this business can still grow its revenues easily.
 
In fact, its revenues are still less than $1 billion. That means this company can grow its revenues by 10 times and it still won't be even half as big as McDonald's.
 
 That's the "10x Project" in a nutshell…
 
All we're doing is taking the same proven business models – and in some cases, the very same brands – and investing in the much smaller and faster-growing versions of these businesses. Can you think of another, better way to make great investments? I can't.
 
These companies all have a simple, proven, and measurable mathematical advantage…
 
They have much smaller capital bases. As a result, they're able to grow at much faster rates. McDonald's revenues aren't growing right now. To earn more per share, it has to cut costs and buy back stock. That's a slow but steady way to grow.
 
The "10x Project" version of McDonald's, meanwhile, is still growing fast. Its sales are up by almost 50% in just the last three years alone. Its smaller size makes it far easier to grow. And that's a huge advantage for investors.
 
For example, since November 2008 – the peak of the financial crisis, where many stocks found their bear market lows – McDonald's has returned a healthy profit for investors. It's up more than 170%, good for annualized returns of 13%.
 
But the "10x Project" opportunity, in virtually the same business, is up more than 2,700%. That's 51% a year, annualized.
 
 Those are the kinds of profits that can make you seriously rich…
 
Instead of making, say, 10% or 15% a year with good, safe investments… you can make up to 50% a year or more. And again, I'm not suggesting you abandon the "good" and "safe." They're built right into this investment, along with the massive upside.
 
Again, I want to stress that you don't have to buy options. And you don't have to take any big risks. In fact, I would argue that the "10x Project" version of McDonald's is much safer to own because, as a smaller business, a lot less can go wrong with it… And it has enough growth ahead of it to overcome the potential for an economic downturn.
 
 So… can you make this kind of adjustment with your own portfolio?
 
Of course you can. There's absolutely no reason you can't begin to invest this way, right now. You can start today.
 
But I'm going to go even further. I'm going to show you how – step by step – on Wednesday, February 15, at 8 p.m. Eastern time.
 
If you'd like to join me, simply click here. Then sign up for our "VIP Reminder" service and we'll make sure you're included.
 
Regards,
 
Porter Stansberry
 
Editor's note: Over the past several months, Porter has been working on the "10x Project" – a way to safely return 10 times your money without touching risky options or using leverage. On Wednesday, February 15, at 8 p.m. Eastern time, Porter will reveal all the details during a special live event. Reserve your spot instantly by clicking here.
 

Source: DailyWealth

How to Buy Real Estate 'Right'

 
Want to know the secret to making a fortune from real estate?
 
Buy right.
 
It's not actually a secret. Almost any good book on the subject will tell you that. The problem is 90%-plus of those who invest in real estate have no idea what "buying right" means.
 
To many people, it means buying property when real estate prices are going up. That, as a practice, sometimes works. But as a strategy for getting wealthy safely? It is a very, very bad one.
 
The first property I invested in seemed very "cheap" when I bought it back in the late 1970s. It was a nice little Washington, D.C. apartment in a refurbished building. The landlady convinced me to buy it by showing me how much prices had been escalating.
 
She told me that if I bought this unit "now," I'd stand to make a lot of money as it appreciated. To make it even easier, she got me a loan from some bank that required nothing down besides a few thousand dollars in closing costs.
 
When my wife and I signed the mortgage and got the keys, we felt like we had made a really good deal.
 
But real estate in Washington D.C. was bubbling up in the mid-1970s, and lots of people who didn't know a thing about real estate were jumping in. Including me.
 
It took me years to finally get rid of that first apartment (and the deadbeat who was renting it from me). And it cost me about $30,000 to boot.
 
I made many mistakes in that one transaction. But for today, I want to focus on just one: buying rental real estate without any idea of what a "good buy" really is.
 
When it comes to rental real estate, a good buy is getting the title to a property that can be fixed up and rented out at a profit right from the outset.
 
So what exactly does it mean to buy rental real estate "right"?
 
My answer is this: If you can buy a piece of property and have it fixed up and ready to rent for less than eight times yearly rent, you are almost certainly "buying right."
 
Let me show you a specific example…
 
Let's say the house you rent in your neighborhood costs $1,500 per month. That would be $18,000 in rent each year ($1,500 x 12 months). As an investor in rental real estate, that means you should not pay more than $144,000 (8 x $18,000) for it.
 
This is a ballpark rule of thumb, of course. But I've been investing profitably in real estate now for over 30 years (that first investment was my only loss), so I can say confidently that it's reliable.
 
If you can buy rental property at that ratio, you stand a good chance of making about 8%-10% on your money if you buy the property with cash.
 
This ratio I just told you about is called a gross rent multiplier (or GRM).
 
Eight times yearly rent is the maximum you should pay for any rental property. If you live in an area that has high property taxes and home insurance, a GRM of 7 is a better bet. Your goal is always to pay the lowest GRM you can find.
 
The big point here is that when you invest in rental real estate, you should be investing for cash flow, not appreciation. Your objective should be to start making cash profits on your investment in the very first year.
 
Be aware: You can't always find rental properties for a GRM of 8 or less. There are places where either rents are too low or property prices are too high… or both. These are places you should not invest in rental real estate.
 
There are also times when it is impossible or nearly impossible to buy rental real estate "right." You certainly couldn't have bought rental real estate for a GRM of 8 in Florida, California, Texas, and other populous states in 2007 and 2008. The cost of property back then was too high compared to their rent rolls.
 
But I want to stop here and reiterate the basic point I have been making. Buying cheap does not mean buying property when it "seems" cheap – either because it is shooting up or because it is cheap compared with what it was before.
 
The No. 1 rule to always follow is to buy rental property when you can get it at GRMs of 8 or less. If you do that, you'll stand a great chance that your property will generate cash flow as long as you manage it well.
 
Regards,
 
Mark Ford
 
Editor's note: Mark has made millions of dollars from his real estate investments over the last 30 years. He reveals all his strategies in Rental Real Estate 101, a program available to members of his Wealth Builders Club. In 12 lessons, you can learn how to generate steady income from rental real estate – from negotiating offers to managing properties (without having to unclog a toilet). Learn more here.

Source: DailyWealth

Up 47% in Two Months, With Plenty of Upside Left

 
Futures prices for this commodity hit $17.75 on the last day of November… and $26.15 yesterday, a new high for this year.
 
That's a 47% move – in a little more than two months.
 
Even better, nobody is talking about it…
 
Nobody, that is, except me. This commodity was the cover story in my True Wealth newsletter last month.
 
It peaked near $140 in 2007. And today, it's around $26. So even after a 47% gain in just over two months, it's nowhere near its former glory. There's still plenty of upside…
 
So what commodity is this? It's uranium…
 
I wrote about uranium in DailyWealth back in October. In that essay, called "Exactly What I Want to See in A Trade, Part II," I quoted legendary commodities investor (and my good friend) Rick Rule on what's wrong with uranium – and what's right with it.
 
What's wrong is that it's an unprofitable business right now… There is too much supply and too little demand. As Rick said at our Stansberry Conference in Las Vegas last year:
 
You make the stuff at $65 a pound, and you sell it for $25 a pound. That means you lose $40 a pound, and you do that 190 million times a year.

 
As you dig into the fundamentals, it's hard to find cause for optimism. Some "lifelines" are out there, but they are long shots.

 
However, at the conference, Rick also made the long-term case for uranium succinctly to the crowd:
 
How many people here believe we're going to have electricity in six or seven years? [Most hands go up.] That means you believe that the price of uranium – the stuff you make electricity out of – goes up. No second choice.

 
In October, I wrote that uranium had what I wanted to see in a trade – but I was not a buyer yet…

 
Uranium is incredibly cheap and incredibly hated. There's a great long-term case for it, as Rick Rule explained. But in the short run, things can get worse before they get better.
 
In the meantime, I will watch for the uptrend – the price action – to confirm this idea before any data in the market will confirm it.

 
My friends, we have that uptrend now… in spades. Uranium is up 47% since bottoming in November.

 
Besides that, it's cheap – relative to its highs from 10 years ago around $140.
 
And finally, it's hated… After 10 years of terrible performance, absolutely nobody is talking about uranium today.
 
Nobody is interested in uranium except me… and my subscribers.
 
Uranium finally has exactly what I want to see in a trade. It's cheap, hated, and in an uptrend.
 
You haven't missed it yet… Get on board, now…
 
Good investing,
 
Steve
 
P.S. Last month, I told my True Wealth readers about the best way to profit on the uptrend in uranium. It's a simple investment, but it has triple-digit upside. My readers are already up around 8% in just three weeks… But our upside is still enormous. To learn how to access this research with a risk-free trial, click here.

Source: DailyWealth

It's Time to Change Your Thinking About Making Money

 
I invest in a simple way…
 
I'm willing to concede a few battles to win the war.
 
This is a simple idea. Unfortunately, most investors can't do it. It goes against our egos to simply admit that we might be wrong and move on. We think we need to be right EVERY SINGLE time.
 
What's the war we're trying to win? Growing our net worth.
 
And to grow your net worth, you have to start by knowing that you are NOT going to win every time in investing. It's not going to happen…
 
You are going to win some, and you are going to lose some. Let me repeat that last part: You are going to lose some.
 
You need to be OK with this.
 
Knowing that you are going to lose some, you have a simple mission: You must take steps to make sure your winners are larger than your losers.
 
This is where nearly all investors fail. But that doesn't have to be you…
 
I turn it into a simple math problem… I make sure my losers stay small by cutting them early. And I let my winners grow.
 
It's the old saying… "Cut your losers and let your winners ride."
 
Let's take a quick look at some easy math so you can see how important this is…
 
Let's say you made three consecutive trades. By the time you closed out, the returns were: -10%, -10%, and +100%.
 
How did you do?
 
You might think that you did poorly… Your median return was -10%. That sounds terrible – no question.
 
Also, you were wrong 67% of the time. That sounds bad, right? Who wants to lose money on two out of three trades?
 
But I would take these three trades any day…
 
Here's what really happened: In this scenario, $100,000 invested would have turned into $162,000.
 
You would have made a 62% return on these three trades. And that holds true regardless of the order you placed them in…
 
$100,000 would have turned into $90,000 after the first losing trade, and then $81,000 after the second losing trade. Then it would have doubled to $162,000 after the winning trade.
 
Flipping the order around gives the same result: $100,000 would have turned into $200,000 on the first trade… Then it would have fallen to $180,000, and finished at $162,000.
 
How does turning $100,000 into $162,000 in three trades sound to you? It sounds pretty good to me!
 
All it takes is cutting your losers early and letting your winners ride. You made sure your losses stayed small… And you let your winner ride all the way to 100% gains.
 
So how do you trade? Do you cut your losers early and let your winners ride?
 
If not, then it's time for a change… You need to realize that it's OK to lose some battles on the way to winning the war.
 
Here's the thing… You will not be right every time. I promise. What matters is what you do when you are wrong.
 
What is your plan? Most people don't have one. And that will crush them, eventually.
 
If you don't have a plan, I suggest changing your thinking about making money. Set yourself up for sustained success. Start cutting those losers early… and letting those winners ride.
 
Good investing,
 
Steve
 
P.S. A great way to learn about this… and even automate it… is through my good friend Richard Smith's website, TradeStops.com. Check it out today.

Source: DailyWealth

The Incredible Power of a Focused Portfolio

 
The investment strategy I recommend to my readers, and the one I personally follow, is controversial.
 
It's about focusing on a small number of stocks – only your best ideas – and letting them ride.
 
Most "experts" tell investors to hedge their risk by owning 20 or more stocks. But the effects of a small-portfolio approach can be mind-boggling.
 
Let me walk you through one example…
 
This example comes from Murray Stahl, CEO of investment firm Horizon Kinetics. I bring it to your attention because when I read it in 1997, it "wowed" me so much that I've never forgotten it.
 
Maybe it will have the same effect on you.
 
Imagine the year is 1982, and you have a portfolio with equal dollar amounts in the following six stocks:
 
Chrysler
General Public Utilities
Pan American World Airways
Massey Ferguson
International Harvester
White Motor
How do you think you would do if we fast-forwarded about 10 years later – to the end of 1993?
 
Before you answer, let me give you a clue: Both Pan American and White Motor went to zero.
 
Put another way, one-third of your portfolio would become worthless – a loss of 100%.
 
And here's another clue: The S&P 500 would return 17% annually from 1982 to 1993.
 
Given those two clues, do you think that six-stock portfolio beat the S&P 500?
 
The surprising answer is… yes.
 
That six-stock portfolio would return about 19% annualized. And the source of those returns comes almost entirely from just two stocks: Chrysler (which returned 32% annualized) and General Public Utilities (28%).
 
These two stocks would come to represent 93% of the portfolio.
 
Stahl writes: "The power of compounding is so remarkable that these two more than compensate for disastrous selections."
 
It's an extreme example. And maybe it's impractical to expect anybody to stick with a six-stock portfolio untouched for 10 years. Then again, maybe that's why many investors do so poorly in the market.
 
In any case, the example shows you what just a couple of big winners can do to a focused portfolio.
 
Sincerely,
 
Chris Mayer
 
Editor's note: Chris Mayer's Focus is all about building a focused portfolio of smaller companies that have the potential to return 100 times your money. And for a limited time, you can claim one bonus year of Chris Mayer's Focus – completely free. But don't hesitate… This presentation – and Chris' special offer – ends tonight. To find out more, click here.

Source: DailyWealth

Why German Stocks Are a Smart Buy Today

 
European stocks have boomed to start 2017.
 
Last week, I told you that European stocks were entering a stealth bull market. And right now, we're seeing a huge breakout in Europe's largest economy… Germany.
 
In December, the iShares MSCI Germany Fund (EWG) jumped 6% in just three days. And the rally has led to new 52-week highs.
 
History shows buying after a 52-week high is a good idea. Not only that, but it could lead to double the typical one-year return on German stocks… starting now.
 
Let me explain…
 
I know most investors are scared of buying after a market hits new highs.
 
It feels wrong. It feels like you already missed it. But history tells a different story…
 
Buying after a new 52-week high is almost always a good idea. And in the case of German stocks, it leads to dramatically higher returns going forward.
 
German stocks tend to more than double their typical one-year return after hitting a new 52-week high. And that is exactly what is happening right now. Take a look…
 
German stocks just staged a major breakout. This almost never happens…
 
German stocks have hit new 52-week highs only 5% of the time going back to 1996. But what happened next is especially interesting…
 
Since 1996, buying after these new 52-week highs was a great idea. It led to more than double the typical "buy and hold" return for German stocks over the following year. Take a look…
 
 
3-Month

6-Month

1-Year
After extreme
5.2%
6.8%
6.9%
All periods
0.8%
1.6%
3.1%
German stocks saw lackluster performance over the last two decades. On average, the typical buy-and-hold strategy led to 3.1% annual gains over that time (not including dividends).
 
That's not an impressive return… But buying after German stocks hit a new 52-week high led to significantly better gains… a 5.2% return in three months, 6.8% in six months, and 6.9% over the next year.
 
That's incredible outperformance… It's not often you get a chance to double the typical annual return in an entire country.
 
That is exactly the opportunity we have in German stocks right now. They just broke out to a new 52-week high… And history says more gains are likely from here.
 
I expect Europe as a whole to be a major investing story for 2017. And German stocks look like a great place to put money to work right now.
 
Good investing,
 
Steve
 

Source: DailyWealth

Why Interest Rates Could Skyrocket in the Coming Years

The Weekend Edition is pulled from the daily Stansberry Digest. The Digest comes free with a subscription to any of our premium products.
 
 Inflation is now rising faster than expected for the first time in five years…
 
Investment bank Citigroup's so-called "Global Inflation Surprise Index" has been surging higher in recent months, along with consumer prices.
 
In simple terms, the index compares actual consumer price data – what most developed countries use to measure "inflation" – with the market's expectations. Values above zero indicate data are coming in above expectations, while values below zero indicate data below expectations.
 
As you can see in the chart below, the index turned positive in December – meaning inflation data around the world were higher than expected – for the first time since early 2012…
 
In other words, after years of falling short of analyst expectations, global inflation is suddenly increasing much faster than predicted. This is another sign the recent rise in prices could be the start of a more significant move than we've seen of late.
 
As we've discussed, a return to inflation should be bullish for precious metals and equities (at least initially)… and absolutely terrible for bonds.
 
 Speaking of bonds, this week, the Wall Street Journal highlighted an unusual consequence of the Federal Reserve's quantitative easing ("QE") program…
 
As longtime readers may recall, the Federal Reserve bought up trillions of dollars' worth of bonds in the years following the 2008 financial crisis.
 
The Fed stopped buying new debt in 2014, but it still holds more than $4 trillion in debt, including nearly $2.5 trillion worth of Treasury securities. This number has been fairly stable for two reasons…
 
First, the Fed holds mostly longer-term debt, meaning relatively little of this debt has matured over the past few years. And second, the Fed has been reinvesting the cash from maturing bonds back into new Treasury debt.
 
But there's more to the story…
 
The Journal notes that the average duration of the Fed's Treasury holdings has been falling. It has fallen from nearly eight years in 2014 to just six years today.
 
In essence, this means the Fed has been reinvesting this cash in relatively shorter-term debt than it had been. And this has helped push interest rates higher. (Remember, bonds and interest rates trade inversely… So less Fed buying of long-term Treasurys has led to lower prices and higher long-term rates.)
 
According to Fed Chair Janet Yellen, this has had the same impact on benchmark 10-year rates as if the Fed had raised short-term rates two more times than it already has.
 
 Why do we bring this up?
 
Because this trend could soon accelerate significantly…
 
According to the Journal, the Fed is now in discussions to cut the size of its bond portfolio for the first time. In practice, this means it will stop reinvesting the cash from maturing bonds back into Treasurys. This would put even more upward pressure on rates.
 
Worse, as you can see in the following chart, a huge chunk of the Fed's Treasury debt is set to mature over the next five years…
 
The amount of maturing Treasury debt is expected to rise to $190 billion this year, followed by an enormous $450 billion in 2018, $410 billion in 2019, and more than $200 billion per year in 2020, 2021, and 2022.
 
But as you can see above, analysts estimate the Fed will only reinvest a little more than half of the cash from debt maturing in 2018, and little to none in the following years. This would require the private market to absorb up to $1.2 trillion of additional Treasury issuance.
 
The massive supply could easily overwhelm investor demand and cause Treasury prices to plunge… and rates to absolutely soar.
 
 This chart is also horrible news for financing-dependent companies…
 
And highly leveraged firms that need to refinance in 2018 and 2019 – like many of those in the "Dirty Thirty" of our Stansberry's Big Trade service – should be downright terrified.
 
Even investment-grade firms could be forced to pay unusually high rates to borrow, while many lower-quality credits will likely be shut out of the market altogether.
 
In short, despite the recent rally, the looming problems in corporate credit that Porter and his team have warned about haven't suddenly disappeared. A crisis is approaching… Only the timing remains uncertain.
 
 In the meantime, we continue to recommend avoiding most lower-quality bonds and bond funds…
 
We believe investors are taking far greater risks than they realize in these investments. But we remain cautiously bullish on equities… Sooner or later, a crisis is certain. But the final, most explosive "inning" of this long bull market could still be ahead.
 
As we've discussed, inflation is already stirring. And despite recent controversies, the new Trump administration could still successfully stoke economic growth. Just cutting taxes and regulations alone could do wonders. Stocks – particularly high-quality, small-cap stocks – could soar before the bull market ends.
 
 If you're interested in learning more about how to find high-quality stocks like these… stocks that could ultimately become "the next Starbucks" or "the next Apple"… you're in luck.
 
Our friend Chris Mayer – chief investment strategist at our corporate affiliate Bonner & Partners – is hosting a special investment "master class" training event TODAY at 3 p.m. Eastern time.
 
In this class – called "The Mayer Method": How to Find Tomorrow's Biggest Stock Market Winners Today – Chris will share everything he has learned about identifying high-quality small-cap stocks that are likely to soar… years before anyone on Wall Street pays attention to them. And it's absolutely free for Stansberry Research subscribers.
 
Better yet, Chris will even share the names and ticker symbols of six stocks from his active watch list to everyone who attends the session.
 
Longtime subscribers know Porter has called Chris one of the few truly great investors he has ever met. And that's not hyperbole… An independent audit of Chris' actual track record shows he outperformed legendary investors like Carl Icahn and George Soros – and even the book value of Warren Buffett's Berkshire Hathaway – by as much as 2-to-1 over a 10-year period.
 
Chris has prepared a series of short introductory videos covering everything you need to know in advance of today's training. You can watch these presentations and sign up for TODAY's training event right here.
 
Regards,
 
Justin Brill
 
Editor's note: At 3 p.m. Eastern time today, Bonner & Partners' Chris Mayer will hold an exclusive investment "master class" that no serious investor should miss. He'll teach you everything you need to know about his breakthrough method to identify the highest-returning stocks of tomorrow… and how to get them at bargain prices today. Sign up right here.
 

Source: DailyWealth