Yesterday, I shared the "decoded message" behind the central banks' actions.
Central banks – including the U.S. Federal Reserve – are not just attempting to boost the economy with quantitative easing. They are broadcasting exactly how far they will go to get out ahead of a recession – and avoid it for as long as possible.
The Portfolio Solutions Investment Committee has discussed this point at length. (That includes Dr. Steve Sjuggerud, Dr. David Eifrig, Porter Stansberry, and myself... and others among our top analysts.) And we unanimously agree on one thing...
It seems clear that this proactive approach by central banks has extended – and will continue to extend – the current economic expansion for far longer than it otherwise could go without such stimulus.
But here's a word of caution...
Eventually, a recession will hit, despite the bankers' actions. And when that happens, central banks will have already run out of bullets. Thus, the ensuing downturn will be extraordinarily bad – a potential "death spiral" indeed.
This reality is in part due to the extreme debt levels sloshing around the financial markets. As we've noted before, there's too much debt everywhere – at the government, corporate, consumer, and investor levels – for this to end well.
So with this risk in mind – and with the understanding that we could be wrong and the recession could occur sooner than we think – we will continue to stay the course on our cautiously bullish investment approach in our Stansberry Portfolio Solutions product.
And in order for you to do the same, here's what that broad investing road map looks like...
We'll temper our bullish outlook and positioning in two ways. First, we'll continue to invest in portfolio protection. We'll own gold. We'll keep some dry powder in reserve. We'll invest in sturdy income investments. We'll honor our stops and other sell disciplines.
Second, and perhaps more important... when we take equity risk, we'll focus on owning the highest-quality blue-chip names. That means we'll look for stocks with four common traits...
- Durable franchises. We want businesses with staying power that we are comfortable owning for the next decade.
- Above-market revenue growth. We want advantaged business models that will compound rapidly in a world otherwise starved for real growth.
- Talented management teams. We want world-class, ethical leaders to captain our investments... leaders whose incentives align with their shareholders' interests.
- High returns on invested capital. We only want to own companies that generate attractive returns on their core businesses – this is crucial for compounding your money over the long term.
These types of companies should do well in any market environment. But they should do particularly well – on a relative basis – when markets get choppier. Their stocks may decline during a broad market sell-off, but less so than other companies.
Not only that, but these are the kinds of winning companies that will likely take more market share during the downturn while competitors are reeling... and come out even stronger on the other side. For long-term investors like us, that's just what we want.
In Stansberry Portfolio Solutions, we've built four portfolios largely based on this model. As I've explained before in DailyWealth, we've carefully constructed each of them to succeed at specific goals depending on what happens in the overall market.
And they're proving incredibly effective. Right now, they're executing on their individual stated goals...
And despite their different aims, all four of our Stansberry Portfolio Solutions strategies are also performing exceedingly well. Take a look...
Of course, it won't always be this way. Porter, Steve, and Doc are market wizards, yes. But we won't always achieve such exceptional returns.
Still, we take the responsibility of managing these portfolios very seriously. We've done our best to ensure that they continue to perform in line with their stated goals... helping our subscribers survive and profit through whatever comes next in the markets. And so far, the results speak for themselves.
So I encourage you to follow this road map when investing in the years ahead.
One day, we'll find that the Fed has already run out of bullets. Before that day comes, make sure you own some portfolio protection. And when you put money into the markets, look for the four key traits of companies that can survive a downturn... and come out stronger.
Good investing,
Austin Root
Editor's note: If your New Year's resolution is to finally get your financial house in order, don't miss our special online event next week. On January 14, Steve, Porter, and Doc will reveal their top market predictions for the coming year... including a new way to make more money, with less work. Plus, you'll find out their No. 1 stock ideas for 2020, just for tuning in. Register for free right here.
Further Reading
"I don't expect a major correction right around the corner," Austin says. "But the storm clouds are gathering." The time to prepare for a market downturn is before it arrives. And there are two ways you can ensure you're protected right now... Read more here: Follow These Steps to a True 'All Weather' Portfolio.
"After the recession, the antifragile company's earnings power is higher than it was before the recession," Dan Ferris writes. It may be hard to believe, but there are certain types of businesses that get even stronger after the market tanks... Learn more here: How to Find Stocks That Thrive in a Bear Market.
Finding durable companies with a competitive edge is one way to grow long-term wealth. And this company is likely to have an edge over its competitors for years to come...
USING THE 'PICKS AND SHOVELS' STRATEGY TO BECOME NO. 1 IN THE WORLD
Today, we're taking a look at a company that's in high demand...
Levi Strauss (the creator of blue jeans) realized something when he set up shop in San Francisco during the California Gold Rush. You don't have to mine gold to get rich... You just have to sell tools and goods to the miners. That's why companies that support broad industries are still known as "picks and shovels" businesses. Today's business provides software for many kinds of clients...
Salesforce.com (CRM) is the world's No. 1 provider of customer-relationship management services. It makes it easy to manage sales, marketing efforts, and customer service, all in one place. And with its cloud-based system, Salesforce allows its clients to access information anywhere... anytime. More and more companies are turning to Salesforce's services to support their businesses... Its third-quarter sales recently beat estimates – up 33% year over year.
As you can see in today's chart, shares are up around 200% over the past five years. And as more brands turn to Salesforce to manage their growing client bases, that trend should keep going...
