Welcome to one of the new benefits of your subscription to Porter & Co… the Daily Journal Sunday Investment Chronicles: All the insight from the past week that you need to know, in one convenient place (see last week’s Sunday Investment Chronicles here).
Every Sunday at 10 am ET we’ll be highlighting the most compelling research from Porter & Co., in case you missed something during the week. And… we’ll also share the most interesting and valuable content from elsewhere in the worlds of investing, finance, and economics that we come across each week.
(Please note that the Sunday Investment Chronicles has replaced our monthly Investment Chronicles publication… we’ll be delivering more insight to you, on a more timely basis.)
In other words… this is the Porter & Co. version of your Sunday paper that may have been part of your weekend routine in the past.
Questions or comments about our Sunday Investment Chronicles? Drop us an email at [email protected].
Good investing,
Porter Stansberry
Stevenson, MD
Last Week At Porter & Co.
The week’s first Daily Journal held an important investing lesson… as Porter explained, in response to a subscriber’s question about the debt load at Philip Morris International (PM) – a longtime Porter, and Big Secret, stock…
… a company that’s investing heavily in growth (like Philip Morris) will spend a lot on capital investments and acquisitions, etc. If that company can maintain its margins and its returns against a growing asset base, that’s a good business. And if a company can do that while using debt to grow, then it’s probably a great business…”
And most importantly… what else is done with that debt…
PM turns debt into brand value. And that’s a heck of a business.”
On Wednesday, Porter explained how investing can be easy – even though we try (and, generally, succeed) to make it difficult. Invest in a great business that is growing, and paying shareholders – for example, through dividends – and… wait. Warren Buffett’s investment in Coca-Cola (KO) today, thanks to decades of rising dividends, pays out nearly 60% every year on Buffett’s original investment. (Important note: Buffett was 58 years old when he finished buying Coke shares in 1988. What this means is that it’s never too late.)
In the latest issue of The Big Secret On Wall Street – released on Thursday – we focus on a stock that might ring a bell with long-time subscribers… because it’s in the same sector as Tellurian (TELL) a previous (less-than-stellar) recommendation we made in the early days of Porter & Co. The promise of the natural-gas sector remains compelling… as we wrote,
… the global economy is woefully unprepared to meet the coming surge in LNG demand. And addressing it won’t be easy, cheap, or quick.”
But we uncovered a company that is getting U.S.-produced LNG to thirsty markets a lot faster, and cheaper, than anyone else. You can read about it here.
On Thursday, we also published Distressed Investing, in which Marty Fridson assessed a bond that’s trading at an annual yield of 15.6% in a highly controversial industry… so much so that the company was not long ago the subject of an epic cagefight-like battle between two Wall Street titans – one who was short the shares (that is, was positioned to profit if the share price fell), and the other of whom was long. The company – a name you’ll recognize that sells good-for-you products in 95 countries – is recovering after a volatile few years, and the prospects for the bond are bright as Marty writes,
As long as operations remain stable, [the company] should get itself into a virtuous cycle – declining interest expense, increasing cash flow, and larger paydowns of debt leading to larger reductions in interest expense, and so on.”
See the most recent Distressed Investing issue here.
And for an update on the latest in the Biotech Frontiers portfolio… editor Erez Kalir sat down with Porter & Co. editorial director Kim Iskyan to talk about the state of play in the biotech sector, what Erez is seeing, and his top picks in the Biotech Frontiers portfolio. You can watch the video of the conversation here.
And finally, in Friday’s Daily Journal, Porter starts off with a bald assertion:
… if you are genuinely honest about your own beliefs, you’ll recognize how, over the course of your life, virtually everything that you thought you ‘knew’ for certain, turned out to be simply wrong.”
And with that caveat, he continues…
And so, as I sit here today, I know the most dangerous aspect of what I’m about to tell you next is that I am so completely certain about it.”
Porter explained how the global economy was transformed by the Bessemer process, which improved the efficiency of steel production 30-fold… and how artificial intelligence (“AI”) will do something similar in coming years. The limiting factor, though, is electricity…
Production, distribution, and control of the ‘spice’ are what drove the politics and the economics in that world.
For us, the spice is electricity. And the spice must flow.”
Want to access everything we’ve described above? Partner Pass members have complete access to everything that Porter & Co. publishes – and everything we publish in the future. Porter explains what the Partner Pass is all about in a special video presentation… check it out here. (Or… call Lance James, our Director of Customer Care, at 888-610-8895 or +1 443-815-4447 and ask about how to become a Partner Pass member.)
What We Read Last Week
Out of the hundreds of sources of investment, finance, and economics news and insight we regularly review – our Bloomberg terminal, hedge-fund letters, annual reports, the financial news media, Securities and Exchange Commission (“SEC”) filings, investment newsletters, newspapers, X (Twitter) threads, conferences, podcasts, and more – here’s what we’ve read that we think you might find interesting.
(Note: Quotes, transcripts, and excerpts are generally reproduced as they appear in the original.)
Markets And Economics
- By these measures, broad market valuations are more extreme than ever before.
- Goldman Sachs’ proprietary Bull/Bear Market Indicator just hit one of its most extreme levels in history.
- Yet, nearly half of American Association of Individual Investors (AAII) survey respondents are now bearish on stocks, a situation which has historically been quite bullish for the market.
- Big Tech may be losing its luster.
- Why the U.S. Dollar Index could be headed significantly lower from here.
The Legends Speak
- An investing checklist from renowned fund manager Peter Lynch.
- What legendary distressed-debt investor Howard Marks is thinking about the market now.
- An in-depth interview with famed British investor Terry Smith.
- Rethinking Warren Buffett’s “Too Hard Pile” strategy.
- Six rules of investing from Li Lu, the “Chinese Charlie Munger.”
Investment Ideas
- How to preserve your wealth in the “Fourth Turning.”
- Here’s a crowd-sourced list of favorite low risk-to-reward opportunities.
- Ten investment themes for the next decade.
- History suggests this could be a fantastic time to own small-cap stocks.
Government Bonds And Credit
- Key takeaways from the Trump administration’s first U.S. Treasury quarterly refunding announcement (QRA).
- The federal deficit is on pace to hit a record $2.5 trillion this year.
- U.S. Treasury Secretary Scott Bessent pledges to “monetize the asset side of the U.S. balance sheet.”
- Taxpayers should have demanded accountability for USAID decades ago.
Corporate Bonds And Credit
- Regulators are getting concerned about the private credit market.
- Small businesses are reporting the best credit conditions since June 2022.
- A look at the state of the distressed debt market.
Real Estate
- The bullish case for real estate investment trusts (REITs).
- These real estate lenders could be the big losers from the Los Angeles fires.
- Losses on commercial mortgage-backed securities (CMBS) surged in January.
- On the other hand, some data also suggest the commercial real estate (CRE) market could finally be at an inflection point (from The Trepp CRE Rundown)…
The National Council of Real Estate Investment Fiduciaries, or NCREIF (pronounced nay-creef), National Property Index was positive in the fourth quarter, marking the second quarter in a row in which a positive return was registered by the index.
What’s more, every individual property type, except office, posted a positive total return for the quarter. Those were led by seniors-housing properties, which recorded a 2.07% return; followed by retail, with a 1.86% return; self-storage, with a 1.57% return; and apartments – which include affiliated sectors like single-family rentals – with a 1.17% return.
The industrial sector had a 1.15% return, while hotels had a 0.85% return. The office sector continued to bleed, with a 0.62% negative return, or loss. That negative return compares with the 0.89% negative return posted in the third quarter.
The index tracks 12,767 institutionally owned and income-producing properties valued at just less than $900 billion. It tracks both income generated by the properties and appreciation. During the latest quarter, the portfolio generated a 1.17% return from income, which was partly offset by the 0.24% loss in appreciation, for a total return of 0.94%. That loss in value was the smallest since the third quarter of 2022, when the index started moving downhill.
That followed the third quarter’s 0.82% positive return. So, despite the negative returns registered during the first and second quarters, the total return for the year was 0.59%.
In contrast, a year ago, the index posted a 2.94% negative total return, or loss.
The index is unlike others in the commercial real estate sector, in that it tracks the returns properties generate, as opposed to their prices or valuations.
The NPI had peaked during the second quarter of 2022 and remains well below levels that then were reached, largely because of higher capitalization rates.
Cap rates based on appraisals for properties in the index declined in the fourth quarter to 4.65% from 4.69% in the third quarter. Properties that had been in the index and were sold changed hands at an average cap rate of 5.46%, down from 5.6%. That could be a red flag indicating that appraised values haven’t yet caught up with market realities… or, perhaps, only lesser quality properties have sold.
In fact, Capital Economics, which had forecast that property values would decline by 20% from their peaks this year, with offices dropping by 45%, said it still believed that ‘valuations are not reflective of true market conditions.’”
Special Situations: Activist Investing, Spinoffs, Arbitrage, Mergers and Acquisitions (M&A), And More
- Here’s a list of new activist reports and notable executive departures disclosed this week.
- A deep-dive into Elliott Management’s activist investor campaigns.
- A special situation involving a quality company and “uniquely strong” growth drivers.
Precious Metals
- What you should know about the “Great London gold crisis.“
- A historical look at the implications of a potential U.S. gold revaluation.
- This could be a “near perfect” setup in gold mining stocks.
- The gold and silver markets may be on the verge of a “fundamental transformation.“
- This chart suggests the gold bull market could still be in its early innings.
Energy
- Global oil inventories have fallen to the lowest level in over two years.
Other Commodities
- Copper could finally be ready to rally.
- Coffee prices have soared to a 53-year high.
Bitcoin And Crypto
- How crypto and AI could fix our broken health insurance system.
- Bitcoin wasn’t the first attempt at a digital currency, It was the last one… the one that finally worked.
- Prince Philip of Serbia says nation-states are secretly stockpiling Bitcoin.
- Twenty U.S. states have introduced Bitcoin reserve legislation.
- What every investor should know about Bitcoin’s security.
P.S. Why Trump Might be Done in 60 Days
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