The conclusion of our Stansberry's Financial Survival Program... Two crucial ingredients to growing your wealth... It pays to be boring... The anomaly that can beat the market... Less risk, more reward... The indestructible stock portfolio...
 Saving the best for last...
A little more than two months ago, our team debuted a brand-new Stansberry's Financial Survival Program, a series of easy-to-understand lessons and actionable recommendations designed specifically for the type of volatile market environment we've seen this year. If you've subscribed or are an Alliance member and have followed along, I (Corey McLaughlin) hope you've enjoyed the material. I sure did. While it's all relevant to today's market, I think you can also put the lessons from our editors and analysts to use anytime. Among the topics... Why cash and other defensive assets are king in a bear market... the "most asymmetric setup in the world today"... the opportunity in "special situations"... how to profit directly from a stock market crash... why downturns make for great times to buy for the long term... and details on the "best business in the world." And finally... To cap off the seven-part series, our Director of Research Matt Weinschenk and senior analyst Alan Gula introduced what they call a five-stock "Indestructible Portfolio." It's just what it sounds like: a selection of stocks that don't just survive market turmoil – like we're seeing today – but actually thrive... Matt and Alan identified these stocks by applying two critical ideas that most investors overlook, but which are crucial to understand if you want to grow your wealth in the long run. The ingredients are quality and low volatility... These ideas might sound obvious, especially to seasoned investors... But they're more powerful than you might think and deserve a discussion. First of all, owning shares of high-quality businesses that generate tons of cash is the best way to get rich in stocks – especially during inflationary times. As our founder Porter Stansberry once wrote, way back in 2012... When a company can maintain its prices and profit margins because of the value placed on its product by the purchaser rather than its production cost... that business can produce excess returns – returns that aren't explainable by rational economics. Those, my friend, are exactly the kind of companies you want to own. And... you especially want to own these stocks during inflationary periods. As things get more and more expensive in the coming years, capital-efficient companies will have to buy less than other companies, on average. This is a simple idea... But it can be difficult to put into practice. After all, if buying high-quality stocks – which also tend to have low volatility – was so obvious and easy to put into action... everyone would do it... Mr. Market might not ever crash... and fewer people would complain about losing money in stocks. These things don't happen. Secondly, we always have a lot of new readers along with us, and we want to make sure we're all "speaking the same language" of what we mean by "quality" and "low volatility." What's more, even if you're an experienced investor, the simple power of Matt and Alan's lesson can still guide you toward better returns. The details are essential... It's one thing to simply say "buy high-quality stocks" – which we often do. But it's another, more useful thing to determine exactly which stocks are higher-quality than their peers. In the conclusion of our Financial Survival Program, Matt and Alan shared a nine-question test you could apply to any stock. I can't give away the full test today... But I can tell you two of the criteria deal directly with "free cash flow," or "FCF," which longtime subscribers know is a measure we love. (FCF is the amount of cash a company has left over after accounting for all capital expenditures. A lot of free cash is a sign of a strong balance sheet and a business in good shape. The company can distribute this money to shareholders without hurting future growth.) As Matt and Alan shared, stocks that fit the bill of this nine-question test can help you beat the market – but here's the kicker: They beat the market with lower volatility. This is a powerful idea... Many folks get the biggest gains with volatile stocks – the ones with the highest price moves. But volatility cuts both ways. Volatile stocks can also yield the biggest losses. So a stock's volatility is also a way of measuring its riskiness. For example, higher-volatility, small-cap stocks with high upside potential and a lot of debt can often go up or down by something like 8% in a day, as we've seen lately... Low-volatility shares don't move as dramatically. This is also a useful concept to think about because, in an unpredictable market, we can actually measure volatility... One way is by calculating a stock or index's "beta." It's math, and a number that basically measures correlation to the S&P 500 Index. It's a concept we shared back in the January 4 Digest... You can do a risk assessment of your portfolio by simply measuring the weighted average of the "beta" of your individual positions. Without getting too deep into the details, beta basically measures how much a stock moves relative to the market as a whole... A beta of "1" means that a stock has the same volatility as the market as a whole. A beta of "0.5" means a stock is half as volatile as the market. And a beta of "2" means it's twice as volatile as the market. Said another way, the S&P 500 has a beta of "1," because it is the market in this example... So, higher-volatility stocks rise and fall more than the broad market in the same period. Consider Eastman Kodak (KODK), which has a five-year beta of 4.8 and gained meme-stock status in recent years. It has gone up and down at 4.8 times the scale of the S&P 500 over the past five years... A particularly low-volatility stock is Hormel Foods (HRL). It has a beta of 0.1, meaning that over the past five years, it has gone up 10% for every 100% gain in the S&P 500, but fallen only 2% over time during a 20% broad market drop, for example. In general, you can think of lower-volatility stocks as trading in a tighter possible range of outcomes... That means they probably won't go up as much as some others during big bull runs, but they won't crash as much in downturns either. Shares of Hormel Foods, for example, are down only 1% for the year, and the company continues to pay shareholders a 2.1% annual dividend for their capital. The problem is... folks love buying stocks that might go up a lot. When they hear that a lower-volatility stock has less upside, they worry about missing the big-time, life-changing returns that would be fun to brag about at a holiday cookout. You'll hear plenty of folks in the financial world selling hopes of the next hot stock, based on which ones delivered eye-popping returns in the past... Everyone loves big returns. And calling something boring is less exciting than a greedy pitch or bold prediction. But if you're in this for the long haul, it pays to be boring. After all, isn't that what we're all here for? To build and protect wealth... And anyway... conventional wisdom, or what might sound appealing, is wrong. Counterintuitively, the Financial Survival Program shows, lower volatility actually means more reward... over time... If you're seeking to build a portfolio that lasts and thrives – and allows you to achieve whatever goals you have in mind – this should be more desirable than instant gratification from a quick win or big mouth-watering gains... The anomaly that can beat the market... What Matt and Alan showed – which you won't find in economics textbooks or in the mainstream media – might be worth the entire subscription cost for our Financial Survival Program on its own. As they wrote... Analysis of securities prices shows a surprising result: Lower risk can still translate into higher long-term returns. This puzzling phenomenon is called the low-volatility anomaly. To illustrate the counterintuitive relationship between risk and reward, we ran a "backtest"... Here's a taste... Since 1995, if you owned an equally weighted basket of the 100 least-volatile stocks you could find in the S&P 500 each month, you would have had a nearly 1,900% total return. That's a great return, and it beats the market by about 400 points while suffering less-dramatic sell-offs along the way. Not to mention, you would have beaten a high-volatility approach by even more... As Matt and Alan shared in our Financial Survival Program...
Lower risk with higher returns. These results fly in the face of the economic theory in textbooks. Researchers have analyzed the low-volatility anomaly using decades of data. One study found that the market mispricing was likely due to a behavioral bias rather than the compensation for some hidden risk. It's possible that collective risk-seeking behavior in the market creates these mispricings. Basically, people are overpaying for lottery-type stocks. The highest-volatility stocks – perceived to have the best chance of multiplying – are too expensive. And low-volatility stocks – perceived to be too boring – are too cheap. I'm not naรฏve... You might still not believe me at this point. This guy is saying lower risk and higher returns? If it were that easy, why won't everybody just do this? I urge you to check out their findings for yourself. But here's my hypothesis: Simply put, humans are humans... We do a lot of dumb stuff because it "feels" good or we hear it on television or think it will save us some time or energy. (Just read a few chapters of Nobel Prize winner Daniel Kahneman's Thinking, Fast and Slow to get the idea.) But as Matt and Alan wrote... We're not concerned about the causes of the low-volatility anomaly or why it persists. But we can, and do, take advantage of it. Even considering lower-volatility and high-quality stocks – which tend to go hand in hand with each other – can put you in a class ahead of most people with money in the stock market today... The challenge is most investors don't have the time, inclination, or ability to put in the work to find these stocks. It's much easier to be sold on Cathie Wood's ARK funds and call it a day... But we go deeper. That's our job... And as we mentioned, Matt and Alan put their advice into practice in the conclusion of our Financial Survival Program. They identified five stocks that fit the bill as high-quality and low-volatility, the kind you want to own now or anytime... By starting our search for quality stocks with low volatility, we believe we can earn better returns. That means better returns in bull markets, in bear markets, and in flat markets. You don't have to be a quantitative investor to benefit from this information. And you don't need to follow specific rules to "only buy stocks with a quality score higher than 80." Rather, use the knowledge that these investment strategies just work as the basis for building your portfolio. You need to see this work for yourself... Matt and Alan are two of our most experienced analysts at Stansberry Research. They looked at the past 25 years to come up with the best high-quality, low-volatility portfolio they could create... The U.S. stock market has suffered eight bear markets or severe corrections in this span. On average, the S&P 500 declined by about 29% in these sell-offs... In every one of these collapses, the five-stock indestructible portfolio they picked out has outperformed... and with lower volatility, meaning less-dramatic sell-offs... along with stronger overall returns. The average return for the portfolio across the eight periods is an impressive 26%. A lot of that is skewed higher by a 186% return during the burst of the dot-com bubble – but still, that's the point... To survive a bear market... recession... crisis... a simple garden-variety correction... or inflation... you want to own quality and low-volatility stocks. And the more, the merrier. That's how you can build an "indestructible" portfolio. I can't give away the five stocks Matt and Alan are recommending... You need to subscribe to our Financial Survival Program or be a Stansberry Alliance member to get them. (Subscribers can check out the full issue and the five-stock portfolio right here.) But like I said, the cost of a subscription to our seven-part program is well worth the price... Click here to get started today. And if it's not for you just yet, that's OK. If you read through today's Digest in its entirety, you're likely already several steps ahead of most other people with money in stocks. We hope you stick around to take a few more. | | | | What the First 100 Days of 2022 Tell Us Last week saw the 100th trading day of the year, marking the worst start in history for the Nasdaq Composite Index and second-worst for the benchmark S&P 500. But it's not all bad news, says Matt McCall... In this new episode of Making Money With Matt McCall, Matt looks back at other times when stocks fell for long periods like we're seeing today and examines how the market reacted for clues to the years ahead. Turns out, the outlook is rather positive...
Click here to watch or listen to this episode right now. And to catch all of Matt's shows and more videos and podcasts from the Stansberry Research team, be sure to visit our Stansberry Investor platform anytime. | | | | | New 52-week highs (as of 5/27/22): Black Stone Minerals (BSM), Continental Resources (CLR), CTS (CTS), ProShares Ultra Oil & Gas Fund (DIG), Enterprise Products Partners (EPD), Kinder Morgan (KMI), Suncor Energy (SU), Viper Energy Partners (VNOM), Energy Select Sector SPDR Fund (XLE), and SPDR S&P Oil & Gas Exploration & Production Fund (XOP). In today's mailbag, more thoughts on what a trillion really is... and feedback on our colleague Dan Ferris' latest Friday Digest... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "When Christ was a cowboy in the year zero, that was about 738,030 DAYS ago. If you spent one million dollars PER DAY since then, you would still be about 261 billion dollars short." – Paid-up subscriber W.B. "Of all the writers at Stansberry, you [Dan Ferris] are my favorite. I can't tell if you are the best or if I think this because I agree with everything you write. Keep up the great work." – Paid-up subscriber Don P. "I think you are right on about things presently. The question is where does this go? All things are moving, either up or down, getting better or worse. It is clear to me that 'things' are getting worse. OK, then the question is where and when does this lead? It is eventually the end of Democracy as we know it, and where our founding fathers debated, collaborated, and envisioned it. I think it's sad." – Paid-up subscriber Larry S. "Dan, I'm guessing that if people reading your Digest columns haven't caught on yet about 'what a market top feels like' then despite your honest attempts to warn and inform you simply aren't going to get through to these folks. You have provided a gallant attempt to warn them... "I enjoy finding your weekly rant. Just plain enjoyable to hear your characterization of this insanity. I find it amazing/shocking someone like Neumann can convince anyone to listen to him but I have to admit he does use all the buzz words. On the one hand it seems like this has gone on long enough at this point that it ought to be treated more like ironic humor but I guess when individuals are losing their life savings and our politicians are giving away our country it's not really a laughing matter. "For a crowd that is in love with momentum investing it would seem that someone out there could see the trend here." – Paid-up subscriber Al M. All the best, Corey McLaughlin
Baltimore, Maryland
May 31, 2022
Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios | Stock | Buy Date | Return | Publication | Analyst | MSFT
Microsoft | 11/11/10 | 978.8% | Retirement Millionaire | Doc | MSFT
Microsoft | 02/10/12 | 841.8% | Stansberry's Investment Advisory | Porter | ADP
Automatic Data | 10/09/08 | 790.5% | Extreme Value | Ferris | ETH/USD
Ethereum | 02/21/20 | 684.7% | Stansberry Innovations Report | Wade | HSY
Hershey | 12/07/07 | 502.6% | Stansberry's Investment Advisory | Porter | BRK.B
Berkshire Hathaway | 04/01/09 | 465.8% | Retirement Millionaire | Doc | AFG
American Finan | 10/12/12 | 434.2% | Stansberry's Investment Advisory | Porter | FSMEX
Fidelity Sel Med | 09/03/08 | 291.0% | Retirement Millionaire | Doc | BTC/USD
Bitcoin | 01/16/20 | 275.6% | Stansberry Innovations Report | Wade | ALS-T
Altius Minerals | 02/16/09 | 271.8% | Extreme Value | Ferris | Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.
| Top 10 Totals | | 3 | Retirement Millionaire | Doc | | 3 | Stansberry's Investment Advisory | Porter | | 2 | Extreme Value | Ferris | | 2 | Stansberry Innovations Report | Wade |
Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio | Stock | Buy Date | Return | Publication | Analyst | ETH/USD
Ethereum | 12/07/18 | 1,521.7% | Crypto Capital | Wade | ONE-USD
Harmony | 12/16/19 | 1,473.5% | Crypto Capital | Wade | POLY/USD
Polymath | 05/19/20 | 1,082.7% | Crypto Capital | Wade | MATIC/USD
Polygon | 02/25/21 | 797.3% | Crypto Capital | Wade | BTC/USD
Bitcoin | 11/27/18 | 744.4% | Crypto Capital | Wade | Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio.
Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios | Investment | Symbol | Duration | Gain | Publication | Analyst | | Nvidia^* | NVDA | 5.96 years | 1,466% | Venture Tech. | Lashmet | | Band Protocol crypto | | 0.32 years | 1,169% | Crypto Capital | Wade | | Terra crypto | | 0.41 years | 1,164% | Crypto Capital | Wade | | Inovio Pharma.^ | INO | 1.01 years | 1,139% | Venture Tech. | Lashmet | | Seabridge Gold^ | SA | 4.20 years | 995% | Sjug Conf. | Sjuggerud | | Frontier crypto | | 0.08 years | 978% | Crypto Capital | Wade | | Binance Coin crypto | | 1.78 years | 963% | Crypto Capital | Wade | | Nvidia^* | NVDA | 4.12 years | 777% | Venture Tech. | Lashmet | | Intellia Therapeutics | NTLA | 1.95 years | 775% | Amer. Moonshots | Root | | Rite Aid 8.5% bond | | 4.97 years | 773% | True Income | Williams | ^ These gains occurred with a partial position in the respective stocks.
* The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. | 
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