Notes from the Alliance Conference
by Tom Dyson
October 23, 2006
Just after taking the stage, my mind went blank. My fingers clenched the edge of the podium and I stared vacantly into the crowd.
I found it difficult to breathe, let alone speak about my favorite investment idea of the moment.
Last week, we all flew to Aspen, Colorado for our company’s annual investment event, called the Alliance Conference. I gave my speech on Thursday.
I had prepared the presentation very thoroughly. I knew the material inside and out, but my nerves took control. Result: I lost my train of thought and it all spiraled out of control. I bombed.
Afterwards, one honest listener told me I was by far the worst speaker of the day. “But don’t worry,” he said. “It’s the content that matters.”
Luckily, the conference was a huge success, and I don’t think anyone will remember my lead balloon. The one thing they will remember is the biggest theme covered at the Alliance Conference: Big, fat blue chip stocks are the smartest investment you can make right now.
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Out of fairness to the attendees, I can’t list the specific plays mentioned last week… but the Dow Industrials Average is a good place to look for stock ideas. These are the largest, most stable companies in the world. They spin off billions and billions in cash every week. Most importantly, several of these giants are trading at incredibly cheap valuations relative to the cash they throw off.
As Extreme Value editor Dan Ferris said in his speech, “When you can buy a piece of one of these great companies for less than 10 years’ worth of earnings, you should do so with a large amount of money and never sell.”
Porter Stansberry has already recommended eight blue chips in his newsletter this year. “There hasn’t been a better time to establish a handful of big, long-term positions in the world’s best companies since the early 1990s,” he says.
The best speaker was Jeff Clark. Jeff is a trader. He writes an options trading service called the S&A Short Report.
I’m averse to options. I found the bid-ask spreads were too wide, plus my broker charges $50 a trade. Buy and hold is more my style. But Jeff made me question my stance. After his speech, I went online and considered parking a few dollars in my old options account. Here’s why:
Track record: The lawyers in Baltimore that follow Jeff’s track record calculate that if you’d put $1,000 into each of the 70 recommendations he’s made in the past year, you would have made $44,000. Earlier this year, Jeff scored seven straight winners.
Safety: Let’s say you have $100,000 to play with. Jeff advises you to immediately invest 90% in the blue chips I mentioned above. “My service is designed to add a little juice to an otherwise conservative portfolio,” he said. The remaining funds will be used to buy options, using exactly $1,000 per trade. He never has more than six or seven positions open at any time, so $10,000 is plenty to work with.
Expenses: I challenged Jeff about the commissions and spreads later in the evening. Schwab charges $19.99 a trade, he told me, and his latest recommendation had smaller than a 5% spread. You could have bought the options at $1.35 and sold them at $1.30, he said.
Jeff not only won me over, he now carries rock-star status with the folks who attend the Alliance Conference. Most subscribers wonder if the Almighty himself tells Jeff what’s going to happen during the next trading session.
I’m not sure where they’ll hold the Alliance Conference next year, but you should consider coming along: great advice, lots of good stories, and the chance to see your nervous DailyWealth editor make a fool of himself!
Good investing,
Tom
Editor's note: Tom Dyson is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
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