Why Most Investors Never Get A 10X Return

At Porter & Co. we are determined to be your best source of investing, economic, and financial insight, and your first choice for information about what to do with your money… in the entire world, bar none.

This is Porter & Co.’s Sunday Investment Chronicles. Every week, the Porter & Co. research team pores over thousands (and thousands) of articles, reports, social media posts, analyses, regulatory filings, and anything else we can get our hands (and eyes) on to understand what’s happening in the world of investing and finance – and to uncover the most original, compelling, and double-head-fake ideas…

… and we curate the best of those here. We do it all the old fashioned way: Hours of reading and brainpower (no AI curation here). We read everything – for you.

In Case You Missed It… What We Published Last Week

We are in a massive bull market, Porter wrote in Monday’s Daily Journal, titled “Will It Be Fire Or Ice?” Adding that massive bull markets don’t last forever… and ultimately burn up or freeze over.

Since the early 1970s, he said, when we got off gold and moved to paper money, three major bull markets have ended in “fire” – an overheating economy, where soaring inflation causes interest rates to spike. And three major bear markets were caused by “ice” – a sudden deflationary collapse.

Fire burned the market down in 1973, 1980, and 2022, while ice (deflationary forces) sent stock prices plunging in the dot-com bust, the Global Financial Crisis, and the COVID crash.

On Wednesday, Porter reminded readers of Warren Buffett’s great pearl of wisdom: to be fearful when others are greedy and to be greedy when others are fearful. Despite the reminder, though, he says that Buffett’s secret is largely ignored because in a frothy market that’s going higher virtually every day, it seems like the best time to make a lot of easy money in stocks.

Porter then restated his main focus in investing is to only buy high-quality stocks, citing a study by Cliff Asness and others from AQR Capital Management:

What their paper showed was that investing in high-quality businesses produces real, sustained alpha. That is, buying high-quality “inevitable” businesses, like the ones Buffett prefers, will deliver high returns over long periods of time, even after controlling for many other variables, such as volatility. And not only that, but the effect was consistent across the quality scale: the higher the quality of the business, the higher the value of the business in the market.”

On Thursday, we released the first monthly issue of Best Buys since rebranding our flagship newsletter Porter Stansberry’s Complete Investor. Porter selected two new entries for the November Best Buys… one of them is a highly popular consumer brand that had a recent pullback in its share price, making a rare opportunity to buy this superb business at a great price.

As he does every second Thursday of the month, Distressed Investing’s Marty Fridson also sent readers a recommendation. This month Marty discovered the bond of a lumber and pulp-processing company that was trading at a 40% discount to its face value. While the company has had an up-and-down year, he reassured readers by saying…

We believe the bond represents solid risk-adjusted value at current prices. If all goes well, the expected annual return on this bond is 23.0%. Even if the company seeks to swap the bond for new ones with a later maturity date – or, less likely, files for bankruptcy – we believe the bond will ultimately be valued materially higher than it is today.”

And on Friday, Porter provided an update on the latest financial performance of Nvidia, which is nothing short of astronomical.

He writes that in the last three years, Microsoft (MSFT), Amazon (AMZN), Google (GOOG), and Meta (META) have invested almost half a trillion dollars on capex, mostly buying Nvidia GPU chips. And believe it or not, he said, these investments in this new technology are accelerating.

He concludes by saying:

Looking at the business results shows the stock price increase (1,418%) hasn’t kept pace with the increase to earnings. As a result, the stock is actually cheaper today than it was in 2022 – it’s trading at a forward P/E ratio of 32.”

The Best Things 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.