Stansberry Research Review – Is Stansberry Investment Advisory a Scam?

Stansberry-Research

Stansberry Research Investment Advisory Newsletter – Is It Legit?

Stansberry’s Investment Advisory from Stansberry Research is the largest independent investment newsletter publication in the world with a reported 500,000 plus subscribers.  They are a part of the newsletter conglomerate Agora Inc, which owns most of the investment newsletters out there.  Porter Stansberry, the founder, and head writer of Stansberry Research created the controversial “End of America” promotion.  Recently Stansberry Research released a video with the former senator Ron Paul of the Coming Currency Crisis.

You can watch them yourself and draw your own conclusions.  In my opinion, the promotions appear to be slick hype.  They take economic facts and principles, but then weave them into scenarios that are strictly opinion.  More specifically, the opinion of Porter Stansberry.

Stansberry Research & Stansberry Investment Advisory 

Stansberry Research is a publishing company and investment advisory service that was founded in 1999 by Frank Porter Stansberry. The publication initially served as an outlet for its founder to write opinion pieces on a variety of financial topics. Since then, the company has expanded and now offers a range of investment advisory services related to retirement, commodities, and stocks.  The company regularly releases specialized investment reports.

Stansberry’s Investment Advisory is a monthly stock newsletter.  Each month, the analysts at Stansberry Research issue stock picks. The newsletters mix storytelling with persuasion.  The purpose is to convince readers that a specific industry, and ultimately a particular company are worth investing in. It is difficult to get a sense of the Investment Advisory’s historical performance.  However, the service emphasizes long-term trades and encourages investors to build a diversified portfolio over time.

Who Owns Stansberry Research?

Stansberry Research, formerly known as Stansberry and Associated Investment Research is an independent company and publisher of financial advice and investment newsletters owned by Frank Porter Stansberry.   The company is owned by Agora, who amongst others own Agora Financial, a publisher of similar newsletters.  Stansberry Research is Independently run and operated but do share certain resources such as editors – with Matt Badiali being listed as a researcher and analyst at Stanberry Research – who is an editor of other newsletters Published By Agora Financial

What You Get When You Sign Up

Once you sign up for the newsletter, you can log into to a member’s only section. This gives you access to a wide variety of current and historical information.  You can actually review all of Porter’s monthly reports going back to the founding of his business in 1999.  It is a nice feature and provides transparency, if you are willing to spend the time to research how good – or bad his recommendations turned out to be.  However, many investment newsletters don’t do this.  They only give you access to the most current picks and recommendations.  You also have access to Stansberry’s special reports:

  • The Gold Investor’s Manual
  • America’s Big Power Shift
  • The World’s Most Valuable Asset in a Time of Crisis

“I’ll say from the start, I have mixed feelings about this review. In all honesty, when I purchased the Stansberry’s Investment Advisory to review, I was expecting complete garbage analysis.  This is based upon the way the material like the “End of America” promotes it. Meaning I was expecting all sizzle, and no steak research. What I found was quite different, and very good.”  Source: investorjunkie.com

Details of the Newsletter Analysis

The format for each monthly newsletter is unique compared to other financial newsletters. Porter and his editors weave a compelling story around their analysis of  the investment of the month. If you have experience reading other financial newsletters, you may find the storybook approach to be novel and entertaining.  Financial advice tends to be ablout as exciting as watching paint dry.

Porter at least makes reading each newsletter interesting.  He also attempts to provide financial and economic data to support his position. This storybook backdrop makes a very persuasive argument for the investments he recommends each month. In general, his recommendations appear to only focus on large-cap stocks.  Also, his investment style is geared towards value investing. His supporting data looks at value, trends and technical indicators.  Personally, I am a fan of value investing and don’t care as much for trends and indicators. The monthly reports offer a summary of the macroeconomic conditions and one-to-three specific stock recommendations. Also included is any update to the current portfolio of stocks.

Stansberry Research Subscription Costs

Stansberry’s Investment Advisory costs $199 per year and starts with a 30-day free trial. This is pretty much in line with the other investment services offered by the company, as well as competitors like Motley Fool and Zacks.  This compares favorably with the price of other research reports.  Some aren’t nearly as detailed in their analysis and cost hundreds of dollars more per year.

The quality and detail of Stansberry’s monthly newsletters appears to be very good.  However, the free special reports he offers do not achieve the same standard of quality. The information misses an audience.  A novice would have difficulty sorting out the information to formulate a strategy.  An advanced investor would likely have more than enough information on such subjects.  In any event, you can find more information available on the internet for free.

Stansberry Research Investment Advisory

The monthly newsletter is released on the first Friday of each month, and it’s typically a 20-30 minute read. The newsletter starts with a lengthy story, which ultimately leads to a deeper dive into a specific industry. From there, Stansberry’s lead analyst on the newsletter will make a case for why this industry is set up for success (or failure) and hone in on the financials and recent performance of several of the major companies in the industry. Finally, the newsletter will narrow to a single stock and highlight a few long-term technical analyses to identify an entry point.  For impatient readers, the Investment Advisory’s recommendation is succinctly summarized in a blue box at the bottom of the newsletter.

Stansberry Research Recommendations 

The Investment Advisory is a relatively conservative stock recommendation platform that focuses on deep dives into a single stock each month. That means that only one new position is opened per month. Most stock purchases that the Stansberry’s Investment Advisory recommends are intended to be multi-year positions.   Historical performance is difficult to gauge for the newsletter since it is not possible to find a record of closed positions without going back to every past newsletter. Recent positions vary in whether they are outperforming the S&P 500, although the long-term positions that remain open typically have gains two to three times that of the broader market. All positions that the Investment Advisory recommends come with standing 25% stop-loss orders as well as target prices for entry.

Stansberry Research Portfolio

The portfolio that the Investment Advisory develops over time aims to contain around 20 positions. Most of these are long and focus on a brand name, Fortune 500 stocks, although the Investment Advisory will occasionally recommend short positions or highlight lesser-known companies. The stock pick recommendations span a range of sectors, and the picks are separated by themes, such as:

  • Future of Medicine
  • Next Boom and Speculations
  • World’s Most Capital-Efficient

In this sense, subscribers get access to a range of different investment strategies. Compared to other services, the picks are relatively diverse.  Each stock in the portfolio is given an updated buy/sell/hold rating each month and assigned a risk rating on a 1-5 scale.

After the new position is discussed, the newsletter includes a paragraph about each stock currently in the portfolio. It is here that each stock will receive an updated buy/sell/hold rating. All of this information is summarized in a table at the bottom of the newsletter.  Occasionally, Stansberry Research will issue special reports that are available to newsletter subscribers. These read much like the newsletter issues, but focus on broad market trends or emerging issues rather than offering specific stock recommendations.  Source: daytraderreview.com

Stansberry Research Marketing Methods

One of the consistent complaints about Stansberry Reasearch is the way it is marketed.  The “End of America” provides a good illustration.  The video appears factual and very well produced.  But it is sold primarily through creating fear in the minds of viewers.  Many of the scenarios are unlikely and due to an economig black swan event.  There is no way to prepare for all possible unlikely events.  There is no way to even predict the timing as to WHEN such an event could occur.  The creation of fear and apprehension is purely a marketing tool to attract attention and solicit new subscribers.  Who wouldn’t want inside information if America was actually ending?

That crisis, according to Stansberry, is the US government’s mounting debt.  The U.S. will be unable to pay it back once it no longer prints money. Many scary scenarios are predicted and described.  Banks and businesses will close their doors, and martial law will be declared across the country.  The video directs listeners to “protect” themselves and their families by signing up for a subscription to his investment firm’s newsletter.

That isn’t to say you shouldn’t prepare for black swan events, you most certainly should. Without question, I recommend some portion of your portfolio to outlier events. That’s not to say I believe the world is going to end tomorrow, and from what I can gather neither does Porter.  Source investmentjunkie.com

A Run-in With the SEC

During the month of November 2003. Porter Stansberry was accused and found guilty of giving and profiting from fraudulent financial advice.  This advise was distributed in a number of newsletters that he edited and published. The charge and court document can be seen here. This conviction should be at least a concern for any one buying any of his or Agora Financial’s newsletters.  Stansberry Research is a publishing company that provides a financial advice newsletters.  The particular focus of the newsletter is to help everyday people to invest with small to medium means available.

The SEC charges indicate a common strategy favoured by Porter Stansberry is to find low demand investments that nobody currently wants.  He then features them in his investment advisory newsletter to half-a-million subscribers.  When the demand shifts, insiders can sell at a significantly elevated price once they become highly valued and desired by novice investors that follow Porter’s investment advice.

I’ve read both Porter’s explanation and the SEC ruling. The SEC stated Stansberry performed insider trading, yet Stansberry claims he never personally owned the stock.  Regardless, insiders were in a position to profit once Porter promoted these investments in his widely read newsletter.

Don’t Blindly Take Investment Advice

If you do subscribe to this newsletter — for this newsletter or any other financial advisor, caveat emptor. Only use an investment newsletter’s recommendations as a starting point for picking investments. Don’t blindly accept what’s recommended.  Specifically, read up on the trends the author describes.  At the same time, find counterpoints to the argument. What you should understand with any investment advice is that it’s an opinion, pure and simple.

As an investment newsletter, Stansberry and his team’s goal are to sell newsletter subscriptions. At the end of the day, that is their bottom line.  If they can, they are going to attempt to hook you in via some controversial marketing tactic – like the End of America. Stansberry’s research is independent of any traditional bank or investment house.  Their analysts are not allowed to own any of the securities they recommend.

Who is Stansberry Research Investment Advisory Suited For? 

Stansberry’s Investment Advisory is targeted at beginner and novice, mostly passive investors. Investors rarely need to act in the month between newsletters except for updating stop losses.  Instructions for how positions should be changed are clearly issued with each new issue. While the Investment Advisory’s performance appears to be strong compared to the broader market, investors need to be comfortable with trusting the newsletter’s rationale for why a company will succeed. There is little true fundamental or technical analysis that goes into the recommended investments.  Instead, they tell a great story, and primarily rely on market trends.

Stansberry Research recommends that all members have at least $1,000 in their portfolios.  That seems a bit low, since Stansberry Research’s stock picks cost $199/year.  It would be nice to be able to generate at least that much more in returns.

Stansberry Research Investment Advisory

Stansberry’s Investment Advisory is the flagship newsletter offered by Stansberry Research. The company now offers over a dozen services ranging from retirement investing to industry-specific investing.  These niche services might appeal to new subscribers, but experienced investors may find them incomplete.

Pros

  • Relatively conservative investment style
  • Develops a long-term diversified portfolio
  • Affordable when compared to other investment newsletters
  • Positions are updated monthly
  • Not spammy like many other newsletters

Cons

  • Newsletters are long and take a while to get to the point
  • Very little apparent technical analysis around entry and exit points
  • Difficult to gauge real historical performance

Source: daytraderreview.com

 

 

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