Weekend Edition
The Best of The S&A Digest
May 31, 2008
Our trading wizard Jeff Clark has been doing especially well lately. Jeff follows several indicators to make blockbuster trades. He's got the "canary in the coal mine," his mother, and most recently, Jim Cramer. "When Jim Cramer nearly wets himself talking about the strength in the stock market, it's probably a good indication of high expectations."
Two weeks ago, Jeff told his S&A Short Report readers he was turning bearish as the S&P hit a four-month high of 1,440. The next morning, he recommended buying PowerShares QQQ puts. The S&P fell below 1,400, and his readers sold half their positions for a 47% gain in less than one day. They closed the other half for a 67% gain two days later.
Jeff's trades are up an average of 28% this year, over an average two-week holding period. Click here to learn how to access Jeff's next trade, which will hit readers' inboxes Monday morning.
Vietnam is finally opening up to Western investment. The Asian country is allowing a Canadian developer, teamed with hedge fund Harbinger Capital, to build a $4.5 billion casino-resort. The project, called Ho Tran, will be the biggest foreign investment there to date. When completed in 2015, Ho Tran will have five hotels with 9,000 rooms, two casinos, an 18-hole Greg Norman-designed golf course, a Cirque du Soleil theater, and a site for swimming with the dolphins.
I got excited about Vietnam after hearing hedge-fund manager Carlo Cannell's speech at last year's Value Investing Congress. Cannell titled his speech "Investing in the Dark," or something close to that, because no Vietnamese companies kept good financial records. Cannell said he met with CEOs and CFOs who had no idea what free cash flow and depreciation were. So, instead of running financial analyses, he based his decisions on management's character. And he made huge gains – several stocks returned thousands of percent.
Our favorite idea for Vietnam: Buy the brewer. Cannell reported the Vietnamese are the world's biggest beer drinkers. Whenever he went to a restaurant, the first thing the waiter did – without direction – was place a case of beer on the table.
Picking bottoms and riding trends can be very profitable. But it's so risky it's not worth it for the vast majority of investors. On the other hand, buying Berkshire Hathaway, ExxonMobil, Wal-Mart, and other solid companies that have huge competitive advantages is like putting money in a bank that pays you double-digit interest.
Three of Stansberry's flagship advisories, PSIA, True Wealth, and Extreme Value started recommending great blue-chip stocks in 2006. It continues to this day with Dr. Steve Sjuggerud's most recent pick, the greatest brand name on Earth, selling cheaper than ever before.
Things are difficult and uncertain out there, and how wonderful that is for the value-oriented seeker of wonderful businesses.
I've been coming to Nicaragua for more than 10 years. Each time I visit, the roads are a little better, the people are a little richer, and it's a little more crowded with tourists. Keep in mind, "crowded" is a relative term. We ate lunch yesterday at one of the 10 best restaurants in the country. The ceviche was the best I've ever had. The churasco was melt-in-your mouth tender. And the view, a 3,000-foot perch overlooking the pacific coast, framed by wild-growing hydrangeas, was second to none. We were the only people in the entire restaurant. The gourmet three-course lunch, for six, including drinks, was less than $100.
Food and labor costs are unbelievably cheap. A good cook costs $20 per week. You can afford to have a driver, a gardener, a cook... all for only a few dollars per day. In Nicaragua, it's still possible to lead a life of luxury on the budget of the average middle-class American. Property is cheap, too. Here in Rancho Santana, many ocean-view lots are still available for less than $200,000 – lots that would cost at least 10 times as much in the U.S. And here, there's a very good chance that property will continue to appreciate. I know it's easy to scoff at the idea of living in Nicaragua – until you see it for yourself.
The Norwegian sovereign wealth fund, the world's second largest, turned in the worst quarter since it started in 1998. The Government Pension Fund, with $350 billion under management, dropped 5.6% in the first quarter, erasing its 4.3% return last year. Leave it to the government to bungle a situation like this.
Norway should consider keeping more of its money in Matt Badiali's recommendation of its state-owned oil company, StatoilHydro (STO). The recommendation is up 40% in four months. If you know someone high up in Norway's government, encourage them to get a subscription to the S&A Oil Report. Click here to learn how else S&A Oil Report readers are boosting their retirement savings with record crude prices.
Regards,
S&A Research
The S&A Digest is written by Porter Stansberry, Dan Ferris, and Sean Goldsmith.
