2/23/2014

How do you get rich? Piggyback the investments of private equity, Golden Gate Capital purchased 22% of Zales (ZLC) at $2 in 2010, Zales was just recently acquired for $21 dollar a share last week. 10 Bagger, 1000% plus return by just following the stock picks of private equity.

See chart below

William Meade
President of The Billionaires Portfolio.

2/22/2013

According to CNBC.COM

A Huge, mysterious bet has traders buzzing.

“Someone is risking $1.5 million on the hope that shares of Southwestern Energy will rise nearly 15% in the next 3 months.

In a massive, unusual options bet, one institutional player is making a wager that Southwestern Energy (SWN) will have an especially energetic run between now and June.

On Thursday, one options trader bought 15,000 June 47-strike calls for about $1 each. This trade won’t make money unless Southwestern rises above $48 by the middle of June, which is some 15 percent above current levels.

If the stock closes below $47 at June expiration, the entire $1.5 million spent on the trade will be lost.”

Here is my take on this huge million dollar options trade. Southwestern Energy (SWN) is a pure play on natural gas prices (and the company happens to be the lowest cost natural gas producer) and with natural gas prices hovering at their highest level in four years one has to believe Southwestern Energy will report their best earnings in years on May 2nd. (This is because the company’s May earnings report will incorporate this winters high natural gas prices of $5 and $6)

Therefore the stock could easily hit $50 on an earnings pop especially by June, when the option expires. Even Better the options are currently selling for only $.70 cents (nearly 30% lower that what the huge option trader paid) and if Southwestern Energy goes to $50, you will make more than 320% on this option trade.

Will Meade
www.billionairesportfolio.com

2/18/2014

$YINN, Direxion Daily China 3X Bull could have 50% upside over the next couple of months.. see chart below

Will Meade
President of the Billionaires Portfolio
www.billionairesportfolio.com

2/13/14

I found that if I took a basket of the biggest and best billionaire activist investors and hedge funds (many of the names we follow in our service, The Billionaires Portfolio) and bought just the stocks they owned, whereby they had initiated an activist campaign against a company, that basket returned 31% annualized over the past 12 years. The S&P 500 returned just 6.1% in the same period.

This means a $20,000 investment 12-years ago, would be worth over $500,000 dollars today. The same investment in the S&P 500 would just be worth $40,000 today..

More importantly, the stock picks of these top activists had only one losing year during the period and that was of course 2008.

In 2008, the stocks in this basket of the top activists lost 18.2% versus a loss of 37% in the S&P 500. So in our study, these activist investors beat the stock market by more than 4 times on an annualized basis or nearly 23 percentage points. But they lost significantly less than the stock market in a losing year (in fact, a terrible year).

To put this return in perspective, no other mutual fund, ETF or private money manager on the entire planet has a returned anywhere close to 31% annualized over the period. The best performing mutual fund in the world returned 14.5%, which is not even half of the annualized performance of our basket. And that same mutual fund lost more than 45% in 2008!

Bottom line: By just following my Activist Select Strategy, you would have outperformed over 20,000 mutual funds, 5,000 money managers and 1,000 ETFs. And you would probably be considered the best investor on the planet.

Yet my next study has even better news. In my next study I took the same top Activist Billionaire Investors and Hedge Funds but this time I only tracked the performance of the activist stocks that fit the following criteria: 1) They had to be a small cap, meaning a market cap under $2 Billion and or 2) had to have a low share price under $15 combined with a market cap of at least $500 million and the results were astonishing.

The average annualized 12 year return for, what I call the Activist Small Cap Strategy, was an amazing 52% annualized over the last 10 years. Again this compares to only a 6.1% annualized return in the S&P 500.

Therefore a $20,000 investment in the activist small cap strategy would now be worth more than $3,000,000 million dollars today

Let me repeat that, because I know it sounds too good to be true, but by only selecting the lowest priced and smallest cap stocks owned by the best activist investors and hedge funds $20,000 investment in 2002 would be worth more than $3,000,000 million dollars today. Of course these huge returns come with a more volatility, yet this activist small cap strategy still had only one down year (2008) over the last 12 years, another amazing statistic.

So there a couple of conclusions you should come away with from this study. First as I have told you before there is no more powerful strategy in the world from a risk reward perspective than piggybacking the stock picks of the world’s best activist investors and hedge funds. Secondly Activist investors do not need the stock market to produce these huge annual returns as proven above, even when the market went through a 10 and 12 year period of low to medium single digit returns, the stock picks of these activists still produced huge market beating returns of 31% to 52% a year!!

Will Meade
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor

2/11/2014

I receive hundreds of emails a week asking me about trading advice, but one email that I received recently really made me think.

It was from a student at one of the top business schools in the world who wrote me a very passionate and eloquent email about options trading, that it took me weeks to think about how to answer him.

His basic question was how do I learn how to trade options?

He told me he had watched videos, read newsletters, books talked to brokers at Morgan Stanley but still felt confused as ever on how to trade options.

So I wanted to share with everyone what I wrote to him plus some other advice that I have learned over 15 years of trading and working for some of the top hedge funds and research firms.

1) Only trade options with money you can lose, meaning never ever bet the house on an option, use 5% to 10% at max of your trading account for options.

2) Do not follow options tips from newspapers, even the prestigious Barrons, and their nice and creative options writer Steven Sears is not a good mentor. Mr. Sears is a good writer, but he is not an options trader, I have written him at least 6 times about mathematical errors in his options columns and mistakes, he seems to think that you can make more than 100% selling an option, its mathematically impossible, yet the editors allow it… Scary huh..

3) Do not follow option tips from Floor Traders, yes traders who worked on the floor of the CBOE or the NYSE or AMEX exchanges
have traded a lot of options, but their scalpers who pay little if any commission or spread on an options trade, so you will
never be able to replicate their trading technique unless you are on the floor. Moreover 99% of floor traders make their
money off deal flow and spread, very few if any take outright positions in options. So their advice is simply not applicable
to the regular investor.

4) Do not trade options or take options advice from full service brokerage firms, for two simple reasons: Brokers are salespeople they make money regardless if you win or lose on your trade, and more importantly they charge huge commissions as much as $100 per trade. There is no worse place to trade options than at a full service brokerage firm.

5) Do not take options advice from newsletter gurus who spam with you promotions, they have no skin in the game and they have blown out more accounts than they have profitable trades. Remember really good option trades are rare, so anyone telling you they can consistently make money trading options is not being truthful.

So where do you go to learn about options or how trade options, let me share with you the letter I wrote to the young business school student the other night.

Dear,…..

It looks like you are on a great path to be a successful options trader.

I honestly think the best way to learn about options is trial by fire. Meaning either paper trade or trade any money you have so you can experience the ups and downs of the market.

Trading is very emotional, you need to see what type of trader you are?

Are you patient and can take drawdowns- then try and use longer dated options where there is a catalyst that could reprice the stock before the option expires. That is how we trade options in our service at The Billionaires Portfolio. But these types of option trades are rare so you have to be very patient.

If you are a short term trader use deep in the money options, 1 to 2 months out maximum and buy calls on popular and market leading stocks (Apple, Google, Twitter, Facebook etc.) after major selloffs and use limit orders and Good Till Cancel Orders. If you don’t know what this is google it and learn it!

Finally there is no magic bullet for trading options, so you have to be flexible and adjust your strategy and temperament to the current market conditions.

Yet options will always be popular, because of the huge profit potential that can be made off a good options trade (100% 500% 1000% and yes many of the greatest hedge fund traders and hedge fund managers started their career and funds with huge options trades that not only made them rich but put them on the map as well.

So stay tuned as I will continue to talk about options trading and strategies on this blog.

Will Meade
President of The Billionaires Portfolio

1/31/2014

If you ever wanted to buy Apple (AAPL) now is the time. Technically, Apple has the best short term bullish trading set up I have seen all year.

Apple today just bounced off the psychological $500 round number level. Actively traded stocks always find support or resistance at round numbers, because there is a lot of trading activity that occurs at round numbers.

Secondly, the $500 level is the exact price that Apple broke from in Late October, and as most chart watchers know previous resistance become support.

If Apple can hold above the $500 price today it is a very strong bullish reversal signal, and it also creates a great trading setup.

On Monday morning you can put a stop in $10 below Apple’s current price (at $490.50). If Apple holds above $500 today then I believe there is a greater than 90% chance it will go up to fill the gap to $550. That means you can risk $10.00 to make $50 or a 5 to 1 risk reward if Apple closes above $500 today (Monday).

You should take profits or put a limit order in at $550 as well, in order to achieve the 5 to 1 risk reward trade.

For aggressive traders you can buy a $500 February Apple Call Option, or mini apple call option (remember a mini option is much cheaper and gives you the right to hold 10 shares of Apple’s stock not a 100).

Either way if you buy the stock or buy a February Apple call option, the risk/reward of being long Apple here at $500, is just too good to miss.

Furthermore, Billionaire Carl Icahn just spent $500 million of his own money purchasing apple stock at or around $500 as well. Its hard to second guess a man who is averaged 27% a year for over 51 years and is worth $20 billion today.

At billionairesportfolio.com our specialty is finding deep value stocks that have a catalyst at work.

One of our favorite “deep value screens” not only identifies cheap stocks, but also situations where a rich, influential investor has taken a significant stake. As a shareholder, the presence of this type of investor can mean you have a partner on your side, working everyday to push management to unlock value in the company.

Selecting deep value stocks, with the presence of an influential investor that is hell-bent on unlocking value, is a very powerful formula. It’s especially powerful when we find situations where the big investor is down on his investment. That tends to raise their sense of urgency and their aggressiveness with management.

Here are four stocks that currently meet these criteria:

1) J. C. Penney Company, Inc. (JCP) – Billionaire David Tepper owns JCPenney at much higher price than where JCP currently trades today. According to my estimate the average price Tepper paid for JC Penney is around $10 a share. If you bought JC Penney today you are getting a 34% discount to what billionaire David Tepper paid for his shares.

1) Transocean (RIG) – Billionaire Carl Icahn owns almost 6% of this oil and gas exploration company. Icahn’s average cost is $50. The stock currently sells for $47. This means you are getting a 6% discount to what Icahn paid for this stock. To even sweeten the deal, RIG currently pays a 5% dividend.

3) Sony Corp (SNE) –The average price Billionaire Dan Loeb paid for Sony is more than $18 a share. If you bought Sony today you are getting a 5% discount to what Loeb paid for his shares. Moreover, Sony is selling at distressed valuation levels. It has a price-to-sales of 0.19 and price-to-book of 0.61.

4) Hologic, Inc. (HOLX) – Two top Billionaire Activists own more than 10% of this healthcare stock. The two Billionaires, Carl Icahn and Ralph Whitman of Relational Investors paid an average cost of $23.10 for Hologic. That means if you buy Hologic today you are buying it at 6% discount to what these top Billionaire Investors paid for their shares.

To piggyback our actively managed portfolio of deep value stocks that are owned by the world’s best billionaire investors, follow us at www.billionairesportfolio.com

1/27/2014

Retail-Apparel stocks have been hit hard due to the extreme cold weather conditions that have plagued most of the United States over the last two months, but a bottom could be finally in.

American Eagle (AEO) one of the biggest and most profitable teen retailers had strong insider buying today. Jay Schottenstein, the company’s interim CEO and Chairman stepped up big and recently purchased over 500,000 shares or more than $6 million dollars of the American Eagle’s stock at around $12.84 a share. This purchase occurred some time over the last two days.

Any insider who purchases over $5 million dollars worth of his company’s stock is always a significant and bullish sign — especially when the purchase comes after the stock has been in a significant decline.

Also, technically it looks like American Eagle has formed a double bottom at $13, with a bullish outside day — a major bullish reversal signal. With this, we may have seen the bottom in all retail and apparel stocks, and if so the risk reward of buying retail apparel companies has never been better.

1/26/14

His fund has generated a 58% annualized return over the past five years.

And he did it during one of the worst stock market crashes in history. In 2008 when the S&P 500 lost 37%, his fund lost only 9%. When the stock market rebounded in 2009, his fund returned 264.38% versus a 26.46% return in the S&P 500. He beat the S&P 500 by more than 10 times. That year, he had 2 stocks that went up more than 1,000%.

To put a 58% annualized return in perspective, no other fund in the world has a better 5-year track record. This means over the past 5 years not one single mutual fund (over 18,000 funds) or a single equity hedge fund (over 4000 funds) has better performance.

Even though he is the best fund manager fund on the planet (literally he has the number one fund in the world), he has completely shunned publicity and has kept his assets base very small around $40 million. This guy is a purist stock picker. All he cares about is his performance not about selling his fund.

He went to Johns Hopkins University — my alma mater. And you might be surprised to learn, he has no formal training in investments. He worked in the medical research field his whole life but according to his colleagues his real passion was always investing. He started his fund in his early 40′s.

So how did he do it? How does he do it? He has a rather simple stock picking formula. He rarely buys more than 10 to 20 stocks in a year. His formula is so rigorous and selective that very few stocks meet his requirements. But he has more 100%+ winners than any fund manager I have ever seen.

As someone who has spent more than 15 years analyzing the world’s greatest hedge fund managers and billionaire investors, I have never seen a fund manager that has these stock picking abilities.

Because this fund manager is so reclusive and his fund is so small, information is hard to find on him. I spent over 100 hours analyzing and pulling up every document I could find on his fund, and researching and documenting every stock pick he has ever made. For my Billionaire’s Portfolio service, this is a new manager I’ve added as a candidate to our stable of the world’s best investors that we follow — even though he doesn’t fit my typical mold of the ultra-rich activist. He has a record of picking stocks that produce multiples on his investment, and that’s precisely what we look for in our portfolio.

Will Meade
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor

What continues to be one of the most obvious trades in the world, yet many investors are missing, is to short gold.

Today Morgan Stanley cut their price target for gold in both 2014 and 2015.

Earlier last week Goldman Sachs cut their price target.

Japan has come out and said they are selling gold and will continue to sell gold throughout the year.

Anyone long gold here is playing a fools game. Stocks are and will continue to be the only game in town. Holding gold or buying gold will only lose you money. It’s a QE fear trad — a hyperinflation fear trade. QE has come (three times) and now is nearing an end. Guess what? No inflation. Sell it now before you are selling it at pre-QE levels ($800).

So next time that gold newsletter huckster tells you gold is bottoming for the 8th time in the past year. Throw it in the trash. Pull up a gold chart from the mid 1980′s to late 1990′s. Gold gave you negative annual returns for almost 15 years. That’s like paying a tax, holding an investment that loses money every year.

1/21/14

The Biotech stocks in our Billionaires Portfolio have returned an annualized 129%. One of our biotech stocks up almost 270% and another biotech stock up more than 70% in less than 2 months.

These stocks have the ability to produce multiple returns, but they have little if any correlation to the overall stock market. Last week, the stock market had its worst one day performance since November. Yet, the biotech stocks in our portfolio gained on average 6% versus a negative 1.5% for the S&P 500.

In 2008 when the S&P 500 lost 37%, the small cap biotech sector actually gained a positive 9%. In 2011 when almost every fund lost money and the market was up a meager 3%, the biotech sector was up 10%. I have two top billion dollar biotech hedge funds in my database that have produced an average annualized return of 45% a year since 2002, without one losing year.

I honestly know of no other investment vehicle that can claim those results. Why? Because biotech stocks are the ultimate event-driven investment. It’s all about FDA approvals, results from clinical data and news of partnerships. That’s the driver and it can unlock value in a rising or falling stock market — it doesn’t matter.

The secret to investing in biotech stocks: follow the smart money. That is to only invest in the biotech stocks. You want the stocks owned by the world’s best billionaire biotech investors and hedge funds.

Will Meade
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor

1/21/14

Everyone knows Twitter (TWTR) has been one of the most volatile IPO’s in decades.

Twitter shares went public at $45, slipped to $40, and then went on a huge run $75 in less than a month.
Now TWTR has formed what traders call a bullish flag or pennant pattern. This pattern occurs after a huge run up in a stock, then the stock pauses and drifts down slowly, as the stock becomes oversold and buyers become exhausted.

The stock will complete the pattern if Twitter rises above $62.50. Once it moves above that price, it should rapidly back up to $75, the stock’s recent highs. Moreover, Goldman Sachs has just raised its price target on Twitter from $46 to $65, a 41% increase on 1/13/2014.

Everyone knows price targets are just made up numbers that analysts create. But the one important thing you should pay attention to when an analysts move their targets, is the percentage move in the price target. In this case, a 41% price target hike is huge move and is extremely bullish.

Now, Goldman is known to move stocks, especially the sentiment on a stock. And as I said, technically, I believe Twitter will trade back up to test its recent of high of $75 very soon, probably before the end of the month is over.

Will Meade
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor

1/19/14

If your sitting in cash and scared to come back into to the stock market, I have some advice for you.

Let’s be honest the markets have become complicated. The so called safe haven investments, treasury bonds and gold, lost 8% and 28% last year, respectively. And the stock market is sitting at all time highs making it more difficult to find value.

Even a bigger problem, interest rates and savings rates are so low that even putting your money in a savings account or a CD will still lose you money. Saving accounts, money market funds and CD’s are yielding less than inflation.

This environment is telling you, you must invest in stocks. But you can’t just buy some index fund or mutual funds that exposes you to potential losses of 20% to 30%. Instead you need to invest tactically in strategies that have good risk/reward profiles.

One of these low risk-high reward strategies is buying deep value stocks – but only when there is a catalyst in play.

Undervalued stocks are usually beaten down in price, selling at their 52 week low or even a 3 or 5 year low. They are usually selling at a discount to the value of their assets, their future cash flows or revenues and they have usually have a lot of cash.

Now, a catalyst is what helps reprice the stock and narrows the gap between the stock’s intrinsic value and its current undervalued share price. The strongest catalysts are when activist or influential investors own the stock and are pushing on the company and management to instantly create shareholder value by: 1) forcing them to buy back their stock, 2) sell some of their assets or 3) even sell their company. Other catalysts can be both significant insider buying and companies that have hired investment banks to help them find a buyer for their company.

When you combine these forces together, deep value stocks with catalysts, you get one of the strongest risk/reward investments out there.

Also for people who are scared to get back in the stock market these levels, these types of stocks should make you feel comfortable. You are buying stocks that are cheap in price, and you also have a catalyst present that can put a floor under a stock and begin pushing the stock higher. And that mix can quickly change investor perception surrounding the stock.

Will Meade
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor

1/13/14

I found that if I took a basket of the biggest and best billionaire activist investors and hedge funds (many of the names we follow in our service, The Billionaires Portfolio) and bought just the stocks they owned, whereby they had initiated an activist campaign against a company, that basket returned 31% annualized over the past 12 years. The S&P 500 returned just 6.1% in the same period.

This means a $20,000 investment 12-years ago, would be worth over $500,000 dollars today. The same investment in the S&P 500 would just be worth $40,000 today..

More importantly, the stock picks of these top activists had only one losing year during the period and that was of course 2008.

In 2008, the stocks in this basket of the top activists lost 18.2% versus a loss of 37% in the S&P 500. So in our study, these activist investors beat the stock market by more than 4 times on an annualized basis or nearly 23 percentage points. But they lost significantly less than the stock market in a losing year (in fact, a terrible year).

To put this return in perspective, no other mutual fund, ETF or private money manager on the entire planet has a returned anywhere close to 31% annualized over the period. The best performing mutual fund in the world returned 14.5%, which is not even half of the annualized performance of our basket. And that same mutual fund lost more than 45% in 2008!

Bottom line: By just following my Activist Select Strategy, you would have outperformed over 20,000 mutual funds, 5,000 money managers and 1,000 ETFs. And you would probably be considered the best investor on the planet.

Yet my next study has even better news. In my next study I took the same top Activist Billionaire Investors and Hedge Funds but this time I only tracked the performance of the activist stocks that fit the following criteria: 1) They had to be a small cap, meaning a market cap under $2 Billion and or 2) had to have a low share price under $15 combined with a market cap of at least $500 million and the results were astonishing.

The average annualized 12 year return for, what I call the Activist Small Cap Strategy, was an amazing 52% annualized over the last 10 years. Again this compares to only a 6.1% annualized return in the S&P 500.

Therefore a $20,000 investment in the activist small cap strategy would now be worth more than $3,000,000 million dollars today!

Let me repeat that, because I know it sounds too good to be true, but by only selecting the lowest priced and smallest cap stocks owned by the best activist investors and hedge funds $20,000 investment in 2002 would be worth more than $3,000,000 million dollars today. Of course these huge returns come with a more volatility, yet this activist small cap strategy still had only one down year (2008) over the last 12 years, another amazing statistic.

So there a couple of conclusions you should come away with from this study. First as I have told you before there is no more powerful strategy in the world from a risk reward perspective than piggybacking the stock picks of the world’s best activist investors and hedge funds. Secondly Activist investors do not need the stock market to produce these huge annual returns as proven above, even when the market went through a 10 and 12 year period of low to medium single digit returns, the stock picks of these activists still produced huge market beating returns of 31% to 52% a year!!

Will Meade
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor

1/6/2014

Warren Buffett once famously said in a BusinessWeek interview that he could return 50% a year if he was managing less than $10 million. Moreover, he guaranteed he could do it.

So if you are not returning at least half of what Buffett said he could do on average, then you are failing as an investor – or your financial advisor/broker is failing you.

With that in mind, here’s my rant/advice. Make 2014 different …

First, fire your financial advisor, stock broker, financial planner or whatever they call themselves nowadays! Yes, I know it’s your golfing buddy, your neighbor, the dad of your kid’s friend, etc…

But let’s be honest, he lost you 40% to 50% of your money in 2008. And even more offensive, in one of the best bull market runs in decades from 2009-2013, I’m willing to bet he only returned you single digit annual returns. Consider this: Even the most basic low cost stock market index funds returned 14% a year annualized over the past five years.

How about 2013? A low cost stock market index fund returned more than 25% in 2013. Your account returned only 9% to 10%, right? Why? Because your broker/advisor diversified you into bonds and gold, which both produced negative returns last year. Worse, they had you in cash, all of which substantially ate away at your portfolios returns.

So quit paying thousands of dollars every year in fees on your account to someone who has failed you.

You paid this so called financial expert to help you beat the market and instead he just siphoned huge fees and commissions out of your pocket, while exposing you to above average risk.

Bottom line, no one deserves to get paid if they can’t perform. I don’t care what industry or profession you are in, when you don’t perform, you get fired. It’s that simple. I’ll let you in on a little secret. It’s not even their fault. It’s a business model that has been set up to use and abuse you. He is just there to sign up accounts. It’s highly likely he knows nothing more about investing than anyone else you pass on the street everyday. So get rid of your financial advisor and save yourself $3,000-$6,000 every year per $100k in assets.

Okay, so what do you do? Take control of your money. Open up an online brokerage account. You will pay cheap commissions — $5 a trade or less. Folks, it’s 2014! No one who has a computer, smartphone, iPad or laptop needs a guy down the street or a guy sitting in some call center milking them for fees and huge commissions on their investable assets. It’s not 1980, where you have to call your broker for a stock quote. Now you can watch your portfolio, get all of the information possible, and even buy or sell a stock right from your phone. Wake up and use modern day technology. Save yourself a bunch of money.

Will Meade
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor

12/27/13

What do Apple, Office Depot and Facebook have in common? I’ve used all three of these stocks in my stock replacement strategy.

My stock replacement strategy is a technique I use to get maximum leverage, while owning some of the greatest and highest potential stocks in the world. It allows me to purchase stocks like Facebook and Apple at 1/10 or 1/20 the price. That leverage makes gains of 100% or even 1000% possible.

Now, for those readers of my blog, you’ll remember this technique was taught to me early in my career by a former Goldman Sachs Partner and Harvard MBA, during my days trading for a top billion dollar hedge fund.

I just recently used this strategy to make a 90% gain in less than 5 months on Office Depot Call Options for my subscribers in my premium trading service, The Billionaire’s Portfolio.

We created The Billionaire’s Portfolio as a way for the everyday investor to use the same technique and strategies that the greatest and richest billionaire hedge funds and investors in the world use. And it has been a great success.

Why people fail trading options

Ninety-five percent of people who trade options lose money. This is not my statistic. This is an actual number from the option exchanges. This remarkably high losing rate comes as a result of people who do not understand how options work. You should only trade options when you have an edge. If you don’t have an edge, you are throwing your money away.

My stock replacement strategy gives you an edge every time you trade an option. Here’s how: I only take a position when I know that there is an event or an influential investor positioned to reprice the stock. I am not throwing darts. I am betting on highly probable events. Normally, I want to see several events/catalysts lined up, with the chance of altering the course of the stock, before my option expires.

When you combine my stock replacement strategy with event driven- activist investing, you greatly improve the success rate on an option. Just ask the customers of my Billionaires Portfolio service. If you want to learn how to trade options and stocks like the best and richest hedge funds/ Billionaire investors in the world, and if you want to learn about my stock replacement strategy, click here The Billionaire’s Portfolio.

Will Meade
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor

12/23/13
U.S. stocks continue to print higher record highs. Yet one of the most widely held stocks in the world, Apple Inc. (NASDAQ:AAPL) remains significantly off of its peak value of $705 per share, reached in late 2012.

I have been an outspoken analyst on Apple. I’ve followed Apple closely since its revival in the early 2000s, when the large hedge fund I worked for as an analyst owned Apple shares under $10.

For those of you that don’t know me, my online portfolio, called The Billionaire’s Portfolio, is made available for subscribers to piggy-back the world’s greatest billionaire investors. The portfolio has beaten the stock market in 2013 and has produced three triple digit winners this year.”

Now, more on Apple …

I was very bearish on Apple in late February of this year, an unpopular view. Apple went on to drop 25% in the following two months. I then flipped the switch a month later and said the bottom was in. Apple shares were trading $433.

Now Apple shares trade back above $500 and despite the persistent strength in the broad stock market, investors seem to lack similar exuberance for one of the leading brands in the world. Of course, Apple leadership has changed, and it’s highly anticipated product roll-out reportedly failed to impress investors. So for the first time in a long time, there is growing scrutiny surrounding the future for the company and the outlook of its stock.

Contrary to that scrutiny, I have become quite bullish on the stock and below are eleven reasons why I think Apple will reach $700 in 2014.

1) “Apple is cheap relative to its historical valuation. Apple’s average 10 year P/E ratio is 17.5 times earnings. At 17.5 times earnings this would put the stock around $700 a share.

2) Technically, Apple just completed a major trend break on a weekly chart which projects a price target for Apple of $680 to $700.

3) Apple has a higher dividend (2.27%) than both the S&P 500 Index (NYSEARCA:SPY) (1.93%) and Dow Jones Industrial Average (NYSEARCA:DIA) (2.25%). Therefore Apple is not only a value stock but also an income stock as well.

4) The world’s greatest investor and activist, Carl Icahn owns 3.9 million shares of Apple, and will continue to push the company to create shareholder value by forcing Apple to buy more of its stock back or pay out a special dividend.

5) According to Research firm Bernstein: Value based mutual funds have been buying Apple at a record pace. Now 36% of value based mutual funds with assets over a $1 billion have a position in Apple. That’s a 40% increase from a year ago.

6) Wall Street loves Apple. Of the analysts that cover Apple, 72% have a strong buy on the stock.

7) 75% of Wall Street analysts are projecting Apple to beat earnings expectations in December. That tends to kick-start momentum in a stock.

8) Apple is significantly cheaper than the S&P 500 Index. Apple sells for 13 times trailing earnings and 10.9 times next year’s earnings. The S&P 500 trades at 18.7 times trailing earnings and 15.9 times next year’s earnings.

9) Apple is the most loved stock by the “smart money.” According to Citigroup, Apple is the most owned stock by hedge funds.

10) Apple represents more than 12% of the Nasdaq 100, yet is lagging the Nasdaq 100 by more than 28% year-to-date. Expect hedge funds to buy Apple and sell the Nasdaq 100 Index in search for this gap to close.”

11) Tapping into emerging growth markets, Apple with its announcement of its China Mobile deal today, will now have access to billions of new customers which should help the stock grow its revenues and earnings over the next year.

We have been telling our readers since November of 2012 to sell gold on every rally and buy stocks on every dip. And I called the bottom in Apple as well. Furthermore, our process of buying the dips on the world’s best billionaire investors and hedge funds stocks picks has rewarded our investors with stocks that have doubled and tripled, including one stock that we booked a 240% profit on in less than 7 months.

Will Meade
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor

12/18/13

Looking for high potential stocks to put in your portfolio stocking for Christmas? Look no further than the retail sector.

In our research at billionairesportfolio.com we follow the moves of billionaire investors, and we tend to find them frequently involved in stocks that are beaten down and in need of a turnaround

Why do they like these stocks? Because these situations tend to have the following attributes: 1) the potential to return 100% or more inside of one year, 2) a catalyst present that can spark momentum in a stock, and 3) Wall Street sponsorship. And given the track records of the rich, influential investors that we follow, that proves to be a formula for consistent, market-beating success.

For the first time in a long time, expectations are for solid economic growth in the coming year (close to 3%). Right now, we are finding more and more names hitting our radar screen from the retail sector. Plus, given the trend of better data in the U.S., there’s a good chance we could see a positive surprise to that 3% growth number. Faster growth will improve the job market, improve confidence and bolster consumer spending. In this scenario, retail stocks will be among the biggest beneficiaries.

With this in mind, we ran the following screen on stocks in the retail sector, to find stocks that analysts think can double in the price in the next year. This screen can give us a starting point for identifying a situation where a billionaire investor is involved and pushing for a turnaround.

Here they are:

1) Wet Seal (WTSL) has a current share price of $2.58. The consensus analyst target price is $5.50. That gives us a “street projected return” of 113%.

2) Pacific Sunwear of California
(PSUN) has a current share price of $3.20. The consensus analyst target price is $6.50. That gives us a “street projected return” of 103%.

3) J.C. Penney (JCP) has a current share price of $8.32. The consensus analyst target price is $18. That gives us a “street projected return” of 116%.

4) Francesca’s Holdings (FRAN) has a current share price of $17.64. The consensus analyst target price is $36. That gives us a “street projected return” of 104%.

5) American Apparel (APP) has a current share price of $1.05. The consensus analyst target price is $2.50. That gives us a “street projected return” of 138%.

To learn more about high potential stocks owned by billionaire investors you can follow us at billionairesportfolio.com.

Will Meade
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor

12/2/13
Did you realize that Warren Buffett returned 81% a year from 1980 to 2003?

Guess what? He didn’t do it by buying Wall Street darlings like an Apple Inc. (NASDAQ:AAPL) or a Facebook Inc (NASDAQ:FB). Buffett accomplished this amazing feat by using a strategy called “takeover speculation.” He bet big, and with leverage, on stocks he thought had a very high likelihood of being acquired.

The average person on the street thinks Warren Buffett is a safe value investor who holds stocks forever. This is only partially true. The other half of his portfolio, and the part of his strategy that has juiced the biggest returns for him, was takeover speculation, where he used significant leverage and options to produce 80+% annualized for 24-years.

Buffett said in a New York Times interview that he made the greatest returns ever in his portfolio employing this takeover speculation strategy.

But Buffett ran into a problem. He became too big. He had to stop using this strategy because the assets he was managing, which in 2003 reached $50 billion, were too big to successfully execute it.

He said in a BusinessWeek article that he guaranteed he could make at least 50% a year if he were managing smaller assets. And he can back it up. We have documented proof from Berkshire Hathaway letters, and from an academic paper on Buffett, which showed that he produced an 81% annualized return over a 24 year stretch.

For those who are interested in what 81% annualized compounds to over 24-years here are some scenarios:

1) A $1,000 account compounded at 81% for 24-years would turn into $1 billion.

2) A $10,000 account compounded at 81% for 24-years would turn into $15.2 billion.

3) A $20,000 account compounded at 81% for 24-years would turn into $30.2 billion.

Learn more about me and how we follow Billionaire Investors into stocks by visiting the Billionaires Portfolio.

Will Meade
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor

11/23/2013

Let me share with you an incredible secret.

The world’s greatest investor is not Warren Buffett. Sure, Buffett is one of the richest men in the world. But there is a man who will overtake Buffett as the richest investor. His name is David Tepper.

David Tepper has the best track record of any investor in the world. Over the last 20 years he has averaged a 40% annual return.

Let me repeat that again because it’s a staggering number. David Tepper has averaged 40% a year over the last 20 years.

Let me put this in perspective for you. If you would have invested $10,000 with David Tepper in 1993 you would now have an incredible $8.3 million. Now, that highlights the two keys to building wealth as an investor. You need big returns. But also, consistent returns. And you need to compound those returns overtime.

That is why David Tepper is the world’s greatest investor. He has done it for a long time. And continues to do it. In what has been considered a tough market.

That is why David Tepper is worth over $7 Billion dollars at only 55 years old.

Now, here is where it should be particularly interesting to you.

David Tepper is just like you!

David Tepper is the true American Dream. He is the stereotypical average American male. He is a little overweight. He is balding. He is average height. And believe it or not, he is not some hot shot Ivy League grad or rocket scientist with a PHD from MIT.

David Tepper is just a graduate of a state school, the University of Pittsburgh. I say this not to disparage his education. I say this because it doesn’t really matter if you went to Harvard or Yale or Pittsburgh. I have a pretty fancy degree. But I can tell you this: It learned nothing about becoming a good investor. I’m a good investor because I have common sense. And because I know how the system works.
The masses will always lose money or, at best, underperform. And that creates an opportunity for me and those like me.

I say all of this to emphasize that you can be, and should, be returning 40% a year like David Tepper.

I have told you numerous times in my blog that if you are not fully invested in stocks and if you not returning 30% to 50% a year then you are failing at investing. If you were in school you would get an F.

But look it’s not your fault. You have been suckered and sold by Wall Street. You’re invested in mutual funds that will never ever make you anything more than 6% to 7% returns on average.

You probably have your money with a stock broker, who is ripping you off by charging you large commissions, spreads, sales fees, plus another 2% to 3% management fees while giving you 5% annual returns – while putting your money at risk of being halved.

So I don’t blame you. But I will blame you if you do not change your investing strategy. If David Tepper, the stereotypical average American male can return 40% a year simply buying stocks, then so should you.

But you need a game plan to do this. And I can help you. My blog and my premium research service The Billionaires Portfolio is built on the same philosophy that David Tepper uses. I like buying cheap undervalued stocks with catalysts and holding them to make triple digit returns. My goal is just like Mr.Tepper’s: To make all of us multi-millionaires by compounding our money at 30% to 50% returns annually.
So fire your broker. Sell your mutual funds. And learn from the world’s greatest investors how to compound your money at 30% to 50% a year.

Will Meade
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor

11/8/13

Finding stocks with asymmetrical risk-reward characteristics is at the core of successful deep value investing. And it’s a key ingredient in the success of our Billionaire’s Portfolio service.

Another important ingredient in our process is identifying stocks with these characteristics that also have the presence of an influential investor. When we have a deeply distressed stock, and a bulldog investor that owns a huge stake in the stock, our chances of a positive outcome increases dramatically.

With that said, in addition to searching through SEC filings for investors that are building controlling
interests in companies, we like to run a series screens to search for stocks that have a 100% to 200% potential upside, combined with limited downside risk. Many times, when we find stocks that fit the bill, we will find a big investor already involved.

In running our screens for the first week of November, the following five stocks have hit our radar as high potential, deep value candidates. Plus they all have the presence of a huge private equity firm:

1) Dice Holdings, Inc. (NYSE:DHX) has a current share price $7.49. The $15 billion dollar private equity firm General Atlantic, LLC owns more than 15% of this stock.

2) Noranda Aluminum Holding Corp (NYSE:NOR) has a current share price $3.04. Apollo Global Management, the $22 billion dollar private equity firm, owns more than 48% of NOR.

3) Red Lion Hotels Corporation (NYSE:RLH) has a current share price of $6.00. The private equity firm Columbia Pacific Advisors owns more than 28% of this stock.

4) Sun Bancorp Inc. (NASDAQ:SNBC) has a current share price $3.20. The private equity firm Invesco Private Capital owns more than 24%.

5) Exco Resources Inc. (NYSE:XCO) has a current share price $5.41. The $15 billion dollar private equity firm Oaktree Capital Management owns more than 16% of this stock.

This gives us a great starting point to identify a stock that may be deeply undervalued with the added kicker of an influential shareholder on board.

To receive our weekly email of top value stocks that hedge funds, private equity firm and/or billionaire investors own, email us at info@billionairesportfolio.com.

Will Meade
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor

10/25/13

1) A study out of Citigroup’s quantitative research group showed one of the best predictors of an earnings beat is a stock’s prior one-month performance going into the earnings report. Apple is up more than 10% over the past month, versus a 3.5% move in the S&P 500.

2) Technically, Apple has just broken out of an intraday bullish flag pattern. And it’s just broken the neckline of a bullish inverse head and shoulders pattern projecting a near term price target for Apple of $570. That out-performance indicates smart money is jumping into this stock before Apple reports earnings on Monday.

3) Analysts have raised their target price over the past week on Apple. Ed Parker with Lazard Capital raised his price target to $570 and reiterated a buy rating on Apple. Cantor Fitzgerald’s Brian White upped his Apple price target to $577 and believes the stock could surprise on the upside. And Goldman Sachs’s Bill Shope reiterated a Buy rating on the stockand a $560 price target last week. These analyst moves are usually a good predictor of a stock set to beat earnings expectations.

4) Apple now has a billionaire activist, Carl Icahn, who is hell-bent on forcing the company to deploy its cash to buy a huge chunk of stock back. Don’t be surprised if Apple on Monday announces another huge stock buyback or increase in its dividend payout.

5) Apple finally has price momentum and product momentum. After Apple’s Media day this week, people were excited for the first time in over a year about Apple’s new products, especially their new more powerful mini iPad. All of this shows that Apple is getting its buzz back. And this means the company will probably forecast better sales and earnings in 2014.
If you want to know what the world’s best Billionaire Investors and Hedge funds are buying, then you can visit The Billionaire’s Portfolio.

Will Meade
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor

10/17/13

With the stock market tracking back toward record highs, Apple back above $500 and Facebook working on a double for the year, finding value can be more challenging than finding the latest hot stock.

As I’ve shared in recent weeks, at billionairesportfolio.com we constantly scour the universe of stocks, through our many proprietary screens, to uncover undervalued stocks that have the potential to produce multiples on our investment. And despite the run-up in broader stocks, we continue to find great opportunities.

One of our favorite “deep value screens” not only identifies cheap stocks, but also situations where a rich, influential investor has taken a significant stake. As a shareholder, the presence of this type of investor can mean you have a partner on your side, working everyday to push management to unlock value in the company.

Selecting deep value stocks, with the presence of an influential investor that is hell-bent on unlocking value, is a very powerful formula. It’s especially powerful when we find situations where the big investor is down 10% or more on their investment. That tends to raise their sense of urgency and their aggressiveness with management. And that tends to result in bigger winners.

With all of that being said, here are five stocks that some top hedge funds and billionaire investors are down on, by 10% or more:

1) Transocean (RIG) – Billionaire Carl Icahn owns almost 6% of this oil and gas exploration company. Icahn’s average cost is $49. The stock currently sells for $45. This means you are getting a 10% discount to what Icahn paid for this stock. To even sweeten the deal RIG currently pays a 5% dividend.

2) J. C. Penney Company, Inc. (JCP) – Four different hedge funds own this stock, and all four paid a much higher price than where JCP currently trades. Glenview Capital, Perry Capital, Tiger Consumer and Soros Fund Management together own more than 15% of this stock. The average price that these hedge funds paid for JC Penney is more than $13 a share. If you bought JC Penney today you are getting a 41% discount to what these top hedge funds paid for their shares. Moreover, JC Penney is selling at distressed valuation levels. It has a price-to-sales of 0.13 and price-to-book of 0.68.

3) Dynavax Technologies Corporation (DVAX) – Two top hedge funds that own more than 8% of this biotech stock. The two funds, Orbimed Advisors and RA Capital Management, are both biotech focused hedge funds run by MDs and PhDs. They paid an average cost of $3.10 for Dynavax. That means if you buy Dynavax today you are buying it at 61% discount to what these top biotech hedge funds paid for their shares.

4) RadioShack Corp (RSH) – Three top hedge funds own Radioshack at much higher prices that what the stock is selling for today. Highfields Capital Management, top private equity firm Blackstone Group and Donald Smith & Company Inc. own more than 15% of RadioShack. The average cost these three hedge funds paid for RadioShack is $4.25. That is more than 20% above what RadioShack is selling for today. If you piggyback these top funds into Radioshack today you are paying a 20% discount to what these top investors paid for this stock.

Will Meade
President of The Billionaires Portfolio
Providing Sophisticated Hedge Fund Strategies and Analysis For The Everyday Investor

In our research at billionairesportfolio.com, we have looked at every private equity and corporate takeover deal going back more than 15-years. In our analysis of that history, we have found over ten statistically significant and predictive factors for companies that tend to be acquired.

At a high level, if you want to try to find companies that may be takeover targets, you want to look at stocks in sectors where there have been a lot of recent and historical takeover activity. Of course, a company that has little or no debt, plus lots of cash flow is very attractive. And if you can find a stock that satisfies those factors and is trading near a 52-week low, you have a very viable candidate.

Based on recent buyout activity this year, no sector is hotter for takeovers than retail . Still, a number of retail stocks are selling near their 52-week low and many of these companies have little or no debt, and lots of cash flow.

Below is a list of retail companies we think could be acquired for a significant premium in the next three to six months:

1) Aeropostale (ARO) has already seen private equity interest. Sycamore Partners recently acquired almost 9% of Aeropostale a month ago. Sycamore Partners has a history of taking companies private at a significant premium. Based on past takeover multiples in the retail sector, we believe Aeropostale could be acquired for as much as $15 a share. That would be a 66% premium to its current share price.

2) American Eagle Outfitters AEO +1.02% (AEO) has zero debt and currently is selling at very low multiples, based on enterprise value-to-free cash flow and enterprise value-to-ebitda. The company has a very strong brand name and is currently selling very close to its 52 week low of $13.14. When you consider previous takeover multiples in the retail sector, the incredible amount of free cash flow American Eagle generates (over $400 million last year), and the fact that they have zero debt, almost any private equity company should be interested in this stock. According to analysts, American Eagle is worth at least $20 on a takeover or a 52% premium from its share price today.

3) Body Central BODY -2.03% (BODY) is a retail company that focuses on young women’s apparel and accessories with stores located mostly in the east coast and south. The company has zero debt, a market cap of only $85 million and is selling right at its 52 week low of $5.15 (the stock price is currently $5.19). Based on previous takeover multiples in the retail sector analysts at Jeffries believe Body Central is worth more than $8 a shares on a buyout or a 54% premium from its share price today.

4) Francesca’s Holding Corp. (FRAN) is another female based accessory and clothing store with locations throughout the United States. The stock has zero debt and is currently selling near its 52-week low of $16.49 (the stock price is currently $17.08). Based on previous takeover multiples in the retail sector Francesca’s could be worth more than $26 on a takeover, or a 52% premium from its current share price.

Click here to find out more about these picks, our top weekly screens, and how to piggy-back on the moves of billionaire investors.

10/13/13

Average investors make a lot of mistakes. Among those mistakes, they spend so much time worrying about complex stock picking issues and unrealistic “win rates.” They ignore the very simple things that are fundamental to investing. Perhaps the biggest mistake investors make is ignoring the concept of diversification.

Now, I’m not talking about adding gold or Chinese stocks to your portfolio. A basic, yet powerful diversification tool is position sizing. Most people blindly buy a fixed amount of shares of a stock, regardless of the price of the stock, regardless of the volatility of the stock.

An easy way to position size is to give each holding an equal chance to perform for you. This means for
each position you buy, you allocate the same amount of money.

Let’s look at a simple example: Assume I have a $100,000 account with a portfolio of 20 stocks … if TEN of my stocks over the next year do nothing (trade sideways), SIX stocks go up an average of 30%, TWO stocks go up an average of 150%, ONE stock drops 50% and another stock goes to zero (a 100% loss).
Would you consider that a success or failure?

My guess is most average investors would consider it a failure. They held ten stocks that didn’t go up. One went to zero.

My take: If you could replicate the performance of that portfolio, year-in and year-out, over your entire you life you would be the best investor in the history of the world. And your wealth accumulation (just on compounding that initially $100k over a lifetime) would land you in the top 1/10th of 1% of the wealthiest people in the world.

So, let’s do the math on the above portfolio scenario.

On a $100,000 account 20 stocks equal weighted would mean that you would invest $5000 on each stock. So TEN stocks that went up zero would still be worth $50,000. The SIX stocks that went up on average of 30% would now be worth $39,000 (on $30,000 originally invested). The TWO stocks that went up 150% on average would now be worth $25,000 (on $10,000 originally invested). The one stock that dropped in half would be worth $2500 (on $5,000 originally invested), and the one stock that went down 100% would be worth zero ($5,000 loss).

Okay, so let’s add these values: $50,000 + $39,000 + $25,000 + $2500 +0 = $116,500

Our $100,000 portfolio is now we worth $116,500. That is a 16.5% annual return. That’s double the average historical return of the S&P 500. And a 16.5% annualized return, compounded on a $100,000 initial investment, goes to $177 million in 50 years.

So now you see the value of diversifying. And the easy way to get diversification is through position sizing.

Put simply: It increases your odds of making money. And making money is THE PRIMARY GOAL in investing.

10/7/13
In past weeks, I’ve talked about some simple, yet powerful screens we run at billionairesportfolio.com

The goal for all of our screens is to identify stocks where the potential reward greatly outweighs the risk, or stocks that have an asymmetrical reward to the risk taken. Finding stocks with these characteristics is the genesis of deep value investing. This is also a key criteria we utilize at the billionairesportfolio.com.

In addition to searching through SEC filings for investors that are building controlling interests in companies, we like to run a series screens to try and find stocks that have a 100% to 200% potential upside combined with limited downside risk.

Here’s another example of one of the top screens we use:

First, we look for companies with a market capitalization greater than $25 million. For the second level of the screen, the companies much have more than three analysts covering the stock. Third, there has to be more than three analysts that have a price target on the stock. Finally, we want to find stocks that are trading at a huge discount to analyst consensus price targets.

Anyone that has worked at a hedge fund or mutual fund knows that Wall Street analysts move stocks. Stocks that have consensus analyst price targets well above their current share price, have strong sentiment and Wall Street sponsorship which usually pushes these stocks higher in the short term.

In running this screen for this this week in October, the following five stocks have hit our radar as high potential, deep value candidates. These stocks have an average analyst price target that is at least 200% higher than its current share price.

1) Ceres Inc. (CERE) has a current share price $1.46. The consensus analyst target price is $5.67. That gives us a “street projected return” of 288%.

2) GSE Holding Inc. (GSE) has a current share price $2.10. The consensus analyst target price is $6.40. That gives us a “street projected return” of 205%.

3) Kior Inc. (KIOR) has a current share price of $2.32. The consensus analyst target price is $7.10. That gives us a “street projected return” of 206%.

4) Echo Therapeutics (ECTE) has a current share price $2.55. The consensus analyst target price is $9.33. That gives us a “street projected return” of 266%.

5) Immunocellular (IMUC) has a current share price $2.67. The consensus analyst target price is $10.25.
That gives us a “street projected return” of 284%.

This gives us a great starting point to identify a stock that may be deeply undervalued coupled with strong Wall Street sponsorship and sentiment.

9/24/13

On Monday Blackberry’s biggest shareholder, Fairfax Financial , announced a bid of $9 a share to take the company private. This is not the end of the Blackberry saga, it’s likely just the beginning.
Of course, the investor behind Fairfax is Prem Watsa. Watsa’s Fairfax owns around 10% of BBRY at much higher prices, roughly $17 per share.

With an official bid now on the table, and a November 4 deadline, Watsa’s bid creates a virtually risk-free trade for other influential investors to enter the trade. By stepping in today, an activist investor or group would have a floor in Watsa’s bid, and the power to influence shareholders to fight for a higher price for their shares.

Moreover, we have 42 days to see if another buyer, with a better bid, will come to the table. In Blackberry, we have the real opportunity for a bidding war. An activist investor that enters Blackberry may find himself owning shares in a company with an implicit floor, while composing a bidding war.

Are there challenges associated with Canada’s takeover laws. Yes. Will that mean one of the world’s best technology providers in the cell phone/mobile computing space quietly goes away for half of its book value? Unlikely.

Back in 2011, there was a company by the name of America Online. AOL AOL -0.51% too was considered a rapidly dying business. It was hated by and poorly understood by analysts. But it had a fantastic balance sheet, and valuable patents and technologies. Starboard Value stepped in and acquired a huge position in AOL. They forced the company to sell its valuable patents and technology. In doing this they created instant value for the shareholders. AOL’s stock price went from a low of $10 in August of 2011 to over $40 in April of 2013.

Blackberry is a stock with about $5 in cash per share with zero debt. The company, according to a consensus of analysts has anywhere from $8 to $10 worth of patents and technology. Regardless of the synergistic value creation that those patents and technology could mean for another big mobile player (Apple AAPL -1.46%, Samsung, Microsoft MSFT -1.02% …) Blackberry is still selling for a substantial discount to its break-up value.

We may see three potential outcomes for Blackberry, with the involvement of an activist investor entering this situation:

Scenario 1 – Mr. Watsa has supplied a floor from which an activist investor can negotiate from on behalf of shareholders. The result: Virtually no risk and a potential premium to Watsa’s bid won for shareholders.

Scenario 2 – With an approaching November deadline and a bid on the table from Watsa, a rapidly evolving bidding war could ensue for the coveted Blackberry technology.

Scenario 3 – An activist investor could block Watsa, force the sale of Blackberry’s most valuable assets, and then force management to pay out a one-time special dividend to its shareholders.

Bottom line: With a takeover bid in place, Blackberry offers a very attractive asymmetric risk/return profile. The stock is just in need of at least one influential investor to fight for the highest value for shareholders in a Blackberry sale.

Consider this: Comparing a Blackberry outcome to the AOL outcome (where Starboard Value forced the company to sell patents and change its strategy), Blackberry could be worth anywhere from $21 to $25 a share.

Another interesting comparable: Dell.

According to Bloomberg, when Dell was taken private by Michael Dell and Silver Lake Partners, at under 6 times its EBITDA for the prior 12 months. The valuation ranked as the lowest multiple ever paid in a buyout of a technology company for more than $1 billion.

At $9 per share, BBRY would be valued at just 1.3 times EBITDA – a quarter of the cheapest takeover in the history of billion dollar+ tech takeovers.

At BillionairesPortfolio.com, I am always looking for deep value stocks that are owned by some of the world’s top hedge funds and billionaire investors.

Nothing represents a great value play more than a stock that is trading below the cash it holds on its books.

A stock that is trading “below cash” means the company has more cash on its balance sheet than its entire market capitalization. As billionaire hedge fund David Tepper put it “buying cash for less than cash” is one of the easiest ways to make money in the stock market.

Here are five stocks that top hedge funds own that are also trading below cash:

1) STR Holdings, Inc. has $1.74 per share in cash and has zero debt. The stocks sells for only $1.72. Top hedge fund Red Mountain Capital Partners owns nearly 15% of this stock.

2) Career Education Corporation has $3.44 in cash per share and zero debt. The stocks sells for $2.66. Blum Capital Partners, a top hedge fund/private equity firm, owns almost 14% of this stock.

3) AVEO Pharmaceuticals AVEO +0.96%, Inc. has $3.04 per share in cash and has zero debt. The stock sells for only $2.09. Billionaire and legendary hedge fund manager, Seth Klarman of the Baupost Group owns more than 7% of this stock.

4) The First Marblehead Corporation has $1.23 per share in cash and has zero debt. The stock sells for just $0.85. Value-based hedge fund Mangrove Partners owns almost of 10% of this stock.

5) Savient Pharmaceuticals, Inc. has $0.71 per share in cash and has zero debt. The stock sells for only $0.62 cents. Top biotech hedge fund Palo Alto Investors owns more than 13% of this stock.

Disclosure: Clients of Billionaire’s Portfolio, own shares of STR Holdings (STRI)

Dear Mr. Icahn and Mr. Smith,

I am writing you to respectfully recommend an investment opportunity that I think well suits your respective investment styles.

The stock is Blackberry. As you know Blackberry has put itself on the block and has given a deadline to sell itself.

And as you know, Blackberry has an influential investor involved, Prem Watsa, an investor that owns shares at much higher prices (roughly $17/share).

Now, Mr. Watsa is in position to take this company private. And that creates opportunity. Given the deadline Blackberry has self-imposed, if/when Mr. Watsa makes a public bid to take Blackberry private, this will create a virtually risk-free trade for other influential investors to enter the trade.

You will have a floor, in Watsa’s bid, and the power to influence shareholders to force that bid higher.
Moreover, as the November date approaches, the opportunity for a bidding war grows. You may find yourself owning shares in a company with an implicit floor, while composing a bidding war.

Are there challenges associated with Canada’s takeover laws. Yes. Will that mean one of the world’s best technology providers in the cell phone/mobile computing space quietly goes away for book value? Unlikely.

Mr. Smith, I recall you 2011 investment in AOL. AOL was considered a rapidly dying business. It was hated by and poorly understood by analysts. Sound familiar. But it had a fantastic balance sheet, and valuable patents and technologies. Your firm acquired a huge position in AOL in 2011, and instantly forced the company to sell its valuable patents and technology. In doing this you created instant value for the shareholders. AOL’s stock price went from a low of $10 in August of 2011 to over $40 in April of 2013.

Blackberry is a stock with $5.50 in cash per share with zero debt. The company, according to a consensus of analysts has anywhere from $8 to $10 worth of patents and technology. Regardless of the synergistic value creation that those patents and technology could mean for another big mobile player (Apple, Samsung …) Blackberry is still selling for a nice discount to its break-up value.

So I see three potential outcomes for Blackberry, with your involvement:

Scenario 1 – Mr. Watsa tries to take the company private. That supplies a floor from which to negotiate from on behalf of shareholders. The result: Virtually no risk and a potential premium to Watsa’s bid won for shareholders.

Scenario 2 – With an approaching deadline and a bid on the table from Prem Watsa, a rapidly evolving bidding war could ensue for the coveted Blackberry technology.

Scenario 3 – Force the sale of Blackberry most valuable assets and then force management to buy back stock or pay out a one-time special dividend to its shareholders.

Bottom line: Blackberry offers a very attractive asymmetric risk/return profile. And the stock is in need of at least one influential investor to demand the highest value for shareholders in a Blackberry sale.

On a parting note, comparing a Blackberry outcome to the AOL outcome (where Starboard Value forced the company to sell patents and change its strategy), Blackberry could be worth anywhere from $21 to $25 a share. Perhaps most intriguing, given the potential scenarios and the approaching November deadline, a large premium in Blackberry shares could come in just a few short months.

Respectfully,
Will Meade
President of The Billionaires Portfolio

9/9/2013

As I mentioned last week, as part of our research process for our online platform, billionairesportfolio.com, we look for investment ideas using a series of simple, yet powerful, screens.

The goal is to identify stocks where the potential reward greatly outweighs the risk. Finding stocks with asymmetrical risk/reward is at the core of activist investing — it’s a characteristic represented in every one of our picks in our premium research service, the Billionaire’s Portfolio. If you want to find yourself on the right side of big winners, if you want to own the stocks that show up on the news at night after doubling or tripling on the day, you need to focus on this risk/reward relationship in your stock selection.

Among the many screens we run through our research process, we like finding stocks that are trading at a huge discount to analyst consensus price targets. These are stocks that have consensus analyst price targets well above their current share price, that have strong sentiment and Wall Street sponsorship. That can prove to uncover deep value investment opportunities. In using this screen, we tend to “back into” finding the presence of a an influential investors, already involved in the stock.

Now, given the backdrop I’ve described, the following five stocks have recently hit our radar as high potential, deep value candidates. These stocks have an average analyst price target that is at least 100% higher than its current share price.

1) Emcore Corporation (EMKR) has a current share price $4.29. The consensus analyst target price is $8.63. That gives us a “street projected return” of 101%.

2) Global Geophysical Services (GGS) has a current share price $2.55. The consensus analyst target price is $5.57. That gives us a “street projected return” of 122%.

3) Uni-Pixel Inc. (UNXL) has a current share price $18.12. The consensus analyst target price is $45.26 That gives us a “street projected return” of 150%.

4) Virnetx Holding (VHX) has a current share price $19.74. The consensus analyst target price is $46.67. That gives us a “street projected return” of 136%.

5)Wi-Lan Inc. (WILN) has a current share price of $3.26. The consensus analyst target price is $6.57. That gives us a “street projected return” of 101%.

This gives us a great starting point to identify stocks that may be deeply undervalued, with the potential to be the next big winner that dominates financial news headlines.

Will Meade
President of The Billionaires Portfolio