MONTHLY BRIEFING | SEPTEMBER 2018 PortfolioSolutions

STANSBERRY

Capital Portfolio
THE

Income Portfolio
THE

YOUR PORTFOLIO’S Total Portfolio

THE

ALL-WEATHER
PROTECTION
BY AUSTIN ROOT
"If stocks drop 30%... is your portfolio going to be OK?"
Our founder, Porter Stansberry, posed this question to
listeners on a recent episode of his Stansberry Investor Hour
podcast. It's not a fun prospect to contemplate, but it's
critical to think about before a drop occurs.
You must consider how your portfolio will handle a huge
downdraft. And if you realize your assets aren't prepared
to weather the storm, you need to adjust your holdings.
Because while 30% declines aren't frequent, they are
inevitable.
Since 2000, we've had two market drawdowns worse
than 30%. From 2000 to 2002, the S&P 500 Index fell
nearly 50%. And from 2007 to the bottom in 2009, it
dropped more than 55%.
Since then, stocks have been moving up, almost without
interruption. Nearly 10 years in, this is one of the longest
bull markets in history, with scores of companies making
new highs weekly.
Bull markets do not die of old age alone... The historic
length of our current run is not a reason to predict the
end. But the run-up also won't last forever. And when
markets correct, they usually overcorrect... fast.
Hopefully, you've already taken the steps to protect your
nest eggs. But we worry that too many have not. So this
month we are focusing on this 30%-downside scenario
and will show how each of the Portfolio Solutions
strategies addresses it.
But first... we need to consider a slight variation to the
question above:
"If stocks drop 30%... are YOU going to be okay?"
This question speaks to your own personal level of
risk tolerance. And how you answer should inform
how you invest. For instance, if you can stomach
taking larger, short-term "paper" losses – knowing that
over the long run riskier assets do generally produce
higher rates of return – then your portfolio should tilt
more aggressively. Stay invested in stocks. Own some
international, small-cap, and "Melt Up" positions.
Allocate big dollars to shares of world-class companies
with enduring business models and thick profit margins.
But on the other hand, if the prospect of losing a third
of your net worth in a market dislocation keeps you up
at night – if you value wealth preservation and steady
income over risking half your money to try to double
it – then you ought to be more conservative. Own more
U.S. Treasury bonds. Hold large cash and gold reserves.
Allocate big dollars to sturdy dividend-paying stocks and
corporate bonds. If you are not OK with a big loss, don't
be in a position to take one.
And there's another reason to avoid big losses. They're
hard to recover from...
Here's a simple example to illustrate. Consider two
investors: Investor A is aggressive and loves to go for the
big gains. And he's pretty good at achieving them, too.
CONTINUED >>

PORTFOLIO ACTIONS TO TAKE

• BUY shares of Coca-Cola (NYSE: KO). We recommend allocating 2.6% of your portfolio to establish a position.
• SELL shares of CTRIP.com (Nasdaq: CTRP). We stopped out of the recommendation on August 15.
• BUY TO COVER our short position in Simon Property Group (NYSE: SPG). We stopped out of the recommendation on August 22.
• BUY TO COVER our short position in Target (NYSE: TGT). We stopped out of the recommendation on August 23.

Stansberry Research September 2018 | 1


MONTHLY BRIEFING | SEPTEMBER 2018
In good years, he earned 40% returns on his portfolio.
But he's suffered some bad years when his portfolio
drops 30%.
Assuming good and bad years alternate each year and
that his first year was a bad one, Investor A will end
up with less money after 10 years than he had when he
started... even with those strong gains. You can see his
results in the chart below (using a beginning balance of
$100,000).
Now consider Investor B. He invests more conservatively,
making just 8% in good years. But his downside is also
more muted, losing 7% in bad years. Using the same
assumptions as we did with Investor A of alternating
good and bad years and starting out with a bad one...
Investor B ends up with more money than he started
with... and outperforms Investor A by more than 13%...
even with middling positive returns.
You see, you want to avoid the big losses. As Porter said
on his podcast...
Opportunity is infinite, but your capital is finite.
And if you get destroyed, if you take a 30% or
40% portfolio loss, you're going to be out of the
game and you're going to miss out on all of the
value that can be created next.
So what about for our portfolios? If stocks drop 30%, are
the Portfolio Solutions strategies going to be OK?
Yes, they will. We believe that each is positioned to
outperform in a significant downturn. Just look at what
happened earlier this year. From its peak in January
to the trough in February, the S&P 500 Index fell by
more than 10%. Over the same period, all three of our
Stansberry Research September 2018 | 2
PortfolioSolutions
STANSBERRY
Capital Portfolio
THE
strategies outperformed this benchmark index... and
Income Portfolio
THE
two of the three protected you from more than half the
losses.
Total Portfolio
THE
But again, each portfolio will protect you from losses
to varying degrees and in varying ways. So let's briefly
discuss how:
CAPITAL
As you know, The Capital Portfolio is our most aggressive
and growth-oriented strategy. We manage this portfolio
to achieve outsized capital appreciation over a market
cycle. And true to its name, the strategy enjoyed a 28%
return last year, surpassing the gains of the S&P 500.
But what might not be as obvious are the three ways we
protect our downside in this product. First, we invest at
least 10% of the portfolio in "crisis hedges," bond-like
income positions and cash. These provide ballast and
yield to your portfolio.
Second, while we do have a number of aggressive,
Melt Up investments in high-growth companies and
exchange-traded funds, these positions now make up
about half of the portfolio in total. The rest of the stocks
are value-oriented with sturdy cash flows and enduring
business models. Excluding our growth-oriented
positions, the rest of the portfolio generates a 3.3%
dividend yield and on average trades at an attractive
discount to the market.
And finally, The Capital Portfolio is diversified across
industries and geographic locations, including a
significant allocation to emerging markets. This
international exposure is important for long-term capital
appreciation and something that is generally lacking in
most U.S. investors' portfolios. With that said – and
while we expect this international exposure to help drive
returns in the future – our emerging market investments
have detracted from performance (in all three strategies)
so far this year.
INCOME
The Income Portfolio is built like a tank. We believe
that it should hold up well in a downturn... and provide
healthy growth and income while the bull market
continues. At present, roughly one-fourth of the portfolio
is invested in fixed income and cash. This provides safe,
steady yield and a solid foundation for your nest egg.
Another roughly 30% of the portfolio is invested in real
estate and "hybrid" securities. (Hybrids are instruments

MONTHLY BRIEFING | SEPTEMBER 2018
that can own debt and equity, as well as preferred stock.
They generally provide a more diversified, lower volatility
return profile.) Notwithstanding the excesses in the
housing market that preceded the Great Recession, real
estate investments generally provide steady, positive
returns over time that are less correlated with stock
market swoons than other alternatives such as private-
equity or venture capital.
And then the rest of the portfolio is invested in best-in-
class global businesses. As such, we should note that The
Income Portfolio does have its share of growth potential
as well. But it tilts towards owning high-quality
companies that produce both growth and yield. All told,
The Income Portfolio currently yields a little less than 5%
– an outstanding rate compared with the ultralow yields
offered right now by short-term bonds and the broader
stock market.
TOTAL
The Total Portfolio blends the strategies of Capital and
Income together, and then adds a few wrinkles.
Total invests in a few aggressive Melt Up opportunities.
It owns some excellent income plays and core
investments in "Global Elite" stocks that will produce
growth and yield.
But on top of that, we employ three additional allocation
strategies. First, we have the ability to sell short stocks we
believe will decline in value. Lately, these positions have
been frustrating. For example, we stopped out of our short
on electric-car maker Tesla (TSLA) after CEO Elon Musk
attempted to prop up the stock with nonsensical tweets
about taking the company private... only to see the stock
collapse lower than when we started.
The second allocation strategy unique to Total is its
focus on best-in-class property-and-casualty ("P&C")
insurance companies. Almost 15% of the portfolio is
allocated to these investments, and we think they'll
prove to be strong winners in just about any market
environment... but in particular flat or down ones. (We
call P&C the "best business in the world" and recently
wrote about one company here.) The names we own
should generate steady capital appreciation and safe yield
over time. And their fortress balance sheets will hold up
well in a market meltdown.
The third piece that's unique to Total is its extreme focus
on owning capital-efficient businesses. These companies
generate high returns on their assets and consistently
grow revenues, year after year. Most important, these
companies produce huge levels of cash flow as a
percentage of revenues... and since their businesses are
Stansberry Research September 2018 | 3
PortfolioSolutions
STANSBERRY
Capital Portfolio
THE
"asset light," they have a lot of excess cash to reward
Income Portfolio
THE
shareholders with dividends and stock buybacks. More
than one-fourth of the portfolio is invested in businesses
Total Portfolio
THE
with off-the-charts levels of capital efficiency.
As Porter recently noted: "There's just never a bad time
to buy capital-efficient companies if they are fairly
priced. To give you an example, I recommended Hershey
in December of 2007. That's about the worst time you
could buy a U.S.-listed equity in the history of the stock
market, and Hershey didn't even go down 25% during
the Great Recession. We're still long [the] stock today."
As I said, we don't hold these hedges for months like this
past August, when the S&P rose 3%. These positions are
to protect us from the fall. For instance, in February, the
S&P slumped 3.4%. Not a horrible fall, but enough to
make investors worry about the end of the bull market.
At the same time, Income slid 2.6%, while Total and
Capital fell just 1.6% and 1.1%, respectively. While
February's numbers look fairly small... when a big drop
comes, that kind of stability will make it a lot easier to
sleep at night.
This month, I want to make one final point. All this
focus on downside protection does not mean we believe
a massive market correction is imminent. We remain
optimistic about the market over the coming months.
Business confidence is high, employment and consumer
spending are healthy, and earnings growth continues to
be the strongest we've seen in years.
But since no crystal ball will tell you exactly when a
correction will start – and because a severe correction
can occur before you have a chance to fully react – we
need to construct portfolios to protect you. We must
temper optimism with the "guarded" nuance.
The biggest mistake investors make is to lean into their
aggressive investments near a market top and then,
after a big collapse, pull out of the market altogether...
never to return when stocks are finally on sale and the
time is right to "buy in bulk." But as Portfolio Solutions
investors, you'll be in a position to do the opposite, and
make steadier, sleep-at-night gains along the way.
Thank you for your continued trust,
Austin Root, on behalf of
Porter Stansberry, Dr. Steve Sjuggerud, and Dr. David Eifrig
September 4, 2018
OVERVIEW OF MARKETS | SEPTEMBER 2018 PortfolioSolutions
STANSBERRY

Indexes March Capital Portfolio

THE

Income Portfolio
to Record Highs
THE

Total Portfolio
THE

August began the way it ended...

Trade talks and tariffs dominated the headlines. But it
remained unanswered whether the U.S. would strike a
trade deal with China. It became increasingly clear that
the dollar would signal the market's direction.
The U.S., Canada, China, the European Union, and
Mexico engaged in major trade negotiations. Investors
started the month optimistic that the countries could find
a resolution to the standoffs. At the end of July, the EU
and U.S. looked like they were forging a path forward. The
NAFTA accord between Mexico, Canada, and the U.S.
also looked closer to resolution as the U.S. and Mexico
came to an agreement. China sent a delegation to D.C. to
restart talks, boosting investor sentiment.
The markets’ response was positive. The Dow Jones
Industrial Average and the S&P 500 posted their best
Augusts since 2014, while the Nasdaq Composite
Index posted its best August since 2000. The S&P 500
rose 3.02%, and the Dow added 2.16%. The Nasdaq
increased 5.70%, and the Russell 2000 Index jumped
4.18%. According to Bank of America’s fund-flow data,
U.S. equities saw record inflows in the final week of
the month. All of this powered the S&P, Nasdaq, and
Russell to new all-time highs.
Economic sentiment continued to paint a positive picture.
Payroll data disappointed, but the revision to the prior month’s
numbers made up for the miss. Consumer-confidence
data hit their highest levels since 2000. Retail sales were
stronger than expected. Global-manufacturing data showed
economies remained strong despite the trade concerns.
Corporate earnings remained strong and helped to drive
the rally. With 99% of the S&P 500 having reported
second-quarter earnings, 80% had reported positive
earnings per share ("EPS") surprises, while 72% posted
a positive sales surprise, according to financial data firm
AUGUST MACRO RECAP
(AS OF CLOSE 8/31)
• DJIA: +2.16%
• Russell 2000: +4.18%
• Nasdaq: +5.70%
• 30-Year Yields: -2.05%
• 10-Year Yields: -3.37%
• U.S. Dollar Index: +0.58%
• Gold: -2.16%
• Silver: -6.31%
• Crude: +3.11%
• Copper: -6.38%
FactSet. In addition, earnings grew 25% for the quarter,
beating the 24.6% growth in the first quarter and
marking the best quarterly growth rate since the 34.1%
mark set in the third quarter of 2010. Coming into the
quarter, expectations were for 20% growth.
All of this brought increased focus to the dollar. The
greenback rallied 3% to begin August. The strength
placed pressure on emerging markets currencies. Cracks
began to show in Argentina, China, and Turkey. But as
trade optimism increased around mid-month, the dollar
did an about-face. China’s central bank stepped up to
support the weakening yuan, easing dollar demand.
Going forward, investors are looking for dollar weakness
to be the catalyst if the market is going to make that next
leg higher. If the U.S. resolves its disagreements with its
trading partners, it could push the S&P's value north of
3,000 – roughly 17 times the $178.18 estimated average
EPS next year for the companies in the index.

Monthly Performance (August)* Yearly Performance (from 1/31/2018) Annualized

S&P 500 (SPY) 2% 3.8% 6.6%
TOTAL PORTFOLIO 0.9% 0.2% 0.4%
CAPITAL PORTFOLIO 1.1% -0.6% -1%
INCOME PORTFOLIO 1% 0.9% 1.6%
*Monthly performance is measured from the publication of the last issue.

Stansberry Research September 2018 | 4


PORTFOLIO REVIEW | SEPTEMBER 2018
TOTAL PORTFOLIO
Core Holdings
n American Express
(NYSE: AXP)
The global payment company paid a
regular quarterly dividend of $0.35 on
August 10.
n Coca-Cola
(NYSE: KO)
We recommend subscribers establish
a 2.6% portfolio position in the
beverage giant. We think Coke is a
"Global Elite" brand and business. It's
taking new and more aggressive steps to
improve capital efficiency and margins.
It's also refranchising more of its bottling
operations as well as using its dominant
market position to make acquisitions.
n General Mills
(NYSE: GIS)
The packaged-foods company paid a
regular quarterly dividend of $0.49 on
August 1.
n Microsoft
(Nasdaq: MSFT)
The software and cloud-services
company was the subject of positive
commentary by broker Morgan
Stanley. It believes Microsoft will boost
its dividend, pushing the yield north
of 2% – attracting income investors in
addition to growth investors.
n Nvidia
(Nasdaq: NVDA)
The graphic processing unit designer
reported second-quarter earnings
per share ("EPS") of $1.94 versus
the $1.85 estimate. Revenues for the
quarter were $3.12 billion, beating the
expectation of $3.11 billion. Shares
jumped toward the end of the month
on the release of the company's new
graphics processing unit.
Melt Up & Speculation
n Ctrip.com
(Nasdaq: CTRP)
On August 15, we recommended
Stansberry Research September 2018 | 5
subscribers exit their positions in
the online travel agency.
Shares of the online travel agency ser-
vice fell last month as trade concerns
pressured Chinese stocks and triggered
our trailing stop loss.
Capital-Efficient
Investments
n MarketAxess
(Nasdaq: MKTX)
The electronic bond-trading platform
company paid a regular quarterly divi-
dend of $0.42 on August 23.
n NVR
(NYSE: NVR)
The single-family homebuilder an-
nounced a $300 million share-repur-
chase program on August 1.
Special Situations
n Carrols Restaurant
(Nasdaq: TAST)
The Burger King franchisee reported EPS
of $0.22 versus the $0.20 estimate. Reve-
nues for the quarter were $303 million,
beating the estimate of $299 million.
Comparable store sales were up 5%.
Infrastructure &
Commodities
n Freeport-McMoRan
(NYSE: FCX)
The international natural resource
company paid a regular quarterly
dividend of $0.05 on August 1.
Income
n Blackstone
(NYSE: BX)
The management company paid
a regular quarterly partnership
distribution of $0.58 on August 6.
n Macquarie Infrastructure
(NYSE: MIC)
The infrastructure company paid a
regular quarterly dividend of $1 on
August 16.
Income Portfolio
THE
Total Portfolio
THE
Shorts
n Simon Property Group
(NYSE: SPG)
On August 21, we recommended
subscribers exit their short positions
in the real estate investment trust
("REIT").
Shares have moved higher in recent
months on decent earnings results and
analyst upgrades, triggering our trailing
stop. We recommend investing the
proceeds in shares of Coca-Cola
(KO).
n Sprint
(NYSE: S)
The telecommunications carrier report-
ed first-quarter revenue of $8.12 billion
versus the $8.11 billion expectation.
The company saw opposition to its
merger with T-Mobile mount as Dish
Network and Altice USA asked the
Federal Communications Commission
to reject the deal.
n Target
(NYSE: TGT)
On August 22, we recommended
subscribers exit their short positions
of the big-box retailer.
Shares jumped on better-than-expected
earnings, triggering our trailing stop.
We recommend investing the pro-
ceeds in shares of Coca-Cola (KO).
 Capital Portfolio
THE

Income Portfolio
THE

Total Portfolio
THE

Stansberry Research September 2018 | 6

 Income Portfolio
THE

CURRENT PORTFOLIO | SEPTEMBER 2018 Total Portfolio

THE

Prices as of August 31, 2018

Symbol / Initial % Current % # Shares / Ref Ref Current Gain Trailing

Company Income Yield
CUSIP Allocation Allocation # Bonds Date Price Price (Loss) Stop %
Core Investments
American Express AXP 4.0% 4.2% 40 1/31/2018 $99.40 $0.70 $105.98 7.3% 1.3% 25%
Intel^ INTC 2.4% 2.4% 50 1/31/2018 $48.14 $0.90 $48.43 2.5% 2.5% 25%
Ralph Lauren RL 2.9% 3.3% 25 1/31/2018 $114.31 $1.13 $132.81 17.2% 1.9% 25%
Disney DIS 2.0% 2.1% 19 4/2/2018 $98.66 $0.84 $112.02 14.4% 1.5% 25%
Disney^^ DIS 1.5% 1.7% 15 5/11/2018 $102.07 $0.84 $112.02 10.6% 1.5% 25%
General Mills GIS 3.0% 3.1% 68 7/2/2018 $43.44 $0.49 $46.01 7.0% 4.3% 25%
Coca-Cola KO 2.6% NEW 59 8/31/2018 $44.57 $0.00 NEW – 3.5% 25%
Melt Up & Speculation
Ctrip.com CTRIP 2.5% SOLD 27 1/31/2018 $46.78 $0.00 SOLD -18.1% – 25%
Grubhub GRUB 2.0% 3.9% 27 1/31/2018 $72.25 $0.00 $144.11 99.5% – 35%
Naspers NPSNY 4.0% 3.1% 69 1/31/2018 $57.58 $0.00 $45.01 -21.8% 0.2% 35%
Capital-Efficient Investments
Facebook FB 4.9% 4.6% 26 1/31/2018 $186.89 $0.00 $175.73 -6.0% – 25%
Interactive Brokers IBKR 2.5% 2.4% 39 1/31/2018 $63.99 $0.30 $62.16 -2.4% 0.6% 25%
MarketAxess MKTX 2.9% 2.8% 15 1/31/2018 $196.21 $1.26 $189.82 -2.6% 0.9% 25%
NVR NVR 6.4% 5.3% 2 1/31/2018 $3,178.17 $0.00 $2,668.45 -16.0% – 25%
Microsoft MSFT 4.9% 5.8% 52 1/31/2018 $95.01 $1.26 $112.33 19.6% 1.5% 25%
Nvidia NVDA 2.5% 2.8% 10 1/31/2018 $245.80 $0.45 $280.68 14.4% 0.2% 25%
Hershey HSY 0.0% 2.7% 27 6/4/2018 $91.31 $0.72 $100.52 10.9% 2.9% 25%
Special Situations
Carrols Restaurant TAST 2.5% 3.2% 200 1/31/2018 $12.45 $0.00 $15.80 26.9% – 25%
Stericycle SRCL 2.9% 2.4% 39 1/31/2018 $75.36 $0.00 $61.69 -18.1% – 25%
Infrastructure & Commodities
Freeport-McMoRan FCX 2.0% 1.4% 102 1/31/2018 $19.50 $0.10 $14.05 -27.4% 1.4% 50%
Range Resources RRC 2.0% 2.3% 140 1/31/2018 $14.25 $0.04 $16.42 15.5% 0.5% 50%
P&C Insurance
Fairfax Financial FRFHF 2.6% 2.7% 5 1/31/2018 $527.74 $0.00 $548.44 3.9% 1.8% 25%
W.R. Berkley WRB 5.0% 5.3% 68 1/31/2018 $72.98 $0.79 $78.26 8.3% 0.8% 25%
Axis Capital AXS 0.0% 4.0% 70 3/5/2018 $51.53 $0.78 $57.52 13.1% 2.7% 25%
Travelers TRV 0.0% 1.84% 14 4/2/2018 $134.84 $0.77 $131.60 -1.8% 2.3% 25%
Crisis Hedges
Almaden Minerals AAU 1.0% 0.7% 1100 1/31/2018 $0.89 $0.00 $0.64 -27.9% - 100%
Franco-Nevada FNV 2.4% 2.0% 32 1/31/2018 $76.39 $0.47 $63.99 -15.6% 1.5% 35%
Income
Blackstone Mortgage Trust BXMT 10.0% 10.9% 322 1/31/2018 $31.00 $1.24 $34.06 13.9% 7.3% 25%
Annaly Capital NLY 0.0% 5.1% 480 3/5/2018 $10.16 $0.60 $10.62 10.4% 8.4% 25%
Macquarie Infrastructure MIC 0.0% 2.4% 52 4/2/2018 $36.70 $2.00 $47.04 33.6% 8.5% 25%
Blackstone BX 0.0% 2.6% 70 8/6/2018 $35.28 $0.00 $36.91 4.6% 6.3% 25%
Short Sells*
Simon Property Group SPG -1.0% CLOSED -6 1/31/2018 $163.37 $5.90 CLOSED -13.4% 4.4% 25%
Target TGT -1.0% CLOSED -14 4/2/2018 $68.98 $1.26 CLOSED -27.5% 2.9% 25%
Sprint S -1.0% -1.0% -165 8/6/2018 $6.18 $0.00 $6.11 1.1% – 25%
Cash
Cash Cash 7.0% 0.1% $7,019.44 $80
Cash for
Cash for Shorts 3.0% 1.0% $2,989.77 $1,008
Shorts

^ Initial allocation percentage adjusted to reflect March 2018 rebalancing.

^^ On May 10, 2018 we increased our Disney allocation. See update for details.
* When you open a short sale, your broker will put an offsetting amount of cash into your account. Please remember that some of that cash (if the trade goes our way) will be required to cover the short position
when you eventually buy back the shares to close the trade. It is cash, but you should treat it as cash dedicated to cover the securities you are short.
We welcome comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only, and you will not receive a reply. To speak with customer service, e-mail info@stansberrycustomerservice.com or call 888-261-2693
(U.S.) or 443-839-0986 (international) Monday-Friday, 9 a.m.-5 p.m. Eastern time. Please note: The law prohibits us from giving personalized financial advice.
© 2018 Stansberry Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Stansberry Research, 1125 N Charles Street, Baltimore, MD 21201 or
www.stansberryresearch.com.
Stansberry Research forbids its writers from having a financial interest in any security they recommend. All employees of Stansberry Research (and affiliated companies) must wait 24 hours after a recommendation is published online or 72 hours
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This work is based on SEC filings, current events, interviews, corporate press releases, and what we’ve learned as financial journalists. It June contain errors, and you shouldn’t make any financial decision based solely on what you read here. It’s
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Stansberry Research September 2018 | 7