Saturday, September 4, 2010
I was reading the Stansberry publications we produced this week and landed on Dan's Extreme Value update. I was amazed at the values some of Dan's stocks are offering. If you subscribe to Extreme Value, you know what an asset it is.
And if you're not reading Extreme Value, despite our best efforts, you probably never will. As we've written many times before, we have a difficult time selling Extreme Value. It's one of our smallest subscriber bases. So why do we publish it? Because it's simply an outstanding product. And Dan produces excellent returns for his readers (his retention rate with subscribers is one of the highest in our entire business).
A couple years back, Bill Bonner – the founder of our parent company, Agora – said Extreme Value was one of the few publications from his empire that he regularly reads. You're probably also wondering why we're bothering to sell Extreme Value again. I hope, with someone besides Dan singing its praises, the message may stick.
Regardless, back to the Extreme Value update... Money is headed toward safety in the market. Treasury yields are dropping, gold is increasing.
Debt from high-quality corporations – like Wal-Mart and Johnson & Johnson – outperformed junk bonds last month by around 100 basis points. Simply put, Dan's World Dominator stocks are the best place to be in equities, right now.
Reading the update and several of Dan's past issues spurred me to start building positions in these stocks. For example, Dan wrote:
[Company X] raised its targeted dividend payout from 75% of earnings to 80% of earnings. [Company X] also raised its quarterly dividend for the second time this year, from $0.35 per share to $0.38 per share, an increase of about 8.6%. This is great news for shareholders. [Company X] is paying a current yield of 6.7%, based on the new quarterly payout.
Dan's "Company X" is the most dominant business in its industry. And it still pays a huge dividend. Plus, Dan expects this company to continue raising its dividend (returning capital to shareholders is its best use of capital now... It's in a mature industry).
He said the yield could reach 10%. At that rate, you double your money in a little more than seven years... Put another way, that turns $100,000 into $1 million in 24 years. And you don't have to do anything. You simply sit there and collect checks every quarter.
Most people don't want to wait seven years for good returns (or 24 for great ones). They prefer to buy the option that could double in a week or the microcap mining stock that might return hundreds of percent in a few months. These things do happen. And when they do, you can make hundreds of percent in less than a year. But the odds are against you.
It's easy to see guys like John Paulson, who pulled in a $3 billion paycheck in 2007, and think only traders get rich. But buying high-quality stocks and sitting on them is really one of the best ways to get rich.
If you look at most of the best – and most-respected – hedge funds, they're boring value investors. Guys like Seth Klarman of Baupost Group and David Einhorn of Greenlight Capital have produced double-digit returns for their investors for more than a decade. And their strategy is simple... They buy high-quality stocks and wait.
On a side note – David Einhorn loaded up on one of Dan's World Dominator stocks, Microsoft, in the second quarter. And he wasn't alone. Microsoft was one of the most popular stocks last quarter among the top hedge-fund investors.
I hadn't looked at Dan's track record for a while until this week... It's incredible. Every one of his World Dominator stocks is up. Some other returns from his "boring" stocks... 49%, 100%, 87%, 117%, 30%, 120%. The worst-performing World Dominator is up 8%. Dan only has nine losers in his entire portfolio (it's a big portfolio).
Right now, six of Dan's World Dominators are currently in buy range. You may wonder why you'd pay Dan to tell you to buy his World Dominators (household names like Procter & Gamble and AB-InBev).
First, he tells you when to buy them. Not every great company is a great value. Everyone knows ExxonMobil and Johnson & Johnson are "blue chips." But sometimes you can pay too much for a blue chip. Dan constantly tracks the intrinsic value of these stocks and knows exactly when to buy... and sell.
Second, Dan periodically uncovers small-cap, relatively unknown value stocks... His two latest "off the map" investments are up 44% and 71%, respectively. The two he closed last year made readers 248% and 249%.
We probably can't change your mind about value investing being boring. All we can do is explain how profitable the strategy is. We urge you to give Extreme Value a chance. It's a great time to buy a lot of the stocks in Dan's portfolio. You can learn more here.
Date Range:8/26/2010 to 9/2/2010
Date Range:8/26/2010 to 9/2/2010