As the numbers for both infections and fatalities for the coronavirus continue to climb worldwide, Dan assesses the impact that a full-blown epidemic could have on markets, in ascending orders of magnitude.
As in every crisis, some companies will be more affected than others – and that includes heavyweights like his recommendation of Starbucks, for reasons he goes over.
He then introduces this week’s guest, Bryan Beach of Stansberry’s Venture Value.
A former “Big 4” Auditor with a Bachelor’s and Masters degree in accounting, Bryan has a unique ability to sift through SEC filings, finding both opportunities and red flags.
We think you’ll enjoy hearing his war stories of finding opportunities others didn’t see, or even understand, and confounding short sellers while finding opportunities in “dark stocks” that can double or triple in days. To follow Bryan’s work click here.
NOTES & LINKS
3:09: Dan’s finally finished Range: Why Generalists Triumph in a Specialized World, and shares insights on the two learning domains. “This is valuable for investors – pay attention to this!”
6:38: Dan explains how learning domains make the rules in investing. “You can get the worst news about a company – it winds up being the time to buy. It’s like jumping out of an airplane with a parachute, it’s just not a natural act.”
11:12: As John Hopkins provides updated numbers on coronavirus fatalities worldwide, Dan discusses what happens if those numbers creep up. “So what happens if that becomes 55,5000, and then 550,000?”
17:27: Dan introduces this week’s guest, Bryan Beach, editor of Stansberry’s Venture Value. A former “Big 4” Auditor with a Bachelor’s and Masters degree in accounting, Bryan has a unique ability to sift through SEC filings, finding both opportunities and red flags.
19:43: Bryan shares the story of two incredible stocks his grandmother held over time that formed the basis of her retirement, and showed him for the first time what a life-changing investment looks like.
22:34: Bryan tells of how the legacy of Enron sent shockwaves throughout his industry – and how the aftermath “cranked our work up to 11.”
29:52: Dan asks Bryan how he ended up in Stansberry, and Bryan shares the story of how an investment letter he wrote caught the eye of Stansberry’s management.
38:11: Bryan shares the story of one of his first “dark stock” success stories, a company that had plunged as 86% when Bryan saw an opportunity buried deep in its balance sheets.
44:32: Bryan tells how he worked with the Stansberry biotech team to look at a company’s clinical data, see its looming catastrophe ahead, and zero in on a profit opportunity after the stock had been ravaged by bad headlines and short sellers.
54:11: Bryan shares his thinking to move on a stock that had been beaten down to $1/share, and was being held down by an unannounced fine – yet delivered a solid product. “I’ve never seen something like this – the short sellers are out there taking victory laps, at the same time the target company doubles.”
1:09:12: Pete L. asks Dan about negative stockholder’s equity in Starbucks and Home Depot over the last 12 months, and whether share buybacks are the culprit.
Introduction: Broadcasting from Baltimore, Maryland, and all around the world, you're listening to the Stansberry Investor Hour.
Tune in each Thursday on iTunes, for the latest episodes of the Stansberry Investor Hour. Sign up for the free show archive, at investorhour.com. Here is your host, Dan Ferris.
Dan Ferris: Hello and welcome to the Stansberry Investor Hour podcast. I'm your host, Dan Ferris. I'm also the editor of Extreme Value, published by Stansberry Research.
Wow, before we do anything, I'm as shocked as you are, as I bet you are, I'm sure you are, over the death of NBA basketball great, Kobe Bryant, his 13-year-old daughter, and seven others, in a helicopter accident, Sunday morning. I never watch basketball, but that guy was incredible. I just looked him up on the Wikipedia: drafted into the NBA out of high school, 20-year career in the NBA, first NBA guard to play at least 20 seasons, all-star in his second season – he would've still been a teenager, I think – 18-time all-star, 2008 MVP, led the NBA in scoring in two seasons, fourth in all-time regular season scoring, and he was actually fourth in all-time postseason scoring, too. So, just an amazing athlete. And I heard a story about him; I haven't quite confirmed it, but so far it seems pretty good, because I saw it in a couple places.
So, there was a young boy who had cancer, in a hospital in Arizona, and his name was Kobe, and he really wanted to meet Kobe Bryant, because he was a big fan. And he was close to death; he had cancer, there was no way they could help him. Word got to Bryant; he said, "Yeah, I'll do it." And the man surprised me, because I've heard him, you know, referred to as kind of difficult or full of himself or whatever, difficult to play with or whatever, but, you know, people who are driven and great at things are often that way. But in this case, he said no PR. So, no PR, no security people; they just snuck him into the place so nobody'd see him. And he went up and visited with this kid, and he signed a bunch of things, like, a jersey and some little memorabilia, and they took pictures just with the family, you know.
And then he snuck out of there, and on his way out, the woman who was kind of sneaking him in and out, he said to her, "You know, is it a financial problem? Because I can fix that, if it is." So, I don't know, it's a sad – it's a touching story and it's a sad thing. My wife and I both had tears in our eyes, when they reported this. So, condolences to Bryant's surviving family members, who lost, you know, a father and a sister and a daughter – can't imagine their grief – can't imagine it. But I couldn't ignore it. You know, sometimes things just happen and I cannot ignore them, whether they have to do with investing or not.
OK, so, now, I'd like to tell you a couple of things I learned from reading a book I've mentioned or twice before, which I finally finished last weekend. It's called Range: Why Generalists Triumph in a Specialized World, by David Epstein. The book covers some familiar material on learning, which I've also discussed, before, when I talked about a book called How We Learn, by Benedict Carey. But in Range, Epstein talks about learning in two different types of domains. This is valuable for investors – pay attention to this, OKOK? There are what they call kind learning domains, and what they call wicked learning domains – kind and wicked.
So, a kind learning domain is where you can improve your skill level simply by "engaging in the activity and trying to do better," as Epstein puts it. Kind learning domains are where your natural human tendency of pattern recognition works very well for you, and where the rules are very clear, and the feedback usually comes back very quickly and tends to be very accurate. Playing a musical instrument is a good example of a kind learning domain. So is any type of athletic activity, or even a game like chess. Now, I'm not saying anybody can be a virtuoso musician or a world-class athlete or grandmaster of chess, that's not the point. The point is, anybody who keeps doing any of these activities is likely to improve just by continuing to do them.
Now, let's talk about wicked learning domains. I'll just quote it straight from the book: "In wicked domains, the rules of the game are often unclear or incomplete, there may or may not be repetitive patterns, and they may not be obvious, and feedback is often delayed, inaccurate, or both." Then it continues: "In the most devilishly wicked learning environments, experience will reinforce the exact wrong lessons." Then he tells the story of a New York doctor who had great skill at diagnosing typhoid fever. Over and over, this doctor's diagnoses were confirmed correct by testing. How did he do it? Well, part of the examination was to feel around the patient's tongue with his hands.
He was worse than Typhoid Mary: he wasn't diagnosing correctly; he was giving his patients the disease. He was probably deluding himself about what he was feeling on their tongues, because I'm sure many people came to him with no symptoms of typhoid fever, and left his office having newly contracted the disease. So, remember what the late great physicist Richard Feynman said: "The first principle is that you must not fool yourself – and you are the easiest person to fool." Clearly, the financial markets constitute, you know, you could call it several domains or maybe just one giant devilishly wicked domain, a very difficult learning environment.
You can buy and buy and buy, and your stocks go up and up, then one day, after, what, five, 10, 15 years, it all falls apart and you lose half of everything you put in. And then you panic and sell and lock in the loss. And, you know, all the great companies you were sure would change the world, you know, half of 'em go broke and bankrupt. And you can get the worst news about a company; it winds up being a good time to buy, not sell. You can get the best news, and it winds up being a time to sell, not buy. It's crazy. It's like jumping out of an airplane, with or without a parachute, it's just not a natural act.
Another theme in the book is that people with at least one deep area of expertise and many other broad areas of expertise tend to be good at operating in these wicked domains. So it's not saying you shouldn't specialize in a given area in your career; it's just saying that folks who tend to get the best results seem to have broad learning, in addition to whatever they've chosen to focus their careers on. There's a famous quote by Charlie Munger, from Berkshire Hathaway, and Munger says: "In my whole life, I have known no wise people over a broad subject matter area who didn't read all the time. None. Zero. You'd be amazed at how much Warren reads and at how much I read. My children laugh at me, they think I'm a book with a couple of legs sticking out."
And that's the end of the quote. He's talking about Warren Buffett, the chairman CEO of Berkshire Hathaway, his partner for the last half-century. OK, to be fair, there's a more subtle message than whether or not you should be a specialist or a generalist, and, frankly, those distinctions seem a little too neat, for my sensibilities anyway. What I get from reading Range is some insights about the optimal way to approach careers or, you know, hobbies or whatever it is you're doing, especially in these wicked learning domains, which is really where most of us seem to wind up. Because we can't all be professional musicians and athletes, and we can't all be, you know, chess masters, and we can't all be in kind learning domains.
Life is messy. We tend to wind up working in areas where the rules are, maybe not all the time but frequently, less clear, and the feedback might not always be readily available, it might not be that accurate all the time, and we might wind up in situations where there's no direct precedent or rule that can tell you what to do. And he gives the example of some firefighters who saw, you know, various situations, when they arrived on the scene, that they had never seen before. So, you know, they had to figure it out; they didn't know what to do, there was no precedent. And so, we need a broad kind of knowledge, and the ability to apply broad learning to a specific area.
If you want to become a better investor, I honestly think this book can help. Again, it's called Range: Why Generalists Triumph in a Specialized World, by David Epstein. No, this is not an ad for the book, right, we're just sharing information, here – I don't get anything from selling books. I think it's definitely worth, like, a thorough reading, you know? It's definitely worth reading this thing from cover to cover, which I have done, which I rarely do. And of course, one of the things we deal with in financial markets, that makes them kind of wicked, are events like the ongoing spread of coronavirus, which started in Wuhan, China, and has now spread throughout Asia, Australia, Europe, and even the United States.
I live on the West Coast, and we have some cases in the big cities along the coast, San Francisco, LA, Seattle. And I looked on the Johns Hopkins coronavirus map, and there's one case up in British Columbia, but it looked like it was farther north than Vancouver, so. So, maybe, you know, a handful of cases on the West Coast of the United States, I think there's one in Toronto, one in Chicago, and – you know, so it's – and these things, they proceed – there's a guy named Jim Bianco, from Bianco Research – he speaks at the grants conferences a lot – and these things proceed on a geometric sort of a progression. So, you know, one day there's 10 cases, and then there's 50, and then there's 100, and 200, and 500, and – like that. And it's, you put it on what they call a log scale, and it just goes up and to the right 45 degrees.
And it's a good bet, it's practically guaranteed to continue like that, before it gets better. So, the market hasn't really liked it. What are we supposed to do? Are we supposed to sit around and wait and see if the stock market melts down, as the virus goes around the world and kills, you know, who knows how many people? Last time I checked on that Johns Hopkins map, it was 131 deaths, and about 5,500, almost 5,600, cases, worldwide. So what if that becomes 55,000 and, you know, 1,300, and then 550,000 – I mean, if these kind of numbers develop, the market's going to hate it.
And there have been companies, specific companies, like, for example, I read that Starbucks had closed half of its stores in China. What if it closes all of them? One of the main reasons why you want to own Starbucks is the growth in China, so if that shuts down for some period of time, that could really be bad. And there are lots of other companies, and then there are a few, you know, companies working on – there's a few little biotech companies that the shares have just rocketed upward. In the Extreme Value newsletter that I write, yes, we recommended Starbucks. We also recommended Quest Diagnostics. They've caught a slight bit of a bid, the past few sessions – you know, that's the medical testing company.
So, what do you do? Well, you know, there's no magic, here. All you can do is to things, if you own stocks and they're falling: you can hold or you can sell. I mean, I suppose you could buy more, if you really thought that you had a great company and that, ultimately, coronavirus would not affect it. But what do you do? Well, if this sort of thing worries you and you don't already use stop losses, you may consider doing that on your equity positions. And this is a personal thing: how you control risk, and the bets you place, and the investments that you put your money into, it's a very personal thing. If you're the kind of person who can't ride out a bear market in stocks, by holding all your stocks and maybe buying more when things get really bad, you need to know that about yourself.
And I have a good story about this. There's a guy named Morgan Housel – who we actually interviewed, a while back – and he's a pretty good writer, and he wrote a story about Harry Houdini. And one of Houdini's tricks was, he'd go around saying, "Anybody in the world could punch me in the stomach and I'll be just fine," you know? Because he had been a boxer, and he had this method of kind of tightening up his abdominal muscles at the moment of impact, so that he didn't feel hardly any pain, you know, immediately after. Whereas, most of us, you get punched in the gut and you double over, and you're down for a while.
So, a fella comes up to him, one day, and says, "Hey, I heard about this thing where I can punch you in the gut and you're OK," he says, "Do you mind if I do it?" Houdini says, "Oh, yes, go right ahead, sir." And before he could prepare, the guy wallops him in the gut, and he doubles over in pain. And it took him a long time to recover, and he finally caught his breath and he said, "I wasn't quite prepared for that," right? So, that's my analog for knowing how you'll behave in a bear market, "Oh, I'll be just fine." Mostly, you won't.
Mostly, you'll sell out at the bottom. Mostly, you're not prepared for the punch in the gut that you're going to get. So, I would say, if you don't use stop losses and you're terrified of what could happen to your portfolio, you really don't have a lot of options. Speaking of options, I suppose you could buy put options. You could buy put options on some sort of an equity index fund, or something like that.
I've personally done that, but I've been doing that for the last couple years, and, you know, every now and then I make a bunch of money, and mostly, I just lose little tiny bits. That's one thing you could do, and I saw, in the same article in the Bloomberg Opinion, where they were showing us the Jim Bianco thing that showed the geometric progression of the disease, they were also showing that the put call ratio was kind of low, and the sentiment was kind of high, and investors were rather complacent. So that means the puts are not so terribly expensive. But, you know, that won't last if this keeps up. And we've had a couple down days, we've had an up day, you know, by the time you hear this, we might have another up day, another down day.
So, it's really a personal decision, and you have to know yourself. You have to know how you're going to respond if the market winds up, you know, down 20% or something. Because if this thing really gets cookin', people could get scared. And that article I just mentioned is by John Authers, in Bloomberg Opinion; came out Wednesday, I guess. Look, you know, if this thing really, really gets cooking, maybe people are using it as an excuse, he says, to sell; not as the reason to sell. Because, as I've been yammering on for two years, three years, here – almost three – stocks are expensive, we're getting toppy we've been in a bear market for a long time, etc., etc., etc.– you've heard it this many times from me.
So, Authers says maybe this is the excuse to sell, and not the reason. So if all this scares you, you gotta know how you control risk – you just got to. You have to know how you're going to behave and what you're going to do, you have to have a plan. Going into the stock market without a plan is a bad idea. And I can't – I'm sorry, but I can't be much more specific than that. I think most people – if I'm going to generalize, I think most people benefit from just using trailing stops, you know? At Stansberry, Steve Sjuggerud, many, many decades ago, pioneered the use of a standard 25% trailing stop.
And, of course, a Stansberry company, called TradeStops, can help you, you know, know when your stops are hit, and manage your portfolio, if you use trailing stops. And they have a tool that helps you adjust your stops for the, you know, right amount, given the volatility of a stock. So, you know, they're tradestops.com. I mean, I didn't plan on a sales pitch; I'm just riffing on how you can control risk: puts, stops, and, you know, avoiding, right? Selling out, going to cash, and waiting. But, you know, what if it just rallies right back, and you miss it, and you'll have taken profits and paid taxes and – you know, so it's difficult.
And you gotta figure it out, and I'm sorry, that's the best I can do. OK, that's all I have to say about that, right now. So let's talk with Bryan Beach, my colleague from Stansberry; he has some very interesting and highly educational stuff to talk with us about, today. Let's do that right now.
OK, it's time for our interview. This week's guest is my Stansberry colleague, Bryan Beach. Bryan Beach is a former Big Four auditor, and a certified public accountant, who holds bachelor's and master's degrees in business and accounting. He spent six years in public accounting, and then a number of years as a controller and director of publicly held software companies. He also ran his own accounting consulting practice. Bryan's specialty is his unique ability to sift through SEC filings, finding both opportunities and red flags.
His unique experience in both creating and auditing financial reports allows him to see things most investors miss. Bryan is the editor of Stansberry Venture Value, an advisory service focused on small-cap value investing. He is also a senior analyst and contributor to our flagship product Stansberry's Investment Advisory and the bond-focused Stansberry's Credit Opportunities. Bryan Beach, welcome to the program, sir.
Bryan Beach: Thanks, Dan. It's great to be here. That's the dorkiest intro in the history of your podcast, probably, but I am happy to be here and contribute however I can. It's good to talk to you.
Dan Ferris: OK, well, dorky is one way to say it.
Bryan Beach: Yeah.
Dan Ferris: So, Bryan, I just want to start off, though, obviously, when I introduced you, we gave a bit of your background, which is pretty serious business. But what I'm wondering about you is, like, when did the financial bug truly hit you? You know, were you 10 years old, or in college, or after? You know, when did you know you were headed for finance as a career?
Bryan Beach: Oh, wow, I don't know. I mean, I got interested in stocks as a boy, because my – I lived with my grandmother, and she was – this is kind of a cool story – she had Standard Oil stock and Traveler's stock. Of course, the Standard Oil became Exxon stock. And she was a typist at those companies, and put away a little bit of her paycheck, every month, or twice a month, I guess, into their shares, and those shares became the basis of her retirement. So, when we'd come downstairs in the morning, she would be reporting on the Exxon Mobile, or at that point, Exxon's share price, and also the score of the Brave's game. So, I got to have an appreciation for stocks and bullpens, by living with my grandmother, growing up.
And as for a career, you know, I just, I had an itch for business, and got into accounting. I think I'd read most of Warren Buffett's stuff in college, and, you know, he talked about accounting being a great way to learn about business. And, you know, he was right, he was right about a lot of things, he was right about that. And so, I got into that and was reading all kinds of newsletters, throughout my, kind of, throughout my 20s. Including a little letter called Extreme Value. I was a reader of yours long before we met, and a lot of the Stansberry products, Motley Fool products, I read 'em all. So I was kind of a newsletter junkie, for most of my – well, I guess for all of my adult life.
Dan Ferris: Wow, that's cool. I feel sort of a kinship with you, because I, too, entered into this business because I had been a reader. I mean, I had a stack of newsletters, and I was just, like, same kind of deal. Only, not smart enough to, like, get all these degrees – slight difference. When I see, like, a resumé like this, it just makes me want to, you know, spend a few days with you, like, writing down all the stories that you must have of, you know, discovering frauds and other exciting things that must've happened.
Bryan Beach: No, I mean, accounting – Big Four audit is not as exciting as it sounds. I was at – the funniest thing was I was at – so, I came out of grad school and went straight to Arthur Andersen, which at the time, was the, you know, kind of where you wanted to go. Especially, I feel like, in Atlanta, I think Arthur Andersen had, like, 45% of Georgia's public clients. It was kind of the big gorilla in town. And this was in '98-'99, and, obviously, you know, we know it happened to Andersen, and that was incredible. You know, being onboard that ship as kind of, you know, the whole Enron thing went down, and of course, in our Houston office, some Andersen guys were implicated.
And so, that was really interesting, and that was the first two years of my career, and I didn't realize how weird that was. I mean, that whole situation was very unusual, and it sent shockwaves throughout our industry. We auditors, you know, we all landed on our feet, you know, like, we just went to other firms. I went to KPMG, and everyone I knew landed somewhere. But that's where Sarbanes-Oxley came from, which is, you know, a bunch of new guidance around how public companies report, and how they measure their controls, and stuff like that. So, that was part of my, you know, that was part of my background there.
I was not directly involved with any of that fraud, of course, but in the aftermath of that, we just cranked up our work, you know, to 11. I mean, we had to do a lot more work on audits, after that; all the firms did. So that was interesting. You now, one of the things – this comes into play a lot when you're looking at restatements, and you mentioned I was in a consulting practice. Accounting restatement is when a company realizes that they've published and filed financials that can't be relied on anymore. You know, a clean audit, at a company with good controls, at a decent-sized company is going to take a couple of months, easy. But an audit where you can't rely on controls will take, you know, three or four times that long.
And what that means in practical terms is, you know, a given – for any given line item on the financial statements – I know, Dan, you and Mike Barrett go through financial statements with a fine-toothed comb – you know, if you're looking at accounts receivable, for example, a company with good controls, you might just do a sample of three, you know, pick a sample of three and make sure they're accounted correctly, or whatever. And when you can't rely on controls, it's a sample of 30; it's 10 times the work. And so, that really, in the aftermath of the Andersen thing, and when all the firms were just in CYA mode, I mean, we just had to do a ton of work on every audit. It was a very turbulent time to be in the profession.
Dan Ferris: So, I mean, that's kind of – in a way, it's kind of a good thing for you, though, isn't it? Because, you know, you probably learned a lot more, that you would not have learned otherwise, I would imagine, no?
Bryan Beach: Yeah, I mean, I worked a lot more, I mean, we were working around the clock, and a bunch of clients, you know, went into kind of restatement mode after this, you know, with the heightened level of work. And – it's funny, Dan, I mean, the accounting industry was supposed to be kind of punished for this, right? But what ended up happening is, all of the audit partners got to sign up for a bunch of additional work. They all got to say, "Hey, it's going to take twice as long to do audits, now," and so the accounting firms ended up making more money than they used to. And that was a lot more work for everybody, but down at the bottom of the totem pole, which is where I was at the time, it wasn't fun.
You know, we didn't get the checks at the end; we just saw the extra work. But like you said, more work means more learning, and, yeah, I learned a lot more about financials. I probably got two years' worth of experience for every year I was working, those first few years out of grad school.
Dan Ferris: OK, so it's not cool to not get paid, but it is cool to learn more.
Bryan Beach: Well, and be away from your family, that part was the hardest part, I mean, I was just, I was working too much and that part was hard. But I certainly did learn a lot, we all did, yeah.
Dan Ferris: So, you know, you came out of – you came straight out of college into Arthur Andersen, that's kind of neat, and then went through this turbulent time, learned all this stuff. And then it sounds like you had this period of, what, six years, or, no, I'm sorry, a number of years, we said when we introduced you, working for publicly-held software companies. That sounds pretty cool to me, too.
Bryan Beach: Yeah, I went to work for a client, and it was a small publicly-traded software company, probably around $150 million in revenues. And, yeah, I got into the software gig – I had had some software clients, and so this was a natural fit. But they threw me a lot of responsibility early on, there, and one thing led to another. The company was bought by a competitor who was a lot bigger, and that competitor happened to be two years into a four-year restatement. And so, you know, I had left public accounting to get away from all the restatements, and here I am right back into one , because the company I worked for was bought by a company in the midst of a restatement.
And, all in all, I spent – I ended up being controller of that company, a revenue controller, and we – yeah, I think I was there about seven or eight years, and got kind of – we didn't get into this in the bio you read, but started a consulting firm after that. I wanted to get into, Dan, kind of contract CFO gigs for startups. There's a huge startup population here in Atlanta, little tech companies, and I said, "Look, I've done the big public company thing all my life, now," or all my career – at this point, I was, you know, 12 or 15 years in – "Want to try something new." When, it didn't work out that way.
I ended up – it's really hard, when you've only worked on big public companies, to go and pitch yourself as a CFO of a startup. And so, I had to fall back and go back to selling work to software companies. In fact, my biggest client was the company that I had just quit – my old boss kept hiring me back for little projects, there. So, yeah, it's been about seven to – I don't know – the reason why they say "a number of years," you know, I was seven or eight years, probably, doing software, working at publicly held software companies, yeah.
Dan Ferris: OK, so, I guess the next thing I want to know, Bryan, is, you know, I know you were, like, a reader of ours, so, you know, we established that connection. But then after this career of yours, you know, that was, I mean, it sounds like it was, you know, quite a few years, how did you then wind up at Stansberry?
Bryan Beach: Right, right. Well, you know, like I said, I was a newsletter junkie throughout all this time, and when you've got your own kind of consulting thing and you're constantly trying to sell work – so, I had a gap – this was in probably late-2011, I was kind of looking out and I had a gap in the schedule, about three months out or so. So that's when you try and go out and start pitching for work and whatnot. And so, at that time, Stansberry had, you know, one of those Digest alerts that they were looking for people to, you know, do some work, you know – I can't remember what the ad said exactly. But I sent an e-mail to Bryan Hunt, the editor at the time, and the managing editor at the time, and said, "Hey, I'm a longtime reader, longtime subscriber – " you know, Stansberry was my favorite, you know, publisher.
I said, "Here's the deal, you know, I've got about three weeks or so of time, in March. Can I come and, you know, do any kind of work for you guys?" And he said, you know, "We don't really do that. We do, you know, long-term – we're looking for a contractor, but send me what you've got in terms of a stock idea, and I will – you know, we'll see what happens." And I didn't have time to do that, but I'm, like, "I manage a little bit of money for my family, and I write a quarterly update for that." And so I said, "Look, here's a letter I send to some folks I manage money for," and, you know, didn't think much of it.
And Bryan was interested, and had me down to Florida to meet Porter; he was in Miami, at the time, and Porter Stansberry. And, you know, they were basically, like, "We're interested, but we're not going to do one of these three-week, you know, engagement things." So, I signed up Stansberry as a client for the rest of the year, for the rest of 2012, and told any other clients I was not going to be finishing their software work. And, you know, it kind of worked out well. That was March 2012, so it's been, gosh, eight years, here, in a couple of months. And over that time, I worked directly with Porter on the Investment Advisory, our flagship letter, and ended up writing that; helped launch the bond letter, in 2015, and wrote that for a couple of years.
And like you said, I've been doing the small cap stuff for a while, now. So, that's my last eight years, kind of synthesized in a sentence or two.
Dan Ferris: OK, that's pretty cool, too. So, I think Bryan Beach has had a really cool career, and, you know, I say that with all the bias and everything of, you know, knowing you and working with you. So, you have quite an interesting set of skills, to me. Like, when I look at a public filing, you know, my main thing that I'm looking for is, you know, just the basics of the financial statement, you know, is there a lot of leverage, here? Or do they generate a consistent cash profit? You know, all that kind of usual stuff. But it sounds to me like, when you go in, you're looking for a whole different set of parameters, in addition to those things, I would imagine. Is that fair to say?
Bryan Beach: Yeah, I do that. I do a lot of what you do, too, Dan. I mean, I'm a value guy, at heart, I say. You know, I think a lot of true-blue value guys kind of roll their eyes when they hear me say that, but I appreciate the value investing approach, I love free cash flow as much as the next guy. But, yeah, I look – our – my micro-cap – my letter, I look at a lot of micro-cap stuff, I mean, and even as low as, you know, $60 or $80 million market cap. And when you get down to those levels, you're not going to find a whole lot of established, you know – well, you're not necessarily going to find a whole lot of established, you know, revenue-growing, 20%, free cash flow growing, you know, 20% kind of companies trading at a value.
And so, I do try and find small cap growth, but I also do a lot of special situation stuff, and I do a lot of – you know, I have really started focusing, in the last couple of years, on software as a service. We can talk more about any of these strategies, but software as a service, given my background in software, I'm used to seeing those things. But, yeah, you know, you got a good point, I mean, I always start looking for kind of the pure value stuff, but down with the little companies I'm looking at, I think there's a lot of really interesting uncovered companies, you know, that don't get a lot of institutional coverage. And, really, it's a pretty inefficient corner of the market, or less efficient corner of the market. So I kind of have to go out and get outside of the, you know, typical value investor comfort zone.
Dan Ferris: Hey, that can be a wonderful place to be. So, I don't know how to get into this, Bryan, but let's just do it, man. One of the coolest things that you've done, you know, in your career at Stansberry, is covered a company called MiMedx. And I just want to get straight to that because, like, it was this huge short position of a very famous short seller, and then you came in and got in on the other side of it. And I have to say, you know, any time a big short seller has gotten on the other side of something I've done, it just rattles me, I mean, it rattles me. But, you know, and I realize we're talking about you were the long side, you know, after this short seller had been in it for a while.
And I'm talking about being on the long, you know, when the guy gets in after I've been in it for a while, but it's still basically the same situation: you're long, and some famous dude. who's made a ton of money short selling, comes in and tells the entire world that your idea is crap. So, you know, just talk me through this, a little bit, because I think, certainly for your readers and for our listeners, this is like a great learning case for what they can learn about you and what you do, and just about investing in general.
Bryan Beach: Yeah, Dan, you know, I think that – you mentioned MiMedx. MiMedx is the kind of thing I'm talking about when I say "special situation." I mentioned my background in restatements and my public accounting, and even once I was working for, you know, the company I was controller for, like I said, was mired in a four-year restatement. They were two years in when the company bought the company I was working for. I spent a whole lot of time working on restatements, so this is an area of the market where I think I've got a little bit of more experience than most investors. And so, one of the things I think is interesting is to take a hard look at restating companies that have been delisted.
Once a company gets delisted, the stock drops off the face of the earth, and, you know, the financials can't be relied upon, the past financials can't be relied upon. But it becomes a bit of a detective case, right? You can kind of know what the fraud is about, and you kind of know which – they've announced what the fraud is about, or the reason for the restatement, it can be fraud or just sloppiness. And once you kind of know what the sloppiness is, which they will disclose when they restate, it becomes detective work of, you know, which accounts is this going to materially impact, and that becomes kind of an intellectual exercise. And sometimes you'll find things that you're, like, "This was a pretty good company with strong cashflows going into a restatement."
And, you know, restatements, as I mentioned, when you don't rely on controls, you know, it can take two or three years to be complete with a restatement. The accountants are doing work on multiple years, and their sample sizes are huge, so, it can be multiple financial – you know, it can take two or three years to do a restatement. So, one of the first restatement rebounds we did was a company called Hanger, which is a – you know, they were mired in a restatement, and they had gone dark, and the stock dropped, you know, from whatever it was, you know, 14 to two. And, you know, eventually bounced all the way back to where it came from, as the company got its financials together, one by one, and was able to restate.
And just got back to being a big-boy company that has quarterly earnings files, and timely SEC filings, and stuff like that. And our readers were able to enjoy that ride, especially once they started filing some of their financial statements. So, we found another one of those kind of situations, in 2018, with – the company was MiMedx. And MiMedx, I had kind of been following them for a long time. They take the afterbirth, which I think is the medical term for a placenta, after a birth happens, so they take these placentas of women who had C-sections, and they turn them into, like, skin grafts that can be used to heal really bad wounds. And the wounds that they're usually used for are really bad burns, where the skin just needs to be totally replaced.
Or ulcers that happen with diabetics, that just don't heal normally. So, kind of a niche market, but this MiMedx company, until, like, 2014, was doing a lot of good work in this field. And I kind of knew it because my wife , god bless her, has had four C-sections, and Northside Hospital, here in Atlanta, is one of the hospitals that I think partners with MiMedx. So I kind of knew about what they did. And the sales pitch, Dan, as a numbers guy, I mean, their cost of good sold is zero on one of these, right? Not zero, but the raw ingredient is free, you know? They come through and they talk to the mom before the birth, and they ask, you know, "We're going to throw away your afterbirth, like, literally, in a dumpster. Or we can use it to make these products that help people."
And a lot of moms decide to go ahead to donate, you know, no skin off our nose, so to speak. So, that's kind of how I'd been following the product, kind of loosely. And then, some really smart – what happened with this company was, they have such a niche market. So, heading into, like, 2015-2016, they started to – their CEO, a guy named Pete Petit, started to channel stuff. He started to do some aggressive accounting stuff – I'll talk more about what channel stuffing is, but – and that's the first thing he did. He started getting really aggressive with his sales team, he started to do some shady things at the end of the quarter. Channel stuffing, Dan, as I'm sure you know, it's when you ship product to customers that they don't really want.
And it gets to count as revenue, and, you know, I won't get into the debits and credits, but it's illegal and it's shady, and it's a good way to goose earnings by a percent or two. If it looks like you're going to be a cent or two behind the EPS expectations of Wall Street, channel stuffing is a way to kind of get around that. And it's very illegal and very unethical, and – a bunch of smart short sellers, including Marc Cohodes, who I think you've had on this show – big admirer of his; his track record's amazing – he kind of sniffed out that, "There's some shady stuff happening, here." The other thing Pete Petit, the CEO, did was he – like I said, there's just not a huge market for bad burn victims and bad leg ulcers.
So, he decided to pulverize, make a powder out of the placenta tissue, and to see if he could inject it into knees and elbows and, you know, sell it to kind of orthopedic-type people. And he – I'm skipping a lot, here; I know I'm talking a lot, but believe me, I'm skipping a lot, too – he tried to railroad that product out to market, without going through the FDA, which was an aggressive thing to do. Generally, if your product is based on human tissue, there's a loophole that you don't need to go through the FDA. But this new injectable product probably, you know, almost certainly should've gone through the FDA, and he didn't wait for clearance and he just went out to market.
And, Dan, it was your classic CEO, under pressure to grow a company really fast, and so he started doing some shady stuff, and Cohodes and other folks just called him out on it. And, you know, this is one of the most interesting stories of 2019 and 2018. If you haven't heard it, Cohodes goes after Petit, Petit – including, Cohodes tweeted some stuff that some people construed as death threats. And Petit sent the FBI to his house – well, the story goes Petit got our congressman here in Georgia, Johnny Isakson, to send the FBI out to Cohodes' house and do a shakedown. And, Dan, I know you and I saw Grant Williams and Cohodes do an interview on this, at our conference in September or October – just a crazy story.
So, what happens is, what we've got here is a company that has good efficacy on their core product, which is the skin grafts. And in order to conclude that, Dan, I went to our – you know, we have a biotech team, including bench scientists from Eli Lilly, who's gone through a bunch of this stuff, John Engel, who works a lot with our Stansberry Venture Technology side of things. And so, he looked at some of the old clinical data on their core product, which is the, you know, wound care business, which was 90% of their revenue. He said, "Yeah, this stuff seems to work," and he said that, you know, the injectable product didn't really work, or, we don't know, the jury's still out and the FDA isn't involved, anymore.
So anyway, as often happens, they go back and say, "OK, we need to redo the numbers." Fast-forwarding a little bit, now, into 2018, they decide they need to restate, and the company gets delisted, Pete Petit gets run out of town, run out of the board. And this is the time, Dan, when I got in. So, I was not going head-to-head against Cohodes, at least, I didn't think so, or against these smart short sellers. When I got into this, I said, you know, kudos to these guys, you know, they did an awesome job sniffing out a fraud, and the company is now dark, right now, completely dark, their financials – they're not filing financials. And as I mentioned a couple minutes ago, for some of us who have a high threshold for pain, maybe, this is an interesting time to try and figure out what the restated financials are going to look like.
And given my background with restatements, I thought I had a decent way of thinking that. And so, you know, I got in kind of after Cohodes had won, is at least the way I thought about it. And so, this was December 2018, and then in January of 2019 – and I don't know the exact dates – between January and March 2019, several interesting things happen. The first thing that happens is, Ernst & Young, EY, the auditor who is doing restatements, abruptly resigns, which is an enormous red flag. The market completely freaked out, the stock dropped from, you know, probably $3.50 or $3to $1. Its basically priced for bankruptcy, at that point, and it was really bad.
And so, I, again, working with public audit firms for so long, and in the audit committees of public companies for so long, I kind of looked at the filing. And I don't know if this is what happened, but I'm pretty sure what happened is that, you know, if you look at the wording, EY makes it clear they didn't disagree with the accounting treatment, at all. But they were still going to, you know, they still wanted to walk away, and the market didn't know what to make of that. And what I think happened, Dan, is EY walked into the audit committee and said, you know, "We are not going to rely on any controls. We are going to basically make you completely redo every transaction back to 2012."
And again, at this point it's early 2019, which would have cost a fortune, and probably taken five years to restate. And I think the audit committee's, like, "Well, then you're gone. We can't wait that long. We can't spend that much money." And that is the way that I read the filings in the wake of the EY – when EY resigned. And the stock went down to $1. Around that time, you know, the short sellers looked like geniuses, and they did, they nailed it, man. And my readers are down 80%, at this point; they got in around $3.50.
But I went out to'em and said, "Look, I think that this is basically about fees. The story I told you is still kind of in play." And so, that was hard, that was not easy, and a lot of readers, what I found out in the subsequent years , a lot of readers had ignored my initial guidance, but bought in on, you know, this kind of special alert I sent out reassuring our readers that the story was kind of intact. And so, they have a basis of $1or $2, a lot of these readers, and the stock is now at $6or $7. But around February, a hedge fund, a short selling hedge fund called Prescience Point Capital, goes long with these – you know, publishes a report that, you know – they're, like, "Look, we were looking this at a short. We're a short selling hedge fund."
And they basically kind of reiterated our long thesis. And they had actually gone and found some disgruntled sales guys, and the disgruntled sales guys were, like, "You know, under Petit, the culture there was toxic. But the product works OK, just, Petit's horrible, you know, to work for." I mean, it was kind of that kind of story, at least, that's the way that the Prescience Point guys wrote it up. And so, that caused a rally in the stock, and it got us back kind of towards our basis – we were pretty lucky with that.
The guys at Prescience Point are bullish on the injectable market, which – more so than me. And so, you know, I'm not as bullish as the bulls, and I'm not as bearish as the bears, but, you know, I'm kind of on the fence about this company, even though my readers still have a stake in it. So just kind of fast-forwarding – this is, like you said, it's a case study, you know – fast-forwarding, Joe Nocera, from Bloomberg, came out with an article kind of taking the bull's side of this, and being pretty critical of the shorts. I should've mentioned, the shorts remained short MiMedx, or at least really critical of MiMedx, even after all of the changes. I should've mentioned, Prescience Point, when they got in, they effectuated a really good and really quick and effective board change.
I mean, they flushed the entire board out, they flushed the entire management team out, they helped replace all of the executives. So everybody associated with the old MiMedx is flushed out, in management and the board. And, you know, I don't agree with everything Prescience Point has said, but, you know, Dan, you follow activists all the time, I mean, you should look at what these guys did. The changes they were able to do very quickly, or help effectuate very quickly, it's pretty remarkable. And so, what was interesting is, the shorts continued to bash the company, after I thought they had already won, you know? I'm, like, "You guys won. Congratulations. Petit's out of there."
You know, and the new group came in and they – you know, a lot of these shorts, in the Twittersphere, at least, you know, continued to bash these new managers, you know, on day one. And I didn't really understand, and Joe Nocera from Bloomberg, I think in July or August, came out with an article that was, or, a two-piece article that was critical of the way the short sellers were handling this – I haven't read it in months. At that point, I had my stake, I knew what I thought about MiMedx, so I didn't really pay too much attention to Nocera's article, but I think he was overly sympathetic of Petit, probably. And, you know, I think some of the shorts have been critical of Nocera's sources, and, you know, they've started bashing Nocera personally, really.
It's been, really, a weird year watching MiMedx drama unfold. And anyway, I think it was towards the end of the year, a couple of things happened. One is, Petit got indicted, and I haven't really been following his legal case, because, again, I don't really care. I mean, it doesn't impact the company directly. But he, you know, he might go to jail – he's 80 years old; I don't think he'll go to jail. But, you know, it was really funny, Dan, to watch what happened, because right as that indictment came out and he got in big trouble – oh, and the senator, here in Atlanta, Isakson, had to step down, because of health reasons, ostensibly. But, you know, he stepped down right as Petit got indicted, so it wasn't hard for people to connect the dots.
There's a special election in November, because of this, here in Georgia. You know, that's one of the things, you know, you think these are just accounting stories? I mean, no. There is a special election for one of Georgia's senate seats, over this stuff. I mean, this stuff matters. And so anyway, the interesting thing that happened around that same time that he got indicted was, the SEC gave them a $1.5 million fine. Which is not even a slap on the wrist. It's like a slap on the wrist with a wet noodle. I mean, and that was one of the shorts' big catalysts.
The shorts are, like, you know, "The FDA, the SEC, they are going to fine this company into oblivion. They're going to fine this company into bankruptcy." And back when I sent my alert, when the stock was at $1, I kind of played it out like that. I'm, like, "We don't know how much they're going to get fined, we don't know how much these fines are going to be, but it's got a decent product, you know? Like, I don't see a way where this company is going to get fined into oblivion."
And sure enough, kind of what happened is, once that $1.5 million fine came out, the stock tripled. But what was so funny, Dan – I've never seen something like this – so, the short sellers are out there just taking victory laps, everyone's, like, lavishing praise on Cohodes and all these guys, and rightfully so. Again, Cohodes called out the fact that Petit was a fraud, Petit was a scumbag, you know, all of this stuff. So the shorts are taking a victory lap at the same time that the target company triples. I mean, literally the same time. It was really hard to – it was – maybe not tripled, but definitely doubled over this timeframe.
It was really weird to see the shorts celebrating, while the stock was going straight up. And again, I might be getting my figures wrong and my dates wrong, but that's the basic story. And one of the lessons, here, I think – and Cohodes closed his short position a long time ago; I don't think he's short, anymore, so I'm not talking about him specifically. But a lot of these shorts who are tweeting about MiMedx, what's really interesting, Dan, is, you know, short sellers, in general, I think of them as such a smart nuanced group of people, men and women. But, for example, when Prescience Point came out and started kind of handicapping the revenue hit, you know, like, or when Prescience Point said, "This is a cash-producing business."
When you delist and when you restate, there is some standard legal language that comes out, and it's just standard kind of CYA legal language. And it's, you know, something to the effect of, "None of our financial statements can be relied upon, at all," you know? That's the lawyer saying, you know, don't rely on it. And so, you know, I get it, that's the legal language, but in general, if you kind of pay attention to how restatements work, there's a lot of accounts that aren't going to change that much. And as you know, as a value investor, when you look at statement of cash flows, it's hard to fake cash flows. And if you look at the big restatements in the past, cash flow is not typically something that materially changes.
You can't fake cash coming into your bank. And that's the easiest account to audit; the Big Four audit firms give it to the interns. All they have to do is call the bank and say, "Hey, Dan Ferris Enterprises says they have $6 million in the bank," and the bank says, "OK, that's what our – we agree with that, Dan Ferris Enterprises has $6 million in the bank." And, boom, you're done auditing cash. You know, so the cashflow statement and the cash on the balance sheet is probably an OK number, I mean, or materially close. You know, we'll see – I guess it's possible for me to be wrong about that.
But when Prescience Point was kind of making some of those points, in a very public filing, the short sellers were just, like, "You have to throw out all the financial statements. Why are you relying on – " you know, and it was a really interesting reaction. I get it, because you're going back to the legal language, but it's – usually, they're so good at nuance, you know, like, and everything's not black-and-white, there is some grey there. And I think that there was, you know, amongst the MiMedx haters, there's kind of some dogma there, I don't know, I mean, it's been an interesting story to watch, over the years. And so, where are we right now? We took some gains in December, and so we're kind of hedged, here.
If this thing drops to zero – I think it's at, like, $6.50 or $7.00, now – if it drops to zero, I think we will have lost, like, 20%. But we sold part of our position, to take some money off the table, and we're kind of waiting to see what happens. What I think is going to happen is they're going to release their numbers, and they're not going to be as good as probably I initially thought, maybe. I think that they're probably not working on getting their injectable stuff through the market as quickly as they wanted to. I hope they've been using any cash flow paying the accounts.
So, I don't really need that business to flourish, the second business, the injectable powder business. You know, like I said, Prescience Point is very bullish on that; I'm less bullish. But, Dan, back when this was just a company, a one-trick pony with one product, you know, it was a $12.00-$13.00 stock, you know, and it's at less than $7.00, today. And, oh, by the way, they're still 16 million shares short right now, which is, like, 18% of the float or something, according to Bloomberg – I haven't audited that. But, you know, some good news, and I think there's a short squeeze, and we've got enough of our position left so that hopefully we can enjoy some upside, there. It's not an active position, I'm not actively telling people to buy it, anymore.
But it's a crazy year and a crazy case study, and, you know, it's a certain type of special situation. And it happens to be one that I enjoy doing, given my background with restatements, and background with accounting, and stuff like that. So, yeah, that one was crazy. That's an interesting one that you picked that one out of my portfolio to talk about, but it's a good one.
Dan Ferris: Well, yeah, I mean, I couldn't not pick, it's just so crazy and – and I have to say, you know, you did a good job of, like, kind of heading down the middle. Because these contests, they get so emotional, and each side sort of digs in, you know? And Cohodes, I mean, he's a great guy, we had him on the program, but he really, really went after these guys. And, like, he kept – I think he still tweets about them, you know? He just, he really still doesn't like them.
Bryan Beach: He doesn't, he doesn't. And he was right, and that's fine; I just, you know – and that was one of Nocera's points is, "Why are these guys still bashing? You know, you did great, you won, you got a crook out of the corner office, he's going to jail now, there's a U.S. senator that's leaving office because of you, like, you know, well done." Like, you know, I don't know that Nocera said that; like I said, I haven't read it in six months, but I don't think he denied that they were right. But the evidence against this new management team – and again, I cover, you know, 14 companies, so I don't know every little thing. But, you know, we've got analysts working on this, on our team, you know, and they present the evidence that this new management team is a bunch of crooks, too. I've never found that evidence to be compelling.
But, yeah, I think Cohodes still tweets it, and, honestly, I don't blame him – it's personal. I mean, the FBI came to his house and shook him down, so, this is a big – it's more than just an intellectual exercise, to him. And, plus, I think as long as it stays in the news, you know, it's good for him and good for, you know, his track record or brand or whatever you want to call it. But, yeah, like everything in this country, Dan, you know, it's partisan. And I don't mean republican-democrat, I mean, just everything – everything is – it's extreme bulls and extreme bears with this company. And I'm kind of down the middle. I mean, I disagree with both.
I took a position, when I thought that it was kind of outsized potential for the upside. And I didn't do it perfectly, I mean, I did not see the EY resignation coming – that was a total curveball. But in the end, I decided that didn't change my overall theory.
Dan Ferris: Well, that event strikes me as part of the sort of perfect storm for Bryan Beach's background, right? Most people look at that – like, I would look at that and I would be with the bears, I would be, like, "Oh, that's not good. That's never good," you know? But you've sort of been on the inside of those things, and you knew better how to look at it.
Bryan Beach: Yeah, it was weird language, I mean, when I would read the bear reaction to that, there was some confusion. These bears read the same filing I did, They're like, "It's weird, E&Y isn't saying that they disagree with anything, but they're still resigning. Why is that?" you know. And because I had been part of these negotiations with auditors, I'm sitting there like, "Oh, they're saying they're not relying on any controls, they're making you go back to 2012 to restate – " That's another thing, Dan, believe me, I know I've been talking nonstop for, like, 15-20 minutes, but, like, I'm skipping all kinds of stuff. The new auditors, I think, are only going to restate back to 2015, and E&Y, it looks like, want – E&Y wants to restate back to 2012.
So that was another thing, I think there was a disagreement over how far they needed to go back, and there was a disagreement in how much work they needed to do on each one. And even to this day, Dan, you talk about why, or, places where Bryan Beach kind of has more context, even when you read the bulls, the MiMedx bulls, they are just flabbergasted that it's taken this long to restate four or five years. And I'm just – it doesn't surprise me at all. With Hanger, it was about this long, and, you know, I was part of, you know, a four-year restatement, a five-year restatement, at one point, when that company bought ours in, you know, 2011. It can take a long time to completely redo the books for five years, for sure.
Dan Ferris: Yeah, so, you know, restatements are kind of a core area of expertise for you. Software is a core area for you, because you spent so much time, you know, actually working for public software companies and, you know, acting as a consultant. You know, it's really cool, to me, that these little perfect storms kind of line up, and that you can target your expertise so – and the next thing that I want to talk about, of course, is SaaS companies, because you know quite a bit, you know, Software as a Service companies. And you know quite a bit about that, don't you?
Bryan Beach: Yeah, well, exactly right, when you look at our portfolio, we've got – I kind of like to keep a small portfolio, compared to some other newsletter editors. I think we've got 14 or 15 open positions – 2 or 3 of those are kind of special situations, not necessarily – or maybe 3 or 4 – not necessarily restatement rebounds. I've only got one of those. Those are very unusual. And then, I've got three or four in the software world, just because that's where my background is. And then, probably the remainder are, you know, either high-growth companies or the kind of companies you would like, you know, cash-gushing companies.
But software is a big part of our portfolio right now, and, you know, Dan, the Software as a Service, I think you and I have spoken about this before, I mean, it's just the hottest sector in the – maybe the hottest bull market ever, right? I mean, we're 10 or 11 years into this thing, and there's a group of companies that, basically, Software as a Service was born in my career. You know, Marc Benioff with salesforce.com was the first one to come up with it. And what it means, Dan, all the companies I ever worked for, including my clients, were under the old-fashioned perpetual license model. Where you would buy software, and then you'd buy a bunch of hardware and servers, and then you'd pay somebody to load the software onto the servers.
And you'd have to find a place to put the servers, and find a datacenter, and this, that, and the other. And when we wanted to do an upgrade, we might have to go out with a group of service people and do an upgrade. And we would charge the customers for that, too. It was just a really expensive way to do things. But the cloud, which has enabled software companies to maintain the software on their servers, and then their customers can just access the software via the cloud. They don't have to buy expensive servers, they don't have to maintain datacenters, they don't have to worry about upgrades, the upgrades happen automatically.
So it's basically renting versus buying, and the difference from when I was in software is, we would have really lumpy revenue. We would, you know, sell a handful of huge deployments per quarter, and if one of those deployments fell through, then, you know, we would miss our number. SaaS is a completely different model – it's a subscription model, and so, like all subscription models, if you get a cool software that – you've got something that people want to renew. And most good SaaS companies, there's a renewal rate of over 90%, 95%. It's just a completely different revenue model.
So, this quarter, in 2020, you'll not only have revenue from the new customers you've signed up, but you'll have a layer of revenue from the customers you signed up in 2019, a layer of revenue you'll sign up from the customers in 2018, 2017, and on and on, and so revenue just kind of piles up. And this was new, I mean, this was – when I left the software world, this was really just kind of taking off. Now, Benioff in Salesforce had done this back in 2004, but it really hadn't caught on. And Wall Street, during this bull market, has really begun to appreciate the model, the SaaS model, as opposed to the old perpetual model, watching this revenue pile up on top of itself, quarter after quarter and year after year. As opposed to the lumpy stuff that I used to have to deal with.
And so, Wall Street prefers it, software customers prefer it, and software companies prefer, you know, the subscription revenue model, as well. It's like a win-win-win. But it's certainly not a hidden part of the market. The – we did a bunch of work on this: SaaS companies, average multiple is, like, ten times sales. Ten times sales, not earnings, right, and not cashflows. It's a kind of – to value guys like you and me, I mean, it sounds crazy. But the reason is that, every dollar of revenue in a SaaS company, because they renew over and over, it really, the market treats it like three years' worth of revenue. Or even five or 10 years' worth of revenue.
So, a dollar of SaaS revenue is pretty valuable, and so they've got these crazy multiples, and I think it was a guy named – I can't remember his name, but a lot of people have done studies on this. A guy named, I think, Mark Clayton, but – did an interesting study that I ran into, a lot of people have quoted it and run into it. He said there's been 70 SaaS IPOs since Benioff, since Salesforce kind of invented the whole model. And if you had bought all of those, you'd be up something like 56% annualized, per year. I mean, just, we did some of our own work with these 70 companies, and our colleague, Mike DiBiase, and – so, 56% per year gain, with this group of stocks, it just trounces the whole market.
And so, as a software geek, it's been kind of fun watching this happen. My companies were pretty resistant to the whole SaaS thing when it came – they didn't think it would really take off. I mean, there was just skepticism, nobody really saw it, but now Wall Street prefers it. Wall Street used to not like the subscription model, and now they prefer it; that's been interesting to watch. But one of the things I'm doing with Venture Value is, we have a – we look for hidden companies, you know, these tiny companies that have a hidden, for one reason or another, that the market does not yet realize that there's a good solid growing SaaS business there.
And we can get into specifics if we want – actually, we just published a kind of a report on this, a webinar on this, our publisher, Brett Aitken, just did a big report on this for our letter. But SaaS companies that maybe people don't realize are SaaS companies, yet, because they exist in this tiny – in this corner of the market, small cap, and maybe, you know, the revenue growth hasn't launched, yet. Or it's a subsidiary of an existing business, you know, that kind of thing. I think that there are still some SaaS businesses out there, publicly-traded, tiny companies, that the market hasn't found, yet. And I've been having a good time trying to look for those. We've got three or four in our portfolio, at this point, already.
Dan Ferris: Wow, I love – I love – the idea of finding something inside – you know, finding an asset inside of a public company that people don't realize what it is. Because it's rare, you know, all this information is public, the whole world knows about it, and yet, as you're clearly telling us, if you – well, if you're Bryan Beach, I guess , you know how to go in and find this stuff. I mean, I love those things because that's where you get, like, huge multibaggers. I was going to say huge unexpected, but by definition, they're always unexpected, right? And so, I love this idea to death.
Now, you guys, you've prepared quite a bit of material on this, like, you guys have done a whole presentation just on SaaS, correctomundo?
Bryan Beach: Yeah, well, we're really excited about it, we're – you know, the marketing guys have – we're kind of using it as a way to kind of get people interested in our product. I think it's unusual – like you said, it's hard to find – for example, the example we're talking about, it's hard to find little companies, little SaaS businesses out there, when everything's public nowadays. I mean, the market's pretty efficient. And I think the only way you're going to find those is by looking – sticking with really small companies, micro caps and small caps, and – because, really, Dan, there's thousands of those companies, and the market doesn't pay a ton of attention to them. And so, yeah, Brett Aitken, who's our publisher, kind of put together a special report, and I think the marketing guy –
I'm not involved with the pricing and everything, but they've put together a really unbelievable deal for my letter, based on these SaaS opportunities. But, of course, you get all the opportunities, the special situations, you know, the small growth companies. But we're really excited about SaaS, and we think that in 2020 – I'm trying to find two or three of these, per year, starting in 2020. We got three, right now, that are actionable, one that's probably going to be actionable in the next couple of months or quarters that I've already written up and it's kind of in the hopper and ready to go. So we're excited about it and, you know, we sell newsletters, so we've got a presentation, out there, where people can access it and listen to Brett talk about some of the opportunities we're finding, there.
Dan Ferris: Right, and I just want everybody to know you can find all this at investorhourtech.com, right, so just add T-E-C-H, tech, onto investorhour.com, and that'll take you right to it. And there's a nice video, there, right?
Bryan Beach: Yeah, it's a video of Brett, our publisher, talking about some of the opportunities we're finding in venture value. And at the end, you'll get a big – there's a promo at the end – you'll get a chance to get a low price, you know, a low-price subscription to Venture Value. And, you know, we're excited for our subscribers that we've got now, and obviously we're running a business, we're glad to have new folks sign up and listen in. And it's fun. I've really enjoyed this podcast. You kind of get a taste of two of the types of opportunities we'll be looking at, right? We'll have some special situation type stuff, and we had, you know, one or two winners, so far, with that.
And then, of course, we've got – we're pretty excited about SaaS, as well. And so those are two of the types of opportunities we'll be looking for in 2020 and beyond.
Dan Ferris: Yeah, and I've got to tell listeners, I have to be honest, here, because I know there are some Extreme Value readers out there. Look, Bryan and I, we're both value investors, but, frankly, he's kind of been kicking my butt, lately. So, you know, if you like Extreme Value, I think you're going to love Venture Value. Again, just like Extreme Value, Venture Value is not cheap, but I think they're making a pretty good deal, you know, that you can find out in the presentation. Neither one of us really cares about the price of anything that we're selling, so we don't know, but, hey, you know, we're focused on finding opportunities, and Bryan is focused on –
Bryan Beach: Yeah –
Dan Ferris: Right? I mean –
Bryan Beach: Yeah, I hope the marketing guys aren't listening to this. They'll be very ashamed that I don't know the offer that's out there.
Dan Ferris: I know –
Bryan Beach: But, you know, it's – I've got to find stocks, Dan, you know? I'm not good at selling.
Dan Ferris: I know, I feel your pain, because I never know either, and people are, like, "What? You don't know the price of your own newsletter?" I'm, like, "Dude, it's the publisher's job. Trust me, I'm not doing anything wrong, you know? So, yeah, investorhourtech.com is where everybody needs to go. And our time's up, Bryan, but I'd like, if you could indulge me in my favorite final question –
Bryan Beach: Uh-oh.
Dan Ferris: – to ask all my guests. Yeah, no, it's easy: If there's one idea, besides going to investorhourtech.com, if there's one idea, you know, if you could only leave our listener with one, what would it be?
Bryan Beach: Oh, Dan, yeah, I mean, I think that at least some of your portfolio – I mean, everybody's portfolio is different, right? I mean, if you're 100% retirement relying on income, it might not be for you. For a lot of people, I hope you've got some portion of your portfolio, 5% or something, you know, at least, down in the small cap-micro cap world. And whether you're using my letter or not, you know, you can find other resources out there, I mean, but it's really the last bastion of kind of inefficiency that I've found. And, Dan, I can say this from working in large caps – like I said, I wrote the Investment Advisory for years, I wrote the bond letter for years, the distress credit letter for a while.
But I've never seen, until I started really focusing on this kind of micro-cap level, and I've never seen the inefficiencies you sometimes find down here. And so, you know, I'm not trying to plug my letter or anything, but I've learned that in the last few years. I mean, I've never really focused on that corner of the market, but it's dark, Dan, I mean, there are some inefficiencies, down there. And I will say, as a corollary, you know, don't be afraid to go outside the U.S., whether it's an ETF or something like that. We do recommend small cap Canadian and London companies. We've never really gone to any kind of exotic exchange or anything – maybe we will at some point.
But, you know, don't be afraid to go up to Canada or London, for the same reason. I would – I think that a lot of people are afraid of going kind of where the sun doesn't shine, and rightfully so – I think you need a good guide. But it's been really fun, over the last couple of years, learning more about that part of the market.
Dan Ferris: Excellent advice. Like you say, maybe not for absolutely everyone, but, still, overall, I totally agree – excellent advice. All right, Bryan, thanks a lot. I don't even have to invite you back, because I know we'll have you back, at some point, preferably in the near future. So, you know, that's a done deal, as far as I'm concerned, you can come on any time you want.
Bryan Beach: Good – love to.
Dan Ferris: So, yeah, all right, so, thanks very much, and, you know, we'll talk to you soon, but bye-bye, for now.
Bryan Beach: Bye-bye, for now. Thanks again, Dan.
Dan Ferris: All right, that was really cool. I just want to reiterate, Bryan's an awesome value investor. He has been kind of kicking my butt for the past few years, so if you're a value investor who wants some better ideas and you don't – and you're OK with playing in the small cap space and, you know, really, micro-cap stuff, sometimes, then Venture Value might be right up your alley. And the best way to get it right now, as you're hearing this, is just to go to investorhourtech.com. That's the best way to sign up for it. And you want to do that rather than anything else, because this will get you the best price: investorhourtech.com.
All right, that was cool. Now let's take a look at the mailbag.
Dan Ferris: OK, it's time for the mailbag. This is where you and I get to have a conversation, each week. It's kind of almost the heart of the podcast, isn't it, you and I talking about investing with each other, trying to do this thing better than we did yesterday. So, you write in to [email protected], with questions, comments, and politely worded criticisms, and I will read every single one of them – I do that every week. And I will respond to as many as I can. And I really enjoy this. I've taken to responding to more of them than we used to in the podcast, because I really think this is a wonderful exercise for both of us.
OK, the first one is from Chad E., and Chad E. says: "Dan, love your podcast, but as for Japan being No. 1 in publishing new titles, I lived there for over 15 years, and most of those 'books' are probably mindless manga – " I'm not sure what that is – "mindless manga with very few words – comic books," he says. "All the best, Chad E."
Well, Chad, if you recall, I did mention this sort of in passing, I said, "Look, I'm not saying that all these books that are being published are high-quality stuff." But if you recall, in that discussion, I got some of these ideas that we were throwing around from a guy named Naval Ravikant. And Ravikant said he used to read – he's always read voraciously, but for a while, when he was younger, it was just all kind of junk, you know, maybe even comic books. But after a while, it was more important that the habit of voracious reading had been developed than what he was reading. Because it was much easier just to transition to better stuff, and he still, he was a much better reader anyway.
So, I hear you, and I did acknowledge that, at the time, and you're right, probably, right? But I don't think it matters as much as you might be suggesting. But it's a good question. Thank you.
Next one is from Paul E., he says: "Hi, Dan. I really enjoyed your interview with Harris Kupperman – very interesting. I was curious as to your thoughts on some of the positions he mentioned, like Altisource, Hubzu, and Scorpio Tankers. I mean, do you consider these to be in the value space? I just wanted to hear some of your thoughts on this, and overall, in Kupperman's investing strategy. Thanks, Dan, love the podcast, Paul E."
Thanks, Paul. I thought Altisource sounded like a good idea, and I said so at the time, but you've got to understand, that stock is going to go sideways or down until some big event causes mortgage defaults to start spiking up. So, it's sort of a – it's a contracyclical play, because Harris is bearish – I think he's more bearish than I am, almost. So that's Altisource. I don't really know anything about Hubzu. But Scorpio Tankers – so, Altisource, is definitely in the value space... Scorpio Tankers, definitely in the value space, you know, big oceangoing ships that carry things like oil and iron ore and coal and all that stuff. And the tankers carry oil, and what they call dry bulk tankers carry dry stuff like coal and iron ore.
Scorpio, the thesis, there, was he thought they could do $39.00 a share in cashflow, and it was $39.00 a share at the time. It's sort of traded down, since then, I think, and, frankly, I was in this trade in Extreme Value, we had two tanker companies, two dry-bulk companies: Genco Shipping and Trading and Eagle. And the performance has just been crap. I mean, the thesis is solid, you know, the environmental regulations have kicked into gear, January 1, 2020 – and yet, we're not seeing a rally in the companies that are well-financed enough to handle this new change in regulation. So, you know, I think it's a good bet. It's definitely in the value space, but, man, it's just not working.
Next one is from R.J. I don't normally read stuff like this, but it's an example of what I'm talking about when I ask people to be, you know, polite. And it's very short, and I want to make an example of R.J. He says: "Dan Ferris recently wrote an essay – " this was in the daily Digest – "titled 'There's No Accounting for Bad Taste.' He related some information about President Trump withholding $214 million from the Ukraine. The actual amount withheld from the Ukraine was $391 million. I am not an American and don't live in your country, but if Dan is this poor with facts and figures, I had to ask myself, 'Would I invest on information I paid to receive from this guy?'" And then he says, "There is no accounting for bad taste – " I'm not sure what that means – "R.J."
OK, so, people who are jerks and insult you tend to also be... Stupid. They're wrong. And he's wrong. The real number is $382 million, but my number of $214 million was taken directly from a government accountability office report. And that was in the decision section of the report: They decided that President Trump had illegally withheld not $382 million, $391 million – which is nowhere in any of this – but $214 million. And then there were two other amounts after that, mentioned in the background section, that added up to $382 million – I think it was $141.5 [million] and $26.5 million, as I recall. You know, he's wrong about the amount, and he's being a jerk, and this is why I don't do this, right, because it's just – you know, I sit here and I wind up correcting this one guy, and nobody gets anything out of it. So just in case, you know, you're wondering, and in case you think it's not as much fun, you know, I know Porter liked to almost bait these people, and then attack them, and that can be entertaining. But we're trying to become better investors, here, and I just don't see anything in this. And also, I wanted to establish that, hey, we do deep research, and this stuff is edited by, like, more than one person, before it gets published. And, you know, I'm pretty good at finding original sources. I think that, you know, I'm not going out on a limb, that I've had a decent run as a guy who consults a lot of, you know, original sources for economic and financial data, you know? Call me a crazy lunatic who's just high on himself for that, you know, full of hubris, I know what I'm doing, too.
Anyway, moving on to Mark S. – this is a good one – Mark S. says: "I'm a loyal listener. I find the podcast enormously helpful," and then he made some comments about, you know, my 92-year-old mother, who's doing a lot better, now. She had pneumonia and broke her pelvis, and she's fine. I mean, you know, that's how she got to be 92, I guess. So, then he says: "My politely-worded criticism," he says, "I want to turn off the podcast when you start interjecting your political opinions. Incredibly, your promoted views are equally simplistic and ill-informed as the people you criticize. An investment show ought to discuss politics through the lens of how political scenarios affect investment decisions, not advocating for the host's opinions.
"I will leave it at that." I'll talk about that in a second – he's got one more question. "You advocate for stop losses, which certainly strike me as sensible on the surface, but then I consider the following scenario, which very well could've happened at the end of 2018. Suppose I have 20% stops on all my investments, and suddenly a market downturn results in nearly all of my investments stopping out in close temporal proximity. I am suddenly left with tons of cash and no plan as to when to get back into the market. This strikes me as another form of market timing. Do you have advice as to what to do if this occurs? I feel like one should have a strategy in advance, rather than come up with an ad hoc approach to getting back into the market. Thank you again, Mark S."
So, yeah, you need a strategy for getting back in, like, you should have that. That should be known before you buy. You know, there's no simple way of knowing that. It's specific to each investment. So, if you have a fundamental thesis, let's say, that a certain company's going to do well if a certain – you know, say, you're buying a homebuilder. If the housing industry does, you know, xyz, you know, and if the company's earnings do whatever it is you want them to do, you know, then you're going to buy the stock. And they do it, you buy, and then let's say this thing at the end of 2018 hits and you hit your stop.
Well, OK, you decided that before you went in. But before you went in, also, you needed to decide – you need to decide a couple things. You need to decide what makes you wrong about the stock. Period. Just wrong, so that you'll never get back in. Then you need to decide what are you going to do in terms of an event like 2018, that affected all stocks. And then, that presupposes that you will re-enter, so you need to establish some criteria for re-entering.
In general I would say, if you're exiting because all your stops were hit because of an overall market event – and that clearly was the whole market melting down almost 20% – then, I would say you're just going to have to look at the momentum in the overall market. You look at the big, you know, S&P 500 ETFs and other big-market ETFs and index – or just look at the index action, whatever you want to do, and establish for yourself, "Well, if the market can get back to here, then I'm back in," something like that. But, you know, that's just one thought. You really, you have to figure this out for yourself. And I hate to say you have to figure it out for yourself, but there – some of this stuff is so personal, you just, you have to do it yourself.
And, in fact, doing it yourself cements it more firmly in your consciousness than if somebody tells you. If somebody tells you, you're shaky and you're, like, "Oh, boy, you know, he told me what to do, and things turned out even differently than I thought, and now what do I – " You know, if you're guiding the ship, you're going to be much more solid, you're probably going to get much better results. Even if you're using, you know, like, my research or something. As far as the political thing goes, I hear you. You know, I'm only human... my opinions are going to make it in there. But I hope you'll at least acknowledge that I've really tried to keep them way, way in the background. I mean, I've really done a lot less political commentary than my predecessors, Porter and Buck. So, you know, at least I got that, right?
The next one is from Gary S., he says: "Hello, Dan. I'm a big fan of your podcast and all your writings. Regarding your take on Apple, I respectfully disagree with your saying there's no reason to invest in it, that it's just fashionable and nothing inherently better to account for its runup. One," he says, "the approaching 5G iPhone rollout, beginning this fall, will most likely be quite big, if not huge. Two, the advent of Apple TV, which had 33.6 million subscribers added in Q4," the fourth quarter, "to currently place it in third place among the top streaming video services, behind Netflix and Amazon Prime, and two slots ahead of Disney. Three, Apple is doing a lot of work in investing in their gradual build into healthcare products and services, which is a bit further into the future.
"You can also throw in the brand name; emotional fashion factors even further boost the big 5G phone sales and continued gains in Apple TV subs, sending the stock higher. I do not own Apple shares, but I think these are definitely reasons someone might contemplate to buy into this very forward-thinking company that is constantly looking to better itself even at the current price, while in no way discounting the information you gave."
The only innovation they've made since Jobs left is headphones. That's the – and it's not even really an innovation, it's, you know, big – you know, the ear pods are wireless. So, it's not the same company. All these things are true, that you're saying, but the market already knows them and has known them. And I didn't say there was no reason to invest in Apple, in that it's not – the things that weren't inherently better were just the difference between value and growth stocks. But actually, I'll accept that, I'll accept that there's nothing inherently better about Apple as an investment at 26-times earnings, the highest valuation it's ever achieved in its life. In a year when the revenues have shrunk, the phone market share has shrunk, the whole world knows about 5G, the Galaxy Note, you know, 5G phone is just fine.
Whitney Tilson just put out a little e-mail about it, and he said, you know, he's on 5G, like, 1% of the time, and he pays $10.00 a month extra, you know, to do 5G. So, you know, it's great when it works, but, you know, it's hardly anywhere. And, you know, I don't – I just don't think there's – I don't think saying a company is great and saying it's a great investment are the same thing. I'm going to leave it at that, because I think I made myself clear. Apple's a great business, it's a great company – they haven't been very innovative, the last several years. You know, iPhone's great – I have an iPhone. I'm not getting rid of it, I might get a new one.
So I hear you, but there's a difference between a company being a great company and being a great investment, and I don't think Apple's a great investment right now.
So, what do I have, one more of these, from Kate S.? I hope you enjoy this as much as I do, because I really enjoy it. I enjoy talking with you guys.
So, Kate S. says: "I listen every week. Love your show and all that Stansberry does. I especially love when you read my questions, because I feel like I'm the only girl in the pack. I have to represent. Question: As I look at all the 'warning' indicators you guys talk about – small business index, transportation, inflation, dollar, gold, yadayadayada – and then look at prices of just about every category class of stock out there, everything is just on a climbing spree since Christmas day – " she says 12/25, I think she means 12/24 – that was that big bottom in 2018. "Last year's returns were amazing. So far, 2020 has been, as well, although the coronavirus fears plus China may be problematic, and the match that lights it all on fire.
"It kind of feels like we're well into a melt-up, right now, when stocks soar higher than anyone would think. We're hitting all-time highs on a daily basis, and it seems, when you look at a ten-year chart of nearly any stock, the pattern is all the same, up and to the right at a 45-degree angle or so. I have been moving some things into value stocks, lately, but am wondering, when it all does start to crash a bit, we know the assumption is that value stocks will drop less than growth. But do you have any historical references to share, on average, how much less of value stocks declined as a group, compared to growth, in periods of turmoil like the housing crash in 2008.
"In just peeking at some of the dividend aristocrats, of which many are considered value stocks, many of them were down more than 50%, in 2008-2010. I guess compared to Cisco being down 90%, that's a good return. So I guess my question to you is, what would you estimate, knowing all you know, the relative difference in performance may be in a meltdown between value and growth? Thanks, Kate S."
I get this question at conferences and by e-mail, every now and then. The answer is: I don't know, neither do you, and neither does anyone else. But I want to point out that value absolutely sucked wind in the 2008 crash, because value was what shined before that, right? It was all the banks, and homebuilders, and even the subprime mortgage companies, and mining companies – all the value stocks are what soared into that. So, they were what became toxic waste, and they got murdered in the crash. So that was a period, if you look at the value versus growth indexes, you know, growth outperformed.
And then, after that, of course, since then, you know, growth has – people got a bad taste in their mouth for all that stuff, right? And then, you know, the bear market in mining, from 2012 to just call it early-2016, then that wiped out the idea of mining stocks. So, all the value stuff has just been wiped out of everyone's consciousness, based on those two events, and, you know, it's just performed horribly. And looking historically, meh, you know, it's a limited value. There aren't many datapoints, here. So, all you can say is we expect it to be less, and leave it at that. And it's a bad answer, but I want to give you a bad answer, because people who give you a precise answer, which sounds like a good answer, that's wrong.
You shouldn't accept it, because we don't know. We should always say that we don't know what we don't know. And recently – boy, I'm going to open a can of worms, here, but I don't care – recently on Twitter, I said I'm going to classify myself as a climate change denier, because I deny that you or anyone you know knows anything about it. I don't care what kind of scientist you think you are, you don't know anything about it. And most people, you don't know the pertinent datasets, you don't know anything. And you certainly don't know – nobody on earth knows what's going to happen in 10, 20, 50, 100 years. You don't – and you're lying if you say you do.
And it's bad, it's really intellectually and just plain bad to say you know, and to be passionate and to pound the table, when you don't know. You must acknowledge the truth – the limits, right? Warren Buffett talks about this idea of the circle of competence, and what's in that circle is stuff you really know. And remember, the model is there's a big circle around the things you know, and then you draw a smaller circle in the middle, and that's what you really know. That's your real circle of confidence. So, nobody knows the answer, Kate, and I just think they'll perform better because these things go in cycles.
And who could blame you if you tried to time it and ride it out in cash or whatever? There are people who will do that. But for now, I am still of the belief that it's better to be a value investor right now, than it is to continue buying stuff like Apple, Amazon, Facebook, Google, et cetera, et cetera, et cetera – or any other kind of growth stocks. I'll leave it there, because I obviously feel very passionately about this, in a number of ways, and I could go on and on. But thank you for the question. It's a great issue that we should all think about.
And that's it, that's it for another mailbag and for another episode of the Stansberry Investor Hour. You can find us at www.investorhour.com. And you can go there and find every single episode we've ever done, and you can find a transcript for every single episode we've ever done – I still get e-mails about this. You go to investorhour.com, find the episode you want, click on it, and scroll all the way down, and the transcript will be down at the bottom of the screen. And you can also – what you really should do is go to iTunes and subscribe to the Stansberry Investor Hour, and give us a like, click like.
If you like us, like us, at iTunes. And that'll push us up in the rankings, and more people will listen, and the mailbag will be a lot more fun, and who knows, we may even get our next guest from among our new listenership. If you click on iTunes and say you like us, somebody might tune in and it might be Warren Buffett. I don't expect that to happen, but you get the point, it's just good for everybody if we kind of grow this network together. You remember, we had Albert-Laszlo Barabasi on the show, and he told us about growing your network, didn't he? He said that was the best thing you could do, and so, let's do that. Go to iTunes, subscribe to Stansberry Investor Hour, and click like – you'll be glad you did.
Thanks so much. It's my privilege to come to you this week and every week, and I can't wait until next time. Until then, bye-bye.
Closing: Thank you for listening to the Stansberry Investor Hour. To access today's notes and receive notice of upcoming episodes, go to investorhour.com and enter your e-mail. Have a question for Dan? Send him an e-mail at [email protected] This broadcast is provided for entertainment purposes only, and should not be considered personalized investment advice. Trading stocks and all other financial instruments involves risk. You should not make any investment decision based solely on what you hear. Stansberry Investor Hour is produced by Stansberry Research, and is copyrighted by the Stansberry Radio Network.
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