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The Old and Relentless

By Stansberry Research Interview Series
Wednesday, February 14, 2007

Look for the founders.
 
The best insiders you could ever hope to follow are the guys who founded a company. They usually have large portions of their company's stock in their holdings. And they also tend to buy at the exact right times.
 
Two such insiders are Dan Duncan and Harold Simmons.
 
We've discussed Duncan several times on these pages before. He's the founder and chairman of Enterprise Products Partners (EPD).
 
Enterprise recently hit an all-time high. Yet Duncan continues to buy the stock.
 
Duncan celebrated Christmas by buying himself $1 million worth of EPD's stock. He brought in the New Year with an additional $6 million in January 2007. And in anticipation of Valentine's Day, he bought another $153,000 on February 1.
 
I apologize for sounding quaint, but Duncan's insider purchases are now bordering on the ludicrous. In the last two years alone, he's bought more $74 million worth of Enterprise's stock. During that time, EPD shares have risen some 45%.
 
And he's still buying now.
 
According to Forbes, Duncan is worth an estimated $6 billion. Based on SEC filings, we know he owns some 83 million shares of EPD's stock, valued at roughly $2.4 billion. In other words, nearly half of his net worth is tied up in Enterprise stock.
 
Granted, if Enterprise went bust, Duncan would still be a billionaire. But seeing Duncan continually add to his position in spite of EPD's elevated share price is more than compelling.
 
At 24 times earnings, EPD is not cheap. But its 6% yield makes it attractive beyond potential capital gains. And Duncan keeps adding to his position every month or so.
 
We're seeing something similar with Harold Simmons and Titanium Metals (TIE).
 
Simmons owns TIE through his holding company, Valhi. In the last five years, TIE stock has risen tenfold. And Simmons has bought all the way up. In the last two years alone, he's bought $70 million worth of TIE's stock.
 
Simmons is worth $2.6 billion, and his TIE holdings (via other companies), total about half that. And yet, he's still buying.
 
Recently, he bought $1.4 million worth of TIE's stock in December 2006 and another $1.4 million in January 2007. Like EPD, TIE trades for a high P/E (29x). But it's clear from Simmons purchases, he believes it will go higher. After all, half his personal fortune is tied up in the stock in one way or another.
 
Any asset manager or financial planner will tell you to diversify your holdings. Yet both Duncan and Simmons have made billions doing the exact opposite. And both are predicting bigger moves in their companies in the future.
 
Good trading,
 
Graham




Market Notes
Commodity-sensitive iShares Australia at new all-time high.
 
iShares Japan breaks out to new eight-month high.
 
Agricultural chemical companies Mosaic, Agrium, and Terra at fresh new highs.
 
Earnings today: DaimlerChrysler, Coca-Cola.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1224.71 +0.3% +11.4%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.19 -0.6% +7.2%
Euro 1.34 +1.4% -11.0%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
Change
52-Wk
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%

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