Warren Buffet and Benjamin Graham are probably the two most well-known investors in American history. In a recent article, Stansberry Research explains the investment strategy that is considered by some to be responsible for a large portion of their success. That strategy involves investing in insurance companies that bring in more in premiums than they pay in claims. This simple investment strategy helped build two large fortunes in the US and there are still ample opportunities to invest like Buffet and Graham.
Stansberry Research is a publisher of financial advice that prides itself on providing actionable investment recommendations and research to individuals who manage their own portfolios. Founded in 1999 by Porter Stansberry at his kitchen table, the company has since grown to have over 500,000 global subscribers, 70,000 of whom are lifetime subscribers. This remarkable growth has been fueled in large part by the quality of investment advice of the individuals who write for the company’s various publications. Stansberry Research boasts that it has over 175 years of combined analyst experience.
The Man Behind the Idea
The flag bearer of the company’s approach to investing is Porter Stansberry himself, who has a history of prestigious accomplishments in the field of financial advice. High on the list of these accomplishments is his distinction as being the first American editor of the Fleet Street Letter, which is the world’s oldest English-language financial newsletter. Though the company that bears his name now fields contributions from a range of financial experts, Stansberry still contributes his personal insights to the publisher’s publications.
As the author of the aforementioned article examining the benefits of investing in insurance companies, Stansberry is again working to inform his readers. In the article, he outlines one of the main reasons why some of these companies provide such ripe targets for investment while others perform far worse. The key here is to make sure the company’s business model does not revolve around simply investing capital from premiums in the short term, before paying the capital back out in the form of claims. If an insurance company can instead retain some of the money they gather in the form of premiums, they will be able to have a constantly growing pool of long-term capital to invest.
Of course, knowing which insurance companies are operating with this type of excess cash on hand requires a fair amount of research. It’s not always easily accessible information. However, Stansberry Research has performed that research for a number of years running and that has allowed the company to recommend a variety of financial advice to their readers centered around using this very same approach.
Why Stansberry Research Knows
Stansberry Research’s track record when it comes to investing in insurance companies has been impressive. When looking at the previous six years, the insurance stocks recommended by the company have produced annual gains of 20%. Perhaps even more surprising, these gains could have been even better if the publisher’s recommendations had been to keep the stocks entirely over that duration, instead of a somewhat more conservative approach.
This type of outperformance of the market has come to be a hallmark of Stansberry Research over the years. With a focus on giving advice that they themselves would want to receive, the analysts and contributors of the company’s numerous publications have delivered a wealth of financial knowledge throughout its existence (Wikipedia). This is perhaps best exemplified by the publisher’s long-term focus on subscriptions. With a goal of keeping resources directed on quality of advice, Stansberry Research strives to provide financial information that incites readers to become lifetime subscribers.
Of course, in order to attract their large base of subscribers, the company’s information must provide demonstrable value. To show this value, Stansberry Research dives head-first into evaluating the quality of its own advice. This is done by publicly evaluating the recommendations the publisher makes each year. Additionally, every one of Stansberry Research’s investment newsletters provides track records with each monthly issue. This way, readers can clearly see the value of the offered monthly advice.
The Subscribers Tell Say it All
A further indicator of the degree to which Stansberry Research can provide value to its subscribers is Porter Stansberry’s advice on investing in the insurance industry. As he points out, at the same time that his company was working on efforts to research the best targets for investment in the sector, two high-profile fund managers, David Einhorn of Greenlight Capital and Daniel Loeb of Third Point, were also wading into insurance. In the case of the two managers, they believed so much in the same ideas that sparked Stansberry’s interest that they actually took the additional step of launching their own insurance companies.
However, as Stansberry’s article points out, investing in insurance and operating an insurance company are two entirely different tasks. Even with the well-known successes of Third Point and Greenlight Capital under their belts, Stansberry Research’s P&C Insurance monitor found that Loeb and Einhorn’s insurance companies ended up third to last and dead last in the sector respectively. This again highlights the value that Stansberry Research’s work brings to investors over others in the financial industry. While other players were operating companies that lost 34% of their value, Stansberry’s picks were far outperforming the market (http://thedailyrecord.com/2018/01/15/gary-d-anderson-stansberry-research/).
Having insights that are in line with investors like Buffet and Graham is certainly a flashy claim to fame. Stansberry’s article on investing in insurance companies is just one instance of the value that the company’s been providing its readers for close to twenty years. With some of the financial world’s most innovative thinkers contributing to their publications, it’s also an instance that’s likely to be repeated many times in the future as well. With subscription rates climbing ever higher, it’s clear that Stansberry Research is providing a service that customers are finding to be of real value. With fresh advice from the company coming out on a regular basis, their subscribers can rest assured that the value of their subscription will last a long while into the future as well.