A Look Back At A Profitable Year

You don’t need me to tell you it’s been a good year in the market. As I write this, the S&P 500 has rallied 21.5% year-to-date. A truly remarkable return for what is now the second-longest bull market in history.

As a reader of StreetAuthority Daily, you’ve likely been enjoying the ride right alongside thousands of like-minded investors who’ve benefitted from the bull market (and our experts’ picks).


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Now, with all that said, I want to do something important before we flip the calendar to 2018. I want to take this opportunity to hear straight from our premium experts and what they have to say about 2017 in their newsletters — what worked, what didn’t, and what they are advising their readers to expect in 2018. 

Let’s get to it…

Top Stock Advisor
I hope you’ve been able to capitalize on this year’s market gains. We’ve certainly had some success stories in Top Stock Advisor. The first addition to the portfolio in 2017 was Visa (NYSE: V), which has rewarded us with a solid 44.8% total return this year, doubling the S&P 500’s feverish pace. 

A couple highlights from this year have been the additions of PayPal (Nasdaq: PYPL), up 74.8% in just over eight months, and Tencent (OTC: TCEHY), up 42.5% in less than six months. Both of these have greatly outpaced the S&P 500.

In fact, of our 32 current holdings, 23 of them have outperformed the broader market year-to-date.

Of course, not everything went my way this year. Most notably, I closed out a couple of trades for a loss. I’m a firm believer in cutting losers, especially when my original “buy thesis” no longer applies. It’s important to move on and put that money to work somewhere else. One of the biggest detriments to an investor’s portfolio is the “hope” strategy. That is, hoping for that loser to rebound enough for you to at least break even. If you’ve been investing long enough, you know that that rebound you’re waiting for could be years in the making. 

#-ad_banner-#But even with a couple of black eyes this year, my portfolio tacked on a return of over 19.5% in 12 months. Considering that at this time last year one-third of my portfolio was in cash, that’s a respectable return.

If you’re benchmarking your portfolio against the S&P 500 and you have a considerable amount of cash, it’s going to be extremely hard to outpace the market. After all, the cash component isn’t making any money and acts as a drag on the portfolio’s performance, whereas the S&P 500 is fully invested all of the time. Of course, that doesn’t mean you should always remain fully invested — the same cash that can limit the upside can act as a cushion in a bear market.

To be clear, my goal is to beat the broader market. But that’s not my only priority with this newsletter… I want to help you become a better investor. I want to give you the information that I would want if our roles were reversed. I want to help you build generational wealth through investing by identifying elite companies that should reward shareholders for years to come. All with less risk. 

Here’s to a healthy and prosperous 2018.

Game-Changing Stocks
At Game-Changing Stocks we’re active investors. Armed with a strategy of seeking The Next Big Thing and paradigm-changing companies, we search for companies whose stories are far from the mainstream. 

This strategy is full of peril. In some cases, investors take their chances on still-unproven companies whose big ideas are yet to pay off, such as our two development-stage biotech holdings. In other cases, we look at companies with a special strategy and strong success story.

But any company that embarks on the game-changing path is taking a chance, and so are its investors. A chance that its product… or its service… or its technology… will find its place in the world of tomorrow. This bet may or may not work out, and therefore this type of investing is generally riskier than, say, investing in a market-cap weighted index.

Overall, our Game-Changing Stocks portfolio has had a good run this year. Our closed positions for 2017 have, on average, returned 28.5% — a much stronger result than what we’ve seen from the Russell 2000 index or from the PowerShares S&P Small Cap Information Technology Portfolio ETF (Nasdaq: PSCT), which returned 13% and 11% year-to-date, respectively. It’s not a fair comparison, of course, because our closed positions all have different time frames, but it does stress the strong promise of game-changing stocks. 

I can’t wait to see what 2018 brings.

High-Yield Investing
I’m not a frequent seller, so most of the holdings that were in my portfolio on January 1 are still there today. And many of them have rewarded us with sizeable capital appreciation — on top of their generous dividend distributions. 

Here are some of the more notable winners:


Of course, nobody bats a thousand.

This is also a good reminder of the importance of diversification. By spreading your money effectively among a variety of different securities and asset classes, the occasional backfire won’t knock your entire portfolio off track. 

Invariably, there will be the temptation to compare these gains to the market. But as I’ve said in the past, the S&P 500 isn’t a particularly good comparison benchmark for High-Yield Investing. My main objective is income, and since the S&P carries a weak payout of just 2%, I search elsewhere for yield (including the bond markets). 

Case in point: My High-Yield Investing portfolio increased in value by 7.1% over the past 12 months and 20.3% over the past two years. 

And I have even higher hopes for 2018. 

With the strong recovery in oil, billions of dollars are flowing back into drilling projects. The Department of Energy is forecasting that domestic crude production will reach 9.9 million barrels per day next year — 300,000 more per day than the previous record set in 1970. That will work to the advantage of our midstream energy pipeline and storage holdings. 

I also have an upbeat outlook for our various real estate trusts, particularly those in the industrial, storage and data center sectors where demand has driven rents to record levels.

I’ll be listening intently to newly-appointed Fed chair Jerome Powell, but for now remain biased against the most rate-sensitive areas. I maintain a defensive posture in that regard and have steered clear of longer duration fixed-income instruments. In fact, several of my holdings will actually benefit from higher rates. 

With long overdue corporate tax reform likely easing the burden on U.S. companies (from 35% to 21%) and allowing for the repatriation of trillions in overseas profits, I think we’ll see above-average dividend hikes (both in raw numbers and dollars) in the coming year. 

Scarcity & Real Wealth
What a difference a year makes. Commodities prices (and our portfolio) have taken great strides in 2017. But the appreciation over the past two years is even more dramatic. 

You might recall the dismal state of the commodities markets in January 2016. Crude oil had lost three-fourths of its value, bottoming out around $25 per barrel. Industrial metals like copper had tanked to multi-year lows as well. And there was no safe harbor in gold either, as the yellow metal had spiraled to $1,100 per ounce from a peak of $1,800.

Simply put, nothing was working for commodities investors. And that weakness was reflected in the Scarcity & Real Wealth portfolio. 

Before long, a broad rebound was underway. By June, the portfolio had rebounded, and I was fortunate to take charge of the newsletter just a few months later during this upswing. 

After taking the reins, I did some housekeeping and started reshaping the portfolio. And I’m pleased to say that our portfolio value has climbed by 43.3% over the past two years — crushing the 31.6% gain of the S&P 500. 

Remarkably, we’ve generated that return despite a considerable “cash drag.” There was $119,000 in idle cash at the beginning 2017 (68% of the portfolio) and still $85,000 remaining today (45%). That means the $17,123 in trading gains in 2017 represents a return of more than 20% on the money invested. 

My goal is to feed you exciting new investment candidates to help build wealth. And I believe I succeeded in that regard. I added 13 stocks to my SRW portfolio this year, and 10 of those have made money for us. 

And these are just the new additions. 

The table below shows some of the earlier picks added prior to 2017 that were also standout performers this year.

Many closed positions have also done well. For example, we walked away from Alcoa (NYSE: AA) and Arconic (NYSE: ARNC) with realized gains of 97.4% and 47.5%, respectively.

We’ve certainly covered a lot of ground this year. While most commodities-focused advisories and funds rarely stray outside of their oil and gold comfort zone, Scarcity & Real Wealth leaves no stone unturned in the quest for profitable natural-resource plays.

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