When did Stansberry Asset Management (SAM) begin managing portfolios?
SAM began investing on behalf of clients on April 1, 2016.
What is the minimum investment amount for a SAM portfolio?
The minimum investment amount is $500,000.
Can I use multiple accounts to get to the minimum investment amount?
SAM clients can use multiple accounts to reach the $500,000 investment minimum – for example combining an ordinary investment account with IRA account. However, we ask that all accounts meet a $100,000 minimum themselves, so we can fully implement SAM’s portfolio strategy and properly manage risk.
What are SAM’s fees?
SAM fees are based on assets under management, aligning our incentive with our clients’ best interests. SAM doesn’t earn commissions on trades or have an incentive to “churn” your account.
Fees range from 0.75% to 1.75% of assets invested per year, depending on the amount a client invests and the length of time a client remains with us.
Can SAM manage IRAs?
Yes, SAM is able to accept IRA assets, and already a significant number of clients have invested with us using their IRA funds. We will work with clients to accommodate specialized IRA needs, such as required minimum distributions.*
*Stansberry Asset Management is not a tax adviser and will not provide tax advice.
Where are SAM accounts held?
All accounts with Stansberry Asset Management are custodied at Pershing/Bank of New York Mellon (BONY). We chose this custodian carefully; it is the oldest bank in the United States and has a strong balance sheet. SAM may diversify to other custodians in the future, but probably not in the first year.
Opening and funding a custodial account at BONY is simple for clients, and you’ll have log-in access to view your positions and account balance at any time. BONY does charge a fee for SAM client trades which is in-line with market; these fees will be broken out separately for clients to see on their monthly account statements.
How does Stansberry Asset Management use Stansberry Research recommendations?
At Stansberry Asset Management (SAM), we believe that how we approach investing matters in the long run far more than any specific security in our clients’ accounts. For this reason, the most important way we use Stansberry Research is by starting with its distinctive investment philosophy. We would describe that philosophy as a disciplined, opportunistic approach to value that cuts across geographies, industries, and asset classes, with a strong emphasis on capital preservation and risk management. Anyone who has read Stansberry Research’s publications knows that value – i.e., investing with a margin of safety, and when the odds are favorably asymmetric – is at the heart of the newsletters’ diverse strategies. Similarly, any Stansberry reader also recognizes an emphasis on capital preservation and risk management – for instance, through proper position sizing, the use of trailing stop losses, and being thoughtful about harvesting gains. These concepts are also at SAM’s core.
Beyond a shared investment approach, SAM’s portfolios draw on current and former Stansberry Research picks, as well as broad, thematic ideas that Stansberry Research has highlighted. For example, any regular reader of Porter Stansberry’s Investment Advisory (PSIA) is familiar with that newsletter’s search for investment opportunities in the world’s most capital efficient businesses. Similarly, any regular reader of Steve Sjuggerud’s True Wealth franchise recognizes its search for macro deep-value opportunities that are “cheap, hated, and in an uptrend.” SAM may, on occasion, express one of these themes through specific securities that haven’t been discussed in the newsletters. However, we believe that most of the names in SAM accounts will be recognizable to Stansberry readers either as current or former recommendations, or as expressions of themes that the newsletters have discussed.
How do you choose which Stansberry Research ideas are included in SAM’s client accounts?
Stansberry Research publishes over a dozen newsletters, each of which often generates several recommendations every month. Accordingly, at any given time, the universe of Stansberry Research letters may feature well over a hundred open recommendations. Furthermore, some of these recommendations are at times in tension or even outright conflict with one another. For example, recent readers of Porter Stansberry’s Investment Advisory and Stansberry Credit Opportunities know that these newsletters have expressed caution about investing fresh capital in equity markets due to brewing potential problems in credit. Conversely, recent readers of Steve Sjuggerud’s True Wealth are familiar with its belief that the next eighteen months in U.S. equity markets may prove to be some of the best in recent years.
Stansberry Asset Management believes in constructing simple, relatively concentrated portfolios that generally consist of no more than ~30 – 40 positions (for example, 20 U.S equities and 10 – 20 other securities), and are therefore digestible on a page or two. We believe that significantly larger portfolios can be unnecessarily complex, and dilute the impact of our best ideas. We also believe in constructing portfolios that aim to be resilient to different economic and market outcomes, i.e., that seek to avoid strong “one way” bets. Finally, SAM also believes in allocating to value – that is, in scanning across different industries, geographies, and asset classes on a regular basis to search for the most favorably asymmetric risk/rewards, or the largest margins of safety.
We rely on all of these principles to guide us in helping us navigate the many ideas and themes that appear in Stansberry Research publications, and in constructing our portfolios. There is an unavoidable element of discretion in this process. Of course, Stansberry readers who feel particularly strongly about any Stansberry Research ideas are always free to reflect them in accounts that they manage for themselves.
Do you think of Stansberry Asset Management as more of an “investor,” “trader,” or both?
Our study of the greatest money managers of all time – for instance, Buffett & Munger, Carl Icahn, David Tepper, and others – reveals to us a predominance of patient, long-term investors who exploit the power of compounding and have the “stomach” to wait out short-term volatility or paper losses. There are, of course, exceptions: short-term traders, such as Paul Tudor Jones, have also made fortunes. But we do not believe their approach is easily understood or emulated. Furthermore, in an environment today in which algorithmic, high-speed trading by computers drives short-term price action in so many markets, we are wary of being “suckers at the card table” making short-term bets.
For these reasons and others, Stansberry Asset Management focuses on long-term investing, which we define as investing with at least a three-year horizon to judge performance. We seek like-minded partners. Prospective clients who place an emphasis on performance over shorter time frames are better served looking for different money managers.
How do you think about stop losses? Does SAM use stop losses to manage risk?
To paraphrase Warren Buffett, the first rule of investing is don’t lose money, and the second rule is don’t forget rule number one. Stansberry Asset Management takes capital preservation as a paramount priority. We believe stop losses – and more specifically, volatility-adjusted, trailing stop losses – are generally a very useful risk management tool to preserve capital. We expect to use them for most of our positions. There may be a small handful of positions in our client accounts – for example, small cap, early stage biotech stocks recommended in Stansberry Venture, or distressed bonds recommended in Stansberry Credit Opportunities – for which using stop losses makes less sense. These positions will be sized in a way that reflects their risk of capital impairment, and we anticipate they will be few in number in the context of our overall portfolios.
Does Stansberry Asset Management trade options?
In our experience, trading options makes a lot of money – for options market makers. Because we are wary of being “bait” for the options market-making sharks, we do not expect to trade options with high frequency. Instead, SAM will stick to simple, vanilla options strategies that improve the risk/reward in our equity investments, and/or generate additional income. Examples include selling covered calls and selling naked puts on high quality companies that we would want to own in our portfolios anyway at lower prices. In both examples, we anticipate ramping up our options activity when volatility is high (e.g., VIX > 25), and when we are therefore well compensated for selling options premium.
We recognize that there exists a segment of Stansberry Research subscribers who are very active options traders. We would not describe SAM as a good substitute for those seeking an options-driven alternative asset manager. However, for those Stansberry subscribers who wish to do a lot of short-term options trading on their own and to “farm out” the longer-term portion of their investable assets, SAM may be a good potential fit.
What role do gold and gold mining equities play in SAM’s client accounts?
We believe that physical gold as well as gold mining equities should play a part in any thoughtful asset allocation strategy. Accordingly, we would advise all Stansberry Asset Management clients to include some exposure to these instruments among the others in which they hold their wealth. This advice is grounded in our views on sound, well-diversified asset allocation – not in any short-term views about the price of gold or gold miners. As most Stansberry Research subscribers know, these instruments are exceptionally volatile, and owning them on a shot-term basis is often a recipe for impairing capital.
With that said, we do not expect that either physical gold or gold mining equities will constitute a major part of Stansberry Asset Management client accounts. Our anticipated range of holdings in these asset classes ranges from ~ 0 – 15%. We may choose to raise this range if conditions warrant; if so, we will communicate that shift to our clients. And of course, clients who are more comfortable owning higher allocations to gold or gold mining equities are free to do so on their own.
How many different portfolios does SAM offer, and what are the main differences?
SAM offers clients three portfolios: Conservative, Standard, and Aggressive. All are built on a shared philosophy that includes several key principles:
- An emphasis on capital preservation, by which we mean prioritizing the avoidance of permanent losses on investments.
- “Allocating to value” by identifying investment opportunities that we believe are priced at a substantial discount to our probability-adjusted estimate of intrinsic value; we believe we can identify why that discount exists today and in what ways our view of intrinsic value differs from the market’s consensus.
- The ability to remain flexible and opportunistic, as well as mindful of changes in the investment landscape.
Differences in the Three Strategies
While all three strategies share a common investment philosophy, there are some important differences that impact the risk profiles of our three strategies. Key differences include, but are not limited to:
- The presence or absence of more speculative opportunities that may have high upside potential but are both typically more volatile and carry a higher risk of capital impairment. Our aggressive portfolios will often include several of these ideas; our standard portfolios may include a smaller number of them from time to time; and our conservative portfolios will generally avoid them altogether. Instead, our conservative portfolios will place more emphasis on owning shares in businesses that have, historically, proven themselves to be unusually resilient across the economic cycle.
- Overall asset allocation may differ in the three portfolios under certain market conditions. For example, in 2009, our approach would have called for “Aggressive” portfolios to hold a higher percentage of equities, while “Conservative” portfolios would have owned more corporate debt.
A Special Consideration for SAM Aggressive Portfolios
On February 1, 2017, Stansberry Research began publishing Portfolio Solutions, a new investing letter that takes ideas from across a variety of letters and consolidates them into complete portfolios. Based on strong interest from some SAM clients and prospective clients, SAM will be closely following the “Total Portfolio” from the Portfolio Solutions letter in accounts employing the “Aggressive” strategy. Any clients who choose the “Aggressive” strategy will be invested in a portfolio that closely follows the “Total Portfolio”.
While we aim to closely follow Portfolio Solutions, SAM will use its own discretion when investing as well. SAM will add a layer of due diligence and monitoring, and may make substitutions for positions when we believe it is appropriate. In addition, SAM may include in “Aggressive” portfolios special investing opportunities not mentioned in Portfolio Solutions that we believe provide an asymmetric risk-reward profile on a probability-adjusted basis.
SAM clients are welcome to split their assets with us into more than one of our three portfolios if they wish, however we recommend they invest a minimum of $250,000 in any one.
What returns are you aiming for in the different portfolios?
Many prospective investors have asked us about our return targets. The short answer is, we don’t have them. If someone tells us what the S&P 500 returns over a specific period of time, we can reply with a range of what we would consider to be an acceptable return for SAM over the same period. For example: In 2008, the S&P 500 lost nearly 40%. During that year, anyone who broke even or even lost only a single digit percent of their invested capital deserves, in our view, a hero’s medal.
Conversely, in 2009 the S&P 500 returned about 33%. That year, breaking even would have been a disappointment. Although we’ve used the years 2008 and 2009 as examples here because they were memorable years for many investors, we ourselves assess our performance over three to five year intervals, and would encourage our clients to do the same.
Think of it this way: If you owned and managed a business, would you shut it down based on a single year’s results? Maybe, if the results were truly awful and threatened to bankrupt the entity. But most entrepreneurs would look through any given year, and judge the performance of their business over at least three years if not five. It generally requires that length of time to separate signal from noise, and to assess to whether a business can live up to its promise or is instead destined for mediocrity or failure. We seek to apply a similar mindset to the businesses we invest in through their shares or debt.
Can you share the composition of SAM’s portfolios?
Transparency is incredibly important to us and, once a prospective client actually signs on with SAM, you will have daily visibility into your account as well as the ability to speak with one of our representatives at any time. We are also committed to giving prospective clients as much information as we can before you make a decision to join us, so that you can make an informed choice that SAM is right for you. With that said, it’s likewise true that our portfolio compositions are proprietary. To protect our competitive edge, we can’t make the specific contents of our portfolios available to the wide world (or even prospective clients) before they join us.
To strike a balance between our desire for transparency and our need for confidentiality, we offer clients for whom this matters several ways to help. First, we would be happy to make available, on request, some examples of the positions we are currently holding for clients and how they relate to our current strategy. Second, prospective clients who are passing through New York, where our Chief Investment Officer Erez Kalir is based, are invited to visit us in person for a more detailed walk-through of our current portfolio thinking. Erez is also available via live webinars from time to time that all prospective SAM clients are invited to join, which include an open Q&A component.