Yesterday, I showed you the amazing potential performance of my ultimate portfolio — a total return of 613%*.
I showed you how it has the power to beat Warren Buffett’s Berkshire Hathaway shares by over four to one.
Further, I demonstrated that, while both the S&P and Berkshire Hathaway shares suffered huge losses in 2008, my portfolio could have preserved your capital and even made you money.
Today, I’m going to give you the strategy behind these results.
Plus, I’m going to reveal a simple procedure for doing something no one else has managed to do before — to reliably call the beginning and the end of the next major market decline.
Let’s consider three hypothetical investors. Let’s say they start with $25,000 each. And let’s go back to January 2005.
The first investor buys the S&P 500 index.
The second investor follows Warren Buffett’s Berkshire Hathaway.
And the third investor is you. You don’t buy the S&P or follow Mr. Buffett. Instead, you follow my ultimate portfolio.
Here are the results …
The S&P investor could have made a total return of 102.5% through the end of last month. Not bad.
The Warren Buffett investor could have made a total return of 134.2% in the same period. Even better.
But your return could have been 613.5%.
Let’s put this into dollars and cents: The S&P investor would have a gain of $25,615 today. The Buffett follower would have a gain of $33,550. And you could have a gain of $153,370.
That’s 4.6 times the gains of the Warren Buffett investor. And it’s six times the gains in the S&P.
Big difference. But this difference is especially clear if you look at it year by year:
The S&P 500 investor could have made an average total return of 9.36% per year.
The Warren Buffett investor could have made an average return of 11.4% per year.
And you could have made an average return per year of 58.7%.
That’s why I call this strategy the closest thing to a retirement miracle we’ve ever achieved. It has demonstrated extremely high performance without extreme risk.
Consider, for example, Penny and Richard, a married couple in their 50s planning for their retirement. They worked hard all their life to build a nice nest egg of 500,000 dollars. But, alas, with interest rates at practically zero, that was still not nearly enough to maintain their lifestyle for more than a few years.
If, however, they’d been able to follow my ultimate portfolio, they could have over 3.6 million dollars today, enough to sustain them for many years even with zero yields.
Plus, there’s a lot more to
this than first meets the eye.
It’s very possible that, if Penny and Richard had bought S&P 500 stocks, they would never have made a single dime in the market.
Why? Because of that giant brick wall that would have blocked their progress early in the game, called the bear market of 2008.
In that bear market, they would have suffered a huge decline — a loss of at least 52% of their money! That loss could have been so devastating, they may very well have dropped out of investing entirely.
In contrast, if they followed my ultimate portfolio, they could have preserved their capital during the bear market of 2008. They could have stayed in the game, leaving Warren Buffett investors far behind.
And more importantly, they could have gone on to invest in the highest performing investments in the world, leaving Buffett investors even further behind.
My Ultimate Strategy Unveiled
At this point, I’m sure you’re wondering: How is this possible? So let me walk you through the steps I take.
Step #1 is to shuck off all the garbage.
And right from the get-go, we immediately eliminate from consideration nearly 95% of the stocks in the market. Each stock we keep on our list must have plenty of cash and capital, low debt, steady revenues and cash flow, plus great value.
Step #2: We make sure they have good liquidity in the market — a minimum of 250,000 shares in average daily trading volume and $500 million in market cap.
Over 11,000 stocks fail at least one of these tests.
Fewer than 700 stocks pass all the tests. All of them get our Weiss Stock Rating of “BUY.” And all those “buys” are ratings we publish. So there’s no secret there.
What makes this such a breakthrough is step #3.That’s where we go beyond our published letter grades and use a special score that we don’t publish. This other, unpublished score is not a safety rating. It’s a proprietary index based mostly on each stock’s current performance in the market — how much money the stock is actually making for investors.
That’s a critical step: For example, if we have 100 stocks rated A+, it would not be possible for the public to tell exactly which among them is the best the best. They’re ALL rated A+. But, internally, with our performance score, we can rank them #1, #2, #3, all the way down to #100.
This is how my ultimate portfolio finds the ultimate in quality. It seeks to buy only the 10 stocks at the extreme top of the list — the stocks that are likely to deliver the most profits to you right now, based on the most current data.
And then, as the top ten list changes, we make the needed portfolio changes as well.
These stocks represent less than one-tenth of one percent at the very pinnacle of the list of stocks we rate each week — truly the best of the best of the best.
That’s one of the main factors behind the amazing numbers I’ve shared with you about my ultimate portfolio — 613% total return since 2005, over four times the gains of Berkshire Hathaway, at least a seven-fold multiplication of an investor’s money.
Remember: Virtually all of the stocks that get a Weiss Stock Rating of “buy” are good companies.
But only the top handful are what I call “ultimate buys” — “buys” for my ultimate portfolio.
Plus I take a couple of other important steps as well …
For diversification across industries, major countries, and entire asset classes such as bonds and precious metals, I also use a similar selection process for the most liquid and top-ranked exchange-traded funds, ETFs. And …
For even better results, when the market turns down, my ultimate portfolio is designed to apply a prudent bear market strategy, including more cash and some inverse ETFs at the right time.
How to Spot a Bear Market
While we’re on the topic of bear markets, let me show you how to reliably recognize one. This is critical. Because another bear market is inevitable at some point in the future.
Just bear in mind that there’s no magic formula in the world that can accurately pinpoint the onset of a bear market ahead of time.
But with the simple steps I’m going to give you now, what you can do is reliably recognize a bear market when you see it.
That alone can be extremely valuable. Without it, you might run away from every correction and miss out on nearly all the market’s gains.
Or worse, if you decided to stick with all your stocks and ride out all the corrections, then, one day, when the real bear comes, you could give back all your gains — or even more.
So here’s what to do:
First, at the end of each month, check the closing value of the S&P 500 index and compare it to the S&P’s most recent month-end peak.
Second, if the S&P is up, flat, or if down by less than 10%, don’t change a thing. Just continue buying or holding the best of the best stocks and ETFs.
Third, if the S&P is down by 10% or more, do this:
Check the latest LEI. That’s the Conference’s Board’s Leading Economic Index.
If the LEI has been down by 1% or more in any of the last three months, that’s confirmation that the stock market decline is for real.
If the LEI is not down by 1% or more, then it’s probably just a temporary correction.
Now, here’s the best part: This same indicator works equally well in reverse — to call the END of a bear market — so you can pick up some of the best bargains.
Good luck and God bless!
* For fair comparison, the performance of all investments is calculated on an equivalent basis. It represents each investment’s total compound returns (price appreciation plus dividends) before taxes and broker commissions. The Ultimate Portfolio uses the same measure, depicting what a hypothetical investor could have achieved if he had followed our new model during the same period. For details, see Terms and Conditions. Data Sources: Bloomberg, Weiss Ratings.
The investment strategy and opinions expressed in this article are those of the author’s and do not necessarily reflect those of any other editor at Weiss Research or the company as a whole.