In today’s video, Chief Analyst Adam Galas is going to do something a little different.
He’ll cover how a recent portfolio pick has been performing since we recommended it in April. Since then, we’re up 11.5% and on pace to earn a healthy 5% annual dividend.
It’s a perfect example of the Fortress strategy in action.
This American bank is ready to face hardship if we’re met with harsh economic conditions. But as he’ll show you, it’s priced to handle it and continues to present a great income opportunity today.
Click here or the image below to watch the video or read the transcript.
Click the image below to watch the video or scroll down to read the transcript.
Happy SWAN (sleep well at night) investing,
Brad Thomas Editor, Fortress Portfolio
Transcript
Welcome Fortress Portfolio members to a special edition. This week's video update is a victory lap for U.S. Bancorp (USB).
I'm going to try this for the first time here. We're going to do a screen share and take a look at what happened with U.S. Bancorp.
We recommended USB on April 18, 2023.
Now, notice the pink line is showing us the historical price to earnings ratio and the black line shows the actual price to earnings ratio during that time.
And then look at the section during the Great Recession of 2008.
We had a crash and it bottomed at about 6X earnings and we had about an 8X earnings bottom during the pandemic.
So when we recommended it, we were using this fundamental form of technical analysis based purely on earnings.
We could see that U.S. Bancorp was trading around 9X earnings, pricing in a severe recession, like the Great Recession and the pandemic even though it looks like we are not going to have a recession this year.
And that next year’s recession is likely be mild.
(Source: FAST Graphs)
But you can see that there was a significant decline here although nowhere near Great Recession lows.
And yet the stock was acting as if the economy was on fire.
We're not market timers, and USB dropped a little lower after we recommended it.
But now we are up 16% (from it’s most recent bottom) in a matter of several weeks, 54% annually.
And why does that matter?
Because the trade that made Warren Buffett’s career was American Express during the Salad Oil Swindle scandal.
He made 50% annually for about five years.
So you're literally making Buffett like returns during his prime legendary trade.
Now granted, it's only been a few weeks… but the point is you can make absolutely incredible returns with low-risk blue chips.
Now, look again at the potential for USB in 2025 alone, 80% upside remaining, 27% annually.
(Source: FAST Graphs)
So if you haven’t bought USB yet and you’re excited by it’s upside potential but worried you missed out because it's already up 16%... Maybe, you’re thinking, “There's probably no orange juice left in this squeeze.”
Oh, no, there's plenty of juice.
There's 80%, 27% annually.
And of course, this is still a rapidly growing bank.
I expect it to grow at 8% when this recession is over in 2024.
(Source: FAST Graphs)
You can see the recovery above at 6%, 12%, 11%.
We have a way a suite of tools that follow the best blue chips and tell us what companies trading at the best yield in 25 years. And what the price to earnings ratio was in the pandemic or the great Recession.
Then we check all the fundamentals and make sure the safety and quality are still intact. We look at credit ratings and what whether or not the dividends are expected to keep growing.
We also look for a payout ratio at say a nice 50%.
For USB even with collapse in fundamentals, everything is still safe.
So we can basically see that, okay, the price is going off a cliff.. but the economy isn’t.
USB is priced as if it is in a severe session like the economy is completely imploding... but we can see this is not happening based on the fundamentals on a quarterly basis.
It is priced as if the world is ending, even though it’s not. And all of the bank’s fundamentals are still strong.
So we know that this is one of those incredible opportunities and what Buffett calls fat pitches.
This opportunity promises Buffett-like returns from a blue-chip bargain, hiding in plain sight.
And that is what Fortress Portfolio is all about.
Last week, I promised to show you an incredible blue-chip bargain.
And this week I don't even have to show you the ones hitting new lows (although I will in the coming months).
We'll be talking about some incredible opportunities with yields that are the highest in 23 years, and price to earnings ratios that are the lowest in 20 years.
But today I wanted to remind you that U.S. Bancorp is still an incredible opportunity.
So even when the market's acting silly, stupid, and just plain crazy – you can still remain smart, sensible, and prudent… And at the same time earn these Buffett-like returns while locking in yields of 5%, 6%, 7%, and even 9%.
That’s how Fortress Portfolio can help you retire in safety and splendor.
Thank you for joining us this week.
I hope you join us next week so we can help you make sense of these irrational markets.
And help you stay sane, calm, safe, and live to achieve your financial dreams.
Safe Investing,
Adam Galas
