Saturday, March 16, 2013
A few years ago, I said bonds were at the blow-off top of a multi-decade bull market... only to see rates continue to move lower and bond prices continue to surge higher.
I deserved to be wrong. I knew then that calling market tops and bottoms is a fool's errand. But I'm done with this destructive habit...
Still... you'll find plenty of other folks ready to take a stab at prognosticating. Take Bill Gross, for example. He runs asset management firm PIMCO's massive Total Return Fund, with nearly $290 billion of assets. Gross said it was time to sell Treasurys a couple years ago... and missed a huge rally. Today, he's reducing Treasury holdings again, as well as mortgage-backed securities holdings.
Now, an analyst at brokerage firm Edward Jones has joined the chorus. Tom Kersting, a fixed-income strategist, recommends reducing holdings in long-term bonds. Kersting says his firm is "more conservative" and that it's trying to prepare investors for higher interest rates.
I don't worry about interest rates going up. I focus my attention on an elite group of blue-chip, dividend-paying stocks. You see... despite what a lot of folks think... dividend-paying stocks outperform the market whether rates are going up or down...
It's a common worry that dividend-paying stocks will suffer if interest rates rise. But it's a myth. Independent financial research firm Ned Davis Research Group found that dividend stocks outperformed non-payers from 1927 to 2011 whenever the Fed raised rates.
Dividend-payers returned 2.2% per year, while non-payers returned 1.8% per year. And Ned Davis discovered that dividend-payers beat non-payers when interest rates fell, too. During the study period, dividend-payers returned 10% a year when rates were falling, versus a -2.5% return from non-payers.
The lessons are simple and clear. Famous money managers don't have all the answers. Calling tops and bottoms and worrying about interest rates is a waste of time when you stick with great dividend-paying stocks... Those investments will keep your money safer while earning you higher returns in periods of both high and low interest rates.
My colleague Tom Dyson tells us he's found "the next IBM."
We mention the IT-services giant from time to time. Extreme Value readers are up 7% since I recommended it last August.
I'm extremely picky about the quality of businesses that make it into the Extreme Value portfolio. But IBM's 16% profit margins and $20 billion in annual cash flow allowed it to make it into the club.
IBM is also a major holding of the world's greatest investor, Warren Buffett. He owns more than 6% of the stock, a $13 billion stake. It's a stock that can safely build your wealth over a long, long time. Thus, when I hear a claim of "the next IBM," I take notice...
Tom tells us his brand-new issue of The Palm Beach Letter focuses on a stock he believes will generate safe 12% returns for investors for at least the next few years (and likely a lot more). IBM has built an extraordinary business over the past decade or so by reinventing itself. It's gotten away from the low-margin business of selling hardware (like computers and printers) and into higher-margin businesses like software and IT services. Tom sees his new recommendation making the same smart moves.
Tom's new recommendation is cheap. It's priced 10% below book value and trades at a little more than five times free cash flow. Last year, the company bought back 10% of its shares and raised its dividend more than 30%. And last year, it distributed 55% of its profits to shareholders through dividends and buybacks.
One Wall Street guru has already taken notice and bought $177 million of the stock. Tom is urging readers to buy the company before the rest of Wall Street and the investing public catch on.
As many readers know, Tom was a longtime S&A analyst. A few years ago, he launched The Palm Beach Letter with entrepreneur and wealth-building expert Mark Ford.
Mark is one of Porter Stansberry's mentors. Over the last 35 years, he has built a reputation as one of the country's foremost experts on wealth-building. But unlike most "experts" in this field, Mark actually "walks the walk." He's a serial entrepreneur and a New York Times bestselling author who has built dozens of businesses... and a huge personal fortune.
Mark now spends his time with family, mentoring entrepreneurs, and managing his investments. He also shares his unconventional wealth ideas with people in books and financial newsletters.
As one of the world's largest investment publishers, we've read, met, published, and worked with just about every investment guru in the world... So we feel qualified to judge the ideas Mark and his team are sharing with Palm Beach Letter subscribers. We can say they are of the highest quality in the world.
As we've detailed dozens of times in the Digest, building a solid foundation of basic financial knowledge is the ultimate way readers become rich... not scoring on a "hot tip" or a big options trade.
That's why we've gone to great lengths to share our best "timeless" ideas... like proper asset allocation... how to identify a great business... intelligent position sizing... how to buy discounted corporate bonds... and how to sell put options.
Ideas like intelligent asset allocation are far, far more important to your long-term success than trying to score big in mining stocks... or hitting it big on one options play. However, most investors have no idea that this is the case.
That's the reason The Palm Beach Letter has quickly become one of the most useful investment-research advisories in the world. Sure, the letter features many stock and bond recommendations. But readers also receive a huge amount of educational material from Mark... material that can quickly transform your financial situation.
It's only after someone understands Mark's concepts that investment research can be truly useful.
To make sure you take full advantage of this opportunity, we're willing to make an outlandish guarantee. It's one that will strike many of our fellow publishers as crazy. Right now, you can try out The Palm Beach Letter, risk-free, for a whole year. If you decide it's not for you, The Palm Beach Letter will refund your purchase price... and Stansberry & Associates will send you an additional $50 check, which you can ask for three months after your purchase.
Again... If you decide The Palm Beach Letter is not for you, you can get 100% of your money back... and Stansberry & Associates will send you an additional $50 check. You'll simply have to call our customer service team. After we've verified your cancellation, we'll send you your money. (This offer is only valid once per household.) We're that confident that you'll benefit from Mark and Tom's work. You have nothing to lose by reading through Mark's educational materials... and a lifetime of knowledge to gain.
If you're interested in learning about the stock Tom calls "the next IBM" – and you would like to subscribe to The Palm Beach Letter, click here to get started with your one-year, risk-free trial. (There is no long promotional video to watch.)
Date Range:3/7/2013 to 3/14/2013
Date Range:3/7/2013 to 3/14/2013