The Breakout We've Been Waiting For

Small-cap stocks are outperforming... The lifeblood of a bull market... The risks in mega caps... The opportunity in biotech... More signals about a rate cut... Mailbag: On assassinations and the definition of money... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] Small-cap stocks are outperforming... The lifeblood of a bull market... The risks in mega caps... The opportunity in biotech... More signals about a rate cut... Mailbag: On assassinations and the definition of money... --------------------------------------------------------------- It's the 'lifeblood of a bull market'... That's how Wall Street veteran Ralph Acampora, who calls himself the "Godfather of Technical Analysis," describes "rotation." The concise phrase contains powerful insight... Essentially, the idea of rotation is that money is flowing around the market – among different sectors and styles – but not out of it in a panic or bear market. The leaders and laggards might change, but the "stock market" still moves higher in general. Rotation might reveal itself in the popular sector of the time falling a little one day, while other "laggards" rise. Or you could see it when one or two major indexes trade sideways and another rises for a few days, or weeks, in a row in a noticeable pattern. Today, we saw the hallmarks... Small-cap stocks outperformed substantially for the fourth straight trading day... If I (Corey McLaughlin) had a nickel for every time I've said small caps have been lagging in the past few years, I might have a dollar or two... Now, the story is changing. The small-cap Russell 2000 Index was up another 3.4% today – bringing the index's four-day return to roughly 10%. The benchmark S&P 500 Index is nearly flat in the same span. The tech-heavy Nasdaq Composite Index is down about 2%. Meantime, in the past two days, the Dow Jones Industrial Average is hitting new all-time highs again, and it's up more than 4% since July 9. It's rotation... With the prospect of lower interest rates ahead, which would help capital-intensive smaller or speculative businesses, we've been patiently waiting for small caps to start breaking out. As our Stansberry's Investment Advisory team wrote [in this month's edition]( of our flagship newsletter, the relative valuations of large-cap stocks over small caps recently had reached highs not seen since 2000, which is exactly the time to take the contrarian view... Our portfolio is also hedged against big market downturns with positions in precious metals stocks and world-class, capital-efficient businesses that should hold up much better than the overall market. And we want to put new money to work in less risky parts of this bull run... like small caps, for instance. Large-cap stocks have been crushing small-cap stocks recently. And the ratio of large caps to small caps is now at a level not seen since 2000. That's why we're looking to recommend value-oriented, beaten-down, smaller-cap stocks that are more likely to outperform... We've talked in the past about the opportunity in small caps, like in biotech stocks that tend to outperform when the likelihood of a Federal Reserve rate cut is afoot. Regular readers know we're likely on our way to that point... As we've mentioned several times, small caps have been quietly trending higher since October 2023, but this recent string of outperformance is more notable. The Russell 2000 is now just 5% away from an all-time high last reached in late 2021. If or when that happens, absent a significant sell-off in the S&P 500 or Nasdaq and continued "rotation" instead, all of the major U.S. indexes will likely be trading at or near all-time highs. There are risks to consider, of course... Our founder, Porter Stansberry, just wrote to you on Friday with a great analysis and cautioned against being bullish on mega-cap tech stocks right now. As he began... I believe we are at an important peak in equity prices... that a big decline in stocks is inevitable... and that buying tech stocks here will lead to poor returns for at least a decade. Porter said we're in the "midst of the greatest financial bubble of all time"... The mania in tech stocks today far exceeds the 2000 bubble. Going forward, for the next decade or longer, returns on large-cap tech stocks will be well below average. And for investors who pile into tech stocks today, when they are trading at 30 times sales, the results will be catastrophic. Indeed, buying shares of popular tech names like AI darling Nvidia (NVDA) carries more risk than reward today. Instead, the time to do that would have been years ago... or when shares of the company, or other high-quality names, eventually drop to a more reasonable price. As Porter shared, insiders at Nvidia have been selling shares at the fastest pace ever, dumping $500 million worth of shares in June alone. He also pointed out several reasons why the S&P 500 is incredibly overvalued today, and said... There are great times to be a buyer of stocks and there are terrible times to be a buyer of stocks. Right now has all of the hallmarks of a terrible time to be a buyer of most stocks, especially tech stocks. Porter said he thinks the "top" is in for big-cap tech... advised against buying this current dip... and instead offered several "sensible solutions" for protecting your portfolio from the damage to big-cap stocks that could be ahead. If you missed Porter's essay, [read it here](. One of his ideas was having some exposure to smaller, biotech stocks – which are notoriously sensitive to interest rates. If the economy weakens – which it has been if you're following the unemployment rate – and the Fed cuts its suggested bank lending rate range, biotech stocks could move substantially higher, and certain ones have been trading for less than the net cash on their balance sheets. In other words, ridiculously cheap. Happy hunting... Dan Ferris and I discussed the opportunity in biotech with Erez Kalir – biotech research analyst at Porter's new boutique advisory, Porter & Co. – a few months ago on an episode of the Stansberry Investor Hour. [You can watch that for free here on YouTube]( or listen wherever you get your podcasts and hear Erez's blueprint for identifying these stocks. As I mentioned, you can check out our Investment Advisory for smaller-cap recommendations as well, including fresh advice [in this month's issue](. If you're hunting for more small- (and micro-) cap opportunities, we'll also point you to the great work of Stansberry Venture Value editor Bryan Beach and Stansberry Venture Technology editor Dave Lashmet... Existing subscribers can get caught up right [here]( and [here]( respectively. Many of Bryan's and Dave's recommendations are still trading below recommended buy-up-to prices. If you're interested, please note their specific allocation suggestions and the risks involved with these smaller, more volatile stocks. Bryan has a useful list of "selling guideposts," for example, tied to quantitative metrics. Dave tells his subscribers to diversify across many positions so they're not overexposed to one company and emphasizes position sizing to keep a big loss with any one stock from having an outsized effect on their overall portfolios. We may already be seeing this shift play out... We're not making a formal recommendation here, but for illustrative purposes: As the Russell 2000 Index has taken off over the past week or so, the iShares Biotechnology Fund (IBB) is up 10% concurrently, since July 3. That's the day that, in my view, Federal Reserve Chair Jerome Powell made an "[unofficial announcement]( about the central bank's intent to lower rates ahead. After all, he said he expected inflation to be in the 2% range a year from now but that rate cuts were on the table... suggesting the inflation "fight" is over. The rhetoric has only picked up since. Just yesterday, Powell said plainly that the Fed won't wait until inflation hits 2% to cut rates. In a live, recorded discussion with billionaire David Rubenstein – chairman of the Economic Club of Washington, D.C. (and now owner of the Baltimore Orioles) – Powell referred to staying ahead of the "lag" effects of monetary policy... The implication of that is that if you wait until inflation gets all the way down to 2%, you've probably waited too long, because the tightening that you're doing – or the level of tightness that you have – is still having effects which will probably drive inflation below 2%. Instead, he said he wanted to see some more "good inflation data, and lately here we have been getting some of that." As we wrote last week, not only that, but a "[whiff of deflation]( in the June consumer price index report, which will likely go a long way toward a Fed policy shift in the months ahead. The core personal consumption expenditures ("PCE") index – the bank's preferred inflation measure – also showed 0.1% month-over-month growth in May, for example, a "normal" pre-pandemic pace. Headline consumer price index ("CPI") numbers fell by 0.6% in June and grew by a 0.1% pace in May. If more of the same shows up in the almighty "data" over the next few months, the long-awaited "Fed pivot" will likely finally arrive. The federal-funds futures market currently puts a 92% probability on a 25-basis-point cut at the Fed's September meeting, though 93% odds of no cut coming out of the Fed's next policy meeting on July 30 and 31. --------------------------------------------------------------- Recommended Links: [This Just Created 500,000 Millionaires – Were YOU One of Them?]( AI just minted half a million new U.S. millionaires. But if you're wondering whether now is the time to double down on stocks like Nvidia... or wait for the next big market story... do NOT buy another stock before hearing this shocking AI story the moment it goes live. [It's 100% free here](. --------------------------------------------------------------- [The Presidential Candidate You Should REALLY Be Worried About]( Most Americans are overlooking the seemingly impossible candidate who should worry you. It's not Joe Biden... Donald Trump... Gavin Newsom... or even Michelle Obama. It's someone even worse. New evidence of a secret plan indicates he could soon return and finish what he started. [Get the full story right here](. --------------------------------------------------------------- New 52-week highs (as of 7/15/24): Apple (AAPL), American Express (AXP), Alpha Architect 1-3 Month Box Fund (BOXX), Berkshire Hathaway (BRK-B), Western Asset Emerging Markets Debt Fund (EMD), Diamondback Energy (FANG), GEO Group (GEO), ICON (ICLR), iShares Convertible Bond Fund (ICVT), iShares Core S&P Small-Cap Fund (IJR), iShares Russell 2000 Value Fund (IWN), JPMorgan Chase (JPM), Eli Lilly (LLY), London Stock Exchange Group (LNSTY), Motorola Solutions (MSI), Omega Healthcare Investors (OHI), Planet Fitness (PLNT), Ryder System (R), RadNet (RDNT), Royal Gold (RGLD), Invesco S&P 500 Equal Weight Technology Fund (RSPT), Sprouts Farmers Market (SFM), S&P Global (SPGI), Teradyne (TER), Texas Pacific Land (TPL), United States Lime & Minerals (USLM), ProShares Ultra Financials (UYG), Viper Energy (VNOM), Vanguard S&P 500 Fund (VOO), and Waste Management (WM). In today's mailbag, feedback on [yesterday's edition]( about the assassination attempt on Donald Trump and the market's reaction to it... plus an answer to a question in yesterday's mail... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "If my memory serves me well, there was an assassination attempt on the life of Andrew Jackson. As I recall, the would be assassin approached Jackson and produced two single-shot pistols... but neither fired. Jackson then proceeded to beat his assailant within an inch of his life with his only means of self-defense, his cane..." – Subscriber Ransom G. Corey McLaughlin comment: Yes. My label of "survived attempts" yesterday referred to presidents who were wounded in attempts and survived, but I could have included Jackson's name and a long list of other presidents who have been targeted in "unsuccessful" attempts as well. With Jackson, there were two misfires, as you say, from very close range... Here is an account from the Senate's historical office... On a cold, wet January day in 1835, an unemployed house painter named Richard Lawrence hid behind a pillar at the entrance to the Capitol Rotunda. He awaited the arrival of an important Capitol visitor – President Andrew Jackson – who was attending a congressional funeral. As the president approached, Lawrence stepped forward, raised a derringer single-shot pistol, took careful aim at Jackson's heart, and fired. The cap exploded, noise and smoke filled the air, but the powder failed to ignite. Misfire! The aging president was in ill health, forced to lean on a colleague and use a cane, but he remained defiant. As Lawrence pulled a second pistol and again took aim, Jackson charged his assailant with cane held high. Lawrence pulled the trigger. Again, misfire! Quickly, bystanders tackled the would-be assassin to the floor while the president was hustled away. That was the first known assassination try against a U.S. president, the nation's seventh, about 190 years ago. As we said yesterday, we've seen many other failed plots since then... My conservative count includes at least a dozen. And only 45 people have served as U.S. president, meaning a relatively high percentage (around 25%) have been assassination targets. It has been decades since a U.S. president was wounded by one of these attempts, though, the previous being Ronald Reagan in 1981. "Subscriber Norm R. asked: 'What is money?' "I think we should listen to famed banker J.P. Morgan for the answer. "In 1912 when he testified before Congress he was asked: 'But the basis of banking is credit, is it not?' "To which he replied: 'Not always. That is an evidence of the banking, but it is not the money itself. Money is gold, nothing else.' "These days we think money is the U.S. Dollar but that is not money, it is currency backed by credit." – Subscriber S.I. All the best, Corey McLaughlin Baltimore, Maryland July 16, 2024 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open stock positions across all Stansberry Research portfolios. Returns represent the total return from the initial recommendation. Investment Buy Date Return Publication Analyst MSFT Microsoft 02/10/12 1,447.3% Stansberry's Investment Advisory Porter MSFT Microsoft 11/11/10 1,436.5% Retirement Millionaire Doc ADP Automatic Data Processing 10/09/08 886.3% Extreme Value Ferris WRB W.R. Berkley 03/16/12 745.0% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 670.2% Retirement Millionaire Doc HSY Hershey 12/07/07 467.0% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 445.8% Stansberry's Investment Advisory Porter TT Trane Technologies 04/12/18 445.1% Retirement Millionaire Doc NVO Novo Nordisk 12/05/19 410.0% Stansberry's Investment Advisory Gula TTD The Trade Desk 10/17/19 380.5% Stansberry Innovations Report Engel Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 5 Stansberry's Investment Advisory Porter/Gula 3 Retirement Millionaire Doc 1 Extreme Value Ferris 1 Stansberry Innovations Report Engel --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio. Returns represent the total return from the initial recommendation. Investment Buy Date Return Publication Analyst wstETH Wrapped Staked Ethereum 12/07/18 2,291.8% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 1,625.1% Crypto Capital Wade ONE/USD Harmony 12/16/19 1,163.3% Crypto Capital Wade MATIC/USD Polygon 02/25/21 767.2% Crypto Capital Wade AGI/USD Delysium AI 01/16/24 329.1% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Microsoft^ MSFT 12.74 years 1,185% Retirement Millionaire Doc Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams PNC Warrants PNC-WS 6.16 years 706% True Wealth Systems Sjuggerud Maxar Technologies^ MAXR 1.90 years 691% Venture Tech. Lashmet Silvergate Capital SI 1.95 years 681% Amer. Moonshots Root ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. --------------------------------------------------------------- Stansberry Research Crypto Hall of Fame Top 5 highest-returning closed positions in the Crypto Capital model portfolio Investment Symbol Duration Gain Publication Analyst Band Protocol BAND/USD 0.31 years 1,169% Crypto Capital Wade Terra LUNA/USD 0.41 years 1,166% Crypto Capital Wade Polymesh POLYX/USD 3.84 years 1,157% Crypto Capital Wade Frontier FRONT/USD 0.09 years 979% Crypto Capital Wade Binance Coin BNB/USD 1.78 years 963% Crypto Capital Wade You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. For questions about your account or to speak with customer service, call 888-261-2693 (U.S.) or 443-839-0986 (international) Monday-Friday, 9 a.m.-5 p.m. Eastern time. Or e-mail info@stansberryresearch.com. Please note: The law prohibits us from giving personalized financial advice. © 2024 Stansberry Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Stansberry Research, 1125 N Charles St, Baltimore, MD 21201 or [stansberryresearch.com](. Any brokers mentioned constitute a partial list of available brokers and is for your information only. Stansberry Research does not recommend or endorse any brokers, dealers, or investment advisors. Stansberry Research forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees of Stansberry Research (and affiliated companies) must wait 24 hours after an investment recommendation is published online – or 72 hours after a direct mail publication is sent – before acting on that recommendation. This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.