This Billionaire’s Secret Could
Double Your Income Overnight
Second-level investors bank 5%+ dividends
AND enjoy low-risk gains with this little-known approach
Fellow Income Seeker,
Our pickings have been slim for five or six years and counting.
The 10-year U.S. Treasury bond pays a meager 2.2% and stocks even less.
The current S&P 500 dividend yield of under 2% is less than half of its historical average of 4.4%.
Even if the low yield looks better when inflation-adjusted, it’s still hard times for income investors.
You don’t pay your bills with relative money, after all – you pay them with real money.
Chasing the crowd and investing in supposed “Dividend Aristocrats” isn’t the answer either. That path will virtually guarantee mediocre returns.
But it doesn’t have to be this way…
I’ve just completed a new special report that reveals how income investors can break out of this rut with safe, 6%+ dividends AND book double digit price appreciation in the process.
It’s called Second-Level Investing: Your Guide to the Contrarian Money Machine and outlines step by step how to achieve peace of mind and yield in almost any market.
In a moment I’m going to show you how you can receive a free copy of this report, but first I need to tell you something…
I’m Worried about Your Future
Nearly every one of the independent investors I talk to are so desperate for dividends that they’re piling into practically any large stated yield they find.
On the surface this may seem like a sound approach with the markets at elevated valuation levels – to buy companies that are paying out real cash to their shareholders. But my research shows this is one of the most dangerous strategies to employ today.
Fewer than 40 companies in the S&P 500 currently pay more than 4% annually. And many of them will find themselves in a bind when their payout ratio is too high. They’ll have to stop raising – or worse – lower their dividend. And that will wipe out gains from income and appreciation.
That’s exactly what happened on February 9 when Diamond Offshore (DO) announced it was cutting its regular quarterly dividend payments by 86%. Technically the company was only chopping the “special dividend” payment
portion of its quarterly check to shareholders – but that was 75 out of the 87.5 cents it’d paid every quarter since July 2010.
Investors should have seen this coming. Oil prices had dropped by 50% over the previous 6 months, which meant that Diamond Offshore would most likely have to rent out its oil rigs at much lower prices as its contracts came up for renewal.
But many investors conveniently turned a blind eye to this minor business detail, and instead bid up DO higher than it should have been simply for the 10%+ trailing yield it had paid over the previous 12 months.
This rear-view mirror strategy proved costly, as DO’s stock plummeted 34% over the ensuing 5 months.
DO Tanks on Dividend Cut
Consol Energy (CNX) investors have seen their money cut in half after the company cut its dividend in half in October 2014. As with Diamond Offshore, investors who went beyond the first-level data would have figured that spiraling coal prices were going to impact Consol’s ability to pay its shareholders. Most, however, missed this nuance, and saw their shares decline in value by 50% over the subsequent 21 months after the yield cut.
CNX Cuts Its Dividend – and Share Price – in Half
Gaming mogul Steve Wynn believes as we do that dividends should be paid from profits. On April 28, he told investors in Wynn Resorts, Limited (WYNN) that it would be “foolish to issue dividends on borrowed money” – as he cut the company’s dividend by 67% after the company failed to post a profit that quarter
In the two months following his announcement, his company’s shares dropped 21%. And Wynn’s investors were left wondering why they blindly bet on his gaming stock for a 4.8% trailing yield without considering whether there would be consistent profits to fund these dividends.
WYNN Suffers a Profit Bust – Its Yield and Share Price Follows
Are there dividend disasters like WYNN, DO or CNX hiding in your portfolio? I come across more of them every day, many of which are well-known companies that have done investors reasonably well for years, but whose circumstances have recently changed.
I’ll bet the “next WYNN” is storage company Iron Mountain (IRM). It pays a 5.8% dividend yield today – but over the last three quarters, it’s only earned $0.28 per share in net income, while paying out $1.66 in dividends per share!
This is simply not sustainable – and when something gives, it’s going to be IRM’s yield. And its stock will decline by 20% or more as a result of its upcoming dividend cut.
Dividend disasters like these have forced many income investors to move to the sidelines and to accept the paltry returns of traditional safe havens.
Others, in a typical sign of an over-enthusiastic equity market, are rushing to stocks they would normally shun in search of much needed income.
They’re looking at the usual statistics such as trailing yield, stated yield and other “simple” data points, but failing to dive deeper into the real business behind the numbers. They’re buying issues with serious skeletons in their respective closets.
When these skeletons appear, they’re sending share prices down 20% or much more – which, again, completely defeats the point of buying for income in the first place.
We don’t see this as an either/or choice. Rather, there is safe yield out there, with potential appreciation to boot, but it requires a different way of thinking about the market.
It requires what’s known as “Second-Level Thinking.”
The Billionaire’s Edge: Second-Level Thinking
Enter renowned value investor Howard Marks, probably the richest and smartest money manager that individual investors have never heard of.
He’s the chief of Oaktree Capital Group (OAK) – which has a cool $100 billion under management.
And his four decades of investment experience have earned him a regular spot on Forbes’ World Billionaires list for several years running.
Though you may not know him, Marks is well known among investment insiders – not only for his giant returns, but
also for his prescient writing. He publishes regular commentary in his Oaktree Memos – which are read religiously by many of the greatest investors in the world, including Warren Buffett himself.
I highly recommend reading these Oaktree Memos when you have a chance, but the most interesting thing about Marks is hidden in a chapter of his excellent book The Most Important Thing: Uncommon Sense for the Thoughtful Investor. It's a work that won acclaim from legendary investors Joel Greenblatt, Jeremy Grantham, Seth Klarman, and even Warren Buffett.
In the book, Marks identifies the typical value investor’s first-level thinking: If you analyze a stock and it looks cheap, you should buy it.
And the typical dividend seeker’s first-level thinking: If you’re looking for yield, and you find a stock paying 5%, you should likewise buy it for income.
But everyone is doing this, in one form or another. Growth, value, dividends–all investors look at the same data.
Marks introduces what he calls “second-level thinking” with a few examples:
- “First-level thinking says, ‘It’s a good company let’s buy the stock.’ Second-level thinking says, ‘It’s a good company, but everyone thinks it’s a great company, and it’s not. So the stock’s overrated and overpriced; let’s sell.’”
- “First-level thinking says, ‘The outlook calls for low growth and rising inflation. Let’s dump our stocks.’ Second-level thinking says, ‘The outlook stinks, but everyone else is selling in panic. Buy!’”
- “First-level thinking says, ‘I think the company’s earnings will fall; sell.’ Second-level thinking says, ‘I think the company’s earnings will fall less than people expect, and the pleasant surprise will lift the stock; buy.’”
When investors accept higher risk in hopes of higher return, their entire thinking is flawed, according to Marks. He explains: “If riskier investments could be counted on to return more – they wouldn’t be riskier!”
Instead, he believes “investments that appear riskier have to appear to offer higher returns, or nobody will make (invest in) them. But that doesn’t mean it has to come true.”
In fact, Marks explains, there are always a range of outcomes that are much different than those investors envision, or merely “hope” will happen. And the riskier the investment, the wider the range of possible outcomes – good ones, and bad ones.
In his September 2014 investor memo, Marks wrote:
“The probability of loss is
no more measurable than the probability of rain. It can be modeled, and it can be estimated (and by the experts pretty well), but it cannot be known.”
Howard Marks may not know what his investments are going to return before he buys them – but he can model and estimate the probabilities very well. He and his team are experts at creating statistical models that identify investments which, over a large sample, will constitute a great portfolio.
Oaktree’s primary goal is “achieving attractive returns without commensurate risk.” It’s secret is that it assesses risk based on actual probabilities rather than perception.
It’s a “calculated contrarian strategy” that’s helped Oaktree make a number of gutsy, profitable moves – like the $10.9 billion distressed debt fund it raised in 2008, the largest to date.
Oaktree has earned its clients an astounding 19% after fees on its distressed debt funds, and Howard Marks has made himself a billionaire twice over using this approach.
A track record like his makes it almost tempting to just sign over your portfolio and let Oaktree Capital take care of the rest, no?
Alas, Oaktree offers its services to pension funds, sovereign wealth funds, institutional investors and ultra-high net worth clients only.
So what are the rest of us to do?
Over the last decade, I’ve developed and refined a second-level investing system that identifies the very same types of market opportunities. It’s backed by my own proprietary software algorithm that calculates the second-level investing math behind the basic numbers to determine the probabilities of various financial outcomes actual happening.
With first-level thinking breaking out to all-time highs, there are no shortage of right angles for us to analyze for profits.
In fact, my system recently turned up several dividend payers hiding in plain sight.
Let me tell you about one of my favorite plays right now…
Second-Level Fund Paying 6.2% Dividend with 10% Upside Potential
One of my favorite funds uncovered through this system is trading at a 10% discount to its net asset value (NAV). This means that you’re buying its holdings and getting a free gain once its price trades more in line with its NAV. You’ll also receive a 6.2% yield while you wait… and the best part is the dividend is paid monthly.
Why haven’t the money lords on Wall Street cashed in already? Because the consensus outlook – the perception Marks warned us about – is pessimistic. The first-level thinkers believe this sector is going to get crushed by debt and rising interest rates.
last traded at such a steep discount two years ago. At that time, the first-level thinkers had the exact same concerns. But my second-level analysis determined that their worries were overblown. So I recommended the fund, which gained 13.5% from trough to peak while paying a dividend of nearly 7% along the way.
The setup this time is exactly the same and, based on my system, I don’t see any reason why this fund isn’t due for a similar rally. It should to bounce from $13.50 to over $15 in the next 12 months for a gain of 10% or more. Plus you’ll capture a safe 6.2% monthly dividend in the process.
I’ve prepared a report on this pick titled “The Safest 6% You’ll Find Right Now.” It includes the fund name, ticker, buy-under price and the full backstory on why I like it.
I’ll tell you how to get a copy of this report, in addition to the Second Level Investing report I mentioned earlier, absolutely free in just a moment, but I’m getting ahead of myself…
My Contrarian Background: From Software to Sugar Futures
I’m Brett Owens, Investment Strategist at BNK Invest.
I began buying stocks profitably in between my classes at Cornell University, where I graduated cum laude with a degree in Operations Research and Industrial Engineering. In my classes, I learned how model the probabilities and likelihoods of various events through computer simulations. Outside of class, I was placing at the top of campus-wide stock picking competitions while buying future five-bagger Dick’s Sporting Goods (DKS) for my personal account.
My ORIE major, traditionally used to optimize manufacturing plants and supply chains, had grown particularly popular with Wall Street recruiters. In hindsight, it’s easy to see why – my classmates and I tackled rigorous courses in math, finance, computer programming, entrepreneurship, and probabilities – an ideal combination for the likes of Goldman Sachs. In fact, we created the exact types of financial return models based on probabilities that Howard Marks writes about in his investment letters.
But I couldn’t stand the thought of grinding it out 80 or more hours a week in a cubicle. Worse yet, I didn’t like the idea of becoming yet another drone filling the coffers of a major investment bank or hedge fund.
So I landed a spot in a prestigious technical leadership training program with one of the top industrial companies in America. And parlayed that into an early employee role with a software startup in San Francisco.
This was during big growth period in Silicon Valley and it was definitely an exciting time. Money was everywhere, valuations were through the roof, and it seemed like everyone was looking to become the next tech gazillionaire.
I got in on the excitement and co-founded two SaaS (software as a service) companies which today serve more than 26,000 business users. My companies and I were featured in leading publications including The Economist, Inc Magazine, Forbes, The Chicago Tribune, Entrepreneur Magazine, and The Globe and Mail.
Since founding these companies, the buzz in the technology world has been dominated by the hot consumer apps. From Twitter to Facebook to Instagram, the mantra nowadays is “go big or go home.”
But I knew then, and still believe today, that the odds of success with this “swing for the fences” approach are about as good as winning the lottery.
So, while others were chasing after millions of users, I focused my companies on building great products that would help underserved niche markets – small businesses in particular.
Simply put, NOT following the crowd was the surest path to success and profits. This unique approach helped grow both companies without raising a single dime from outside venture capital.
I took my software profits and started investing in stocks – especially issues that paid income – using the same second-level philosophy outlined by Howard Marks.
I buy very few stocks that don’t pay a dividend. And believe it or not, there was a time when no investor would buy a stock that didn’t pay a dividend.
In fact, in 1938 John Burr Williams’ breakthrough The Theory of Investment Value used the dividend discount model to determine the right price to pay for a stock. It was the same cash flow thinking that the best investors have used ever since—though with some slippery slope changes.
Over time, investors lost their connection to cold hard cash and decided to “trust” management. Instead of the net present value of all future dividends, they focused on all future cash flows.
And then starting in 1960s, more and more individual investors abandoned disciplined valuation at all and chose growth and speculation, or “buy and hope.”
Yet all this straying far from cash has not changed one thing: dividends are
responsible for the majority of the market’s long-term return. Period.
It’s not necessary to take extraordinary risk. Simple old income and compounding do the trick, but you have to look where others don’t.
The cookie cutter approach of buying and holding “Dividend Aristocrats” assumes that the stocks are priced for perfection. But institutions have bought them like mad, and the stocks are likely to lose more than the dividend yield.
Plus, high-yield investments usually bring high risk, which makes us pay in the end.
That’s OK – my specialty is looking where others aren’t. I analyze the probabilities of what may happen to these issues, and when there’s a nice reward without much risk, I buy. That’s how I’ve found investments that paid 7% and 4.3% and 3.8% annually in dividends, while also earning 5% and 15% and 20% respectively in price appreciation within several months.
I also found some big gainers that few people recognized at the time. One of which returned 105% in less than a year and another rallied 80% in 8 months!
Let me make clear that these are NOT “back-tested” hypothetical results. I’m a “bird in the hand” kind of guy, so I’m not satisfied with cherry-picking historical data to find out what “would have” happened “if” my system had been in place.
These gains are taken directly from a sort of “live test run” of my Second-Level system that started back in 2013 and ran for nearly a year. It included a full model portfolio and was shared with about 2,000 individual investors.
Let me show you some specific examples from that period so you can see the system in action.
How My Second-Level System Uncovered Real (& Safe) Yield
In mid-2013, the City of Detroit filed for Chapter 9 bankruptcy. It was the biggest – and most expensive – municipal default in U.S. history. It inspired the return of perma-municipal-bond-bear Meredith Whitney, who started crowing that she was finally right and the municipal bond market was finally melting down.
Five days after the bankruptcy, Whitney penned an op-ed for the Financial Times in which she warned that Detroit “should not be regarded as a one-off in the U.S. municipal market.” Investors became just as spooked as Whitney warned, and sold their muni bonds without a second-thought.
On the chart below you can see the fallout using the Nuveen Muni Opportunity Fund (NIO) as an example. The red “
A” marks Whitney’s bear call.
By year’s end, first-level thinking was aligned with Whitney and other muni-bears. There should be more municipal defaults, which mean municipal bonds are risky and should decline in price.
That’s when my second-level strategy kicked in. My system revealed that NIO was trading at an 8.4% discount to its net asset value – which meant investors were quite pessimistic. It also led to a deeper look at the bonds that the fund held, and found that these were loans that were going to easily be paid back. For example, the City of Dallas was paying over 5% on bonds it had issued to fund its airport expansion. This was good money that wasn’t affected by Detroit.
The “B” on the chart indicates where my readers and I stepped in and bought NIO, collected a safe 7% annual yield, and within six months earned an additional 5% in price appreciation, too.
The following month, my second-level investing system uncovered a utility stock that exactly ZERO out of the 23 analysts that covered the issue rated as a “Buy.”
Exelon Corp (EXC) was in Wall Street’s doghouse for failing to execute on ambitious expansion plans. “Everybody knew” about management’s failures – and they wanted little to do with the stock as a result.
I looked at Exelon’s clean-energy business and 4.3% yield and determined the situation wasn’t quite as bad as onlookers thought. And when things went from “bad” to “a little less bad” from a first-level perspective, some analysts actually upgraded their rating on Exelon. That sent the share price up 20% in just a few months:
Exelon Had Nowhere To Go But Up When the Last Analyst Gave Up
Even reliable dividend payers can fall out of favor for the wrong reasons. In the summer of 2013, investors were rushing to sell the shares of security company Diebold (DBD).
Even though the company had increased dividends for 38 consecutive years, and had a strong foothold in a growing market (ATMs), investors hated the stock so much that its short interest (the percent of total shares sold short)
rose from 1% to over 6% in just a couple of months. The four analysts covering DBD weren’t fans, either – none of them had a buy rating on the issue.
What were they missing? A much needed leadership change. Diebold’s Board of Directors had hired turnaround expert Andy Mattes a few months earlier. Mattes and his team went to work right away, focusing on growing the company’s higher margin products and shedding its lower margin professional services.
The changes soon paid off as Diebold continued to pay its dividend. We collected the 3.8% annual yield while earning 20% in stock price appreciation as first-level investors realized their mistake and slowly bought back in over the next year.
DBD Paid Us 3.8% ($1.16) Plus 20% in a Year
As you can see, this system pulled in safe 7% and 4.3% and 3.8% yields while we enjoyed 5%, 15% and even 20% in stock price rallies. Not bad, right?
Tell you what, I appreciate that people think of me as a straight shooter, so here’s a list of the final active holdings in our portfolio at the time we closed out.
Our final active holdings included 10 out of 12 winners and a 22% total return after about 1-year’s time.
Of course there’s no such thing as a “perfect” system, but I’m sure just about anyone will agree that a 22% total return is pretty darn good… Many would say great, in fact, when you consider this system built with safety and peace of mind among our highest priorities.
Make Your Move to the Second-Level
Since closing out this “test” portfolio, I’ve spent the past year analyzing lessons learned and implementing new enhancements to make the Second-Level Investing system even better.
It’s humming like never before, thanks to my continuous improvements, and an investment environment that’s rich in first-level thinking.
In fact, with so many opportunities popping up
on my radar, the biggest challenge has not been in finding safe dividends to beat or even double the S&P average. The hardest part is choosing favorites among all of the second-level stocks that will handily triple the S&P average yield.
Which is why I’m excited to announce the launch of my new research service, The Contrarian Income Report.
Designed around the very same “secret” that made Howard Marks a billionaire, it’s the fastest, easiest way for you to put an end to unnecessary risk-taking in exchange for paltry gains.
If you’re ready to take your income to the next level, here’s a snapshot of what you’ll find in The Contrarian Income Report:
- 12 Monthly Issues – On the first Friday each month you’ll receive my latest Second Level investment research right in your inbox. I’ll include at least one new recommendation, updates on existing positions and an overview of trends and events that may affect our portfolio.
- Flash Alerts – You’ll never have to worry about missing out on breaking news on our portfolio stocks. I’ll have an eye on all of them 24/7 and email you right away if there’s ever any change in our position.
- Second-Level Coaching – You’ll profit handsomely (and safely) by following along with my portfolio, but I want you to become a confident Second-Level investor too. I’ll explain the “how” and the “why” behind each pick, with detailed explanation of our reasoning and expectations that will help you find other safe, under-appreciated opportunities on you own.
- Weekly Market Analysis – Sent straight from my desk to your inbox, you’ll get my weekly analysis of major market events, second-level ideas and stocks I’ve been watching.
- 24/7 Access to the CIR Website – Day or night, you can log into our password protected website, where you’ll find easy access to all of our resources, including the archives with each monthly issue, special reports, Flash Alerts and the full portfolio.
- World-Class Customer Service – Contact us right away if you have any questions and we’ll do everything we can to ensure you get the most out of your subscription.
- 60-Day Risk-Free Guarantee – Try out the service risk-free for two full months. Cherry pick the stocks you like best from the private portfolio. Learn my approach and prepare to profit.
If you’re not
100% satisfied in the first 60 days, simply let me know and we’ll refund every penny you’ve paid. No questions asked.
Of course I realize you might be hesitant about trying a brand new service, and I want you to be certain this is worth your time and effort, so…
Let Me Sweeten the Deal
In addition to everything I mentioned above, we’re going to kick start your second-level investing with the following special reports absolutely free:
Free Special Report #1:
The Safest 6% You’ll Find Right Now
First-level thinkers have been overly pessimistic about this entire sector, and this play in particular has been severely punished.
It sports a stable 6.2% yield right now and is trading 10% below its net asset value (NAV).
That means we’re anticipating at least that much in gains once the broader perception realigns with reality.
To top it off, the dividend is paid monthly, so the checks will start rolling in almost immediately.
Free Special Report #2
Second-Level Investing: Your Guide to the Contrarian Money Machine
Many super-investors agree with Marks on the virtues of contrary thinking. However, I haven’t yet heard one of them specifically outline how they go about finding these unpopular stocks to buy. And that’s exactly what you’ll find in this step-by-step contrarian guide.
For the past decade I’ve been refining a system that identifies and selects the top contrarian candidates for investment. By following these steps, you’ll be able to find the types of stocks that Marks, Buffett and many other greats are also sorting through.
Free Special Report #3
The Dirty Dozen: 12 Dividend Stocks to Sell Now
In the course of my research I don’t just unearth potential big winners, I also dig up some pretty surprising landmines too. This report reveals the 12 biggest potential disasters on my watchlist, including some of the most popular names on the street. Can you guess…
… which telecom darling has financed dividend increases with long-term debt three out of the last four years?
… the multinational manufacturer paying out nearly 90% of its earnings while EPS has been on a steady 27% decline since 2011?
… the toy company on a 3-year losing streak yet paying over 6% while its product line falls further and further out of favor?
Make sure you're not holding any of these losers when they finally make the decision to cut payouts.
Now you’re probably wondering what a service like this is going to cost…
Profitable Advice That Doesn’t Cost a Fortune
I’ve been perfecting this system for nearly ten years… it’s already been successfully “beta tested” in front of thousands of real-world investors… and the final adjustments are in place.
We’re already delivering yields well beyond what you’ll find in Treasuries and the supposed Dividend Aristocrats.
The special reports you’ll get absolutely free could sell for hundreds of dollars each.
And even that would be a bargain compared with the yield I’m looking for in my very next pick.
But I’m not going to ask you to pay anything close to that.
The masthead price is just $99 a year, which your profits would easily cover in no time.
But I’m excited for you to get started, so I’ve convinced my publisher to allow the next 250 people who respond to receive a 1-year Charter Membership for just $39.
Yes, you read that correctly – over 60% off your first 12 months if you are among the next 250 members who join.
My publisher is a little nervous about this concession though, so I’m sure he’ll go back to the full price the moment all 250 seats are filled. I don’t know how long it will take to do, but I’m sure it will be a matter of days at best.
If that’s still doesn’t convince you this is an excellent deal, there’s just one more thing I’d
like to add…
Our 100% Money-Back Guarantee
I’m so confident you’ll profit from my research that I’m going to give you 60 days to try The Contrarian Income Report risk-free.
Here’s how it works…
Start your Charter Membership today for just $39.
Check out the website and download your free reports (particularly the one on the 6.2% monthly payer with nearly 10% growth potential).
Enjoy the next couple issues of The Contrarian Income Report, my weekly column, flash alerts and more.
Cherry pick a few of the plays you like… and then profit.
If, after nearly 2 months, you don’t feel the advice has more than covered your cost, or it’s just not right for you, simply let us know and we’ll refund your full membership fee.
That’s 100% money back, no questions asked.
Plus you’re welcome to keep the reports as our thanks for trying it out.
So, you get a 60% Charter Member discount, three free reports AND a risk-free 60 period to decide if you like the service.
I don’t see how you can lose here as I’m the one taking all the risk. Click the button below to get started right now.
If you’re still holding underperforming or even mediocre stocks, it’s most likely because you’ve been using a first-level mindset. Don’t miss out on this opportunity to move to the second level right now!
Chief Investment Strategist
The Contrarian Income Report
P.S. Since my recommendations are contrary to prevailing popular beliefs, they have a habit of rallying quickly as soon as the Wall Street crew realizes they are missing out. I encourage you to get started right now so that you can get into my favorite income stock at a good price.
P.S. Remember that our 6.2% dividend is a monthly payer, or a little over 0.5% per month. That means even a small position in this fund would yield more than enough to cover a full year’s membership… before your 60 day trial even ends!