By Brad Thomas and Adam Galas

On May 7, 1915, a German U-boat torpedoed the RMS Lusitania.

The Lusitania was a UK-registered ocean liner departing New York.

After the German submarine struck it, the boat sank in 18 minutes.

Images of the ship’s destruction circulated all over the world. It became a symbol of the horrors of the First World War… And spurred America’s entry into the war two years later.

Of the 2,235 people on board, 1,474 of them perished.

Among them was an American electrical engineer and entrepreneur who had achieved a lot of success in his 53 short years: Frederick Stark Pearson.

You may never have heard of him before. But Pearson started a company that today manages around $800 million… and is behind this month’s Fortress Portfolio recommendation.

A professor of chemistry at the Massachusetts Institute of Technology and mathematics and applied mechanics at Tufts College, Pearson had a brilliant mind and even more business savvy.

He developed an electrical transportation system in Boston… was the head engineer for Metropolitan Street Railways in New York… and consulted for power generating stations.

Like most great investors in history, Pearson met triumphs and defeats on the journey to building his empire.

He lost everything when a corrupt Mexican government nationalized his assets in the country and cost him his entire fortune.

But he rose from the ashes to build railways, tramways, energy companies, hydro projects, and other ventures in North and South America. And he was always on the lookout for profitable opportunities in diverse markets.

Pearson was able to find wide-ranging success because he learned how to navigate the maze of global government regulations.

Today, the company that continues his legacy operates in over 30 countries on five continents… All to bring investors the biggest and best opportunities to profit.

At Fortress Portfolio, our goal is to build a portfolio that can withstand market volatility, recessions, record-high inflation, interest rate hikes, and other economic setbacks better than the broad market.

We do this by selecting a diversified collection of income-producing stocks, bonds, and managed futures that pass our strict safety metrics. This buy-and-hold strategy pinpoints the strongest companies for beating the market and generating outsized returns over the long term.

Today’s recommendation has shown a strong history of surviving all kinds of markets. And as we’ll show you in this month’s issue, we expect it to continue doing the same for years.

By combining Pearson’s history with his passion for energy-focused businesses, it’s earned its spot as a Fortress Portfolio holding.

With it, we can set ourselves up for double-digit returns and a healthy 4.6% dividend for the next few years.

Founded in 1899 as the Sao Paulo Tramway, Light and Power Company, today’s parent company slowly diversified from an energy provider in Brazil… to the second largest alternative investment manager in the world.

In 2002, it got its new name: Brookfield Asset Management.

Brookfield has made a name for itself as a global asset management company. It targets investments in real estate, infrastructure, credit and private equity, and other lesser-known areas.

These days, it’s identified another massive investment opportunity – one Bloomberg expects to grow $5 trillion per year for 30 years.

What is this $150 trillion megatrend?

Renewable energy.

Which is why Brookfield established a subsidiary in 2011 to focus exclusively on investments in this sector…

That company bears the name Brookfield Renewable Corp. (BEPC). And it’s where our opportunity lies today.

We originally recommended Brookfield Renewable on February 10.

It owns and operates renewable power assets like hydroelectric, wind, solar and storage facilities in North America, South America, Europe and Asia.

Source: Brookfield Renewable Corp

Brookfield Renewable is what’s called a “yieldco.” That’s a kind of yield-based investment company similar to a real estate investment trust (REIT) and midstream master limited partnership (MLP).

That means it was created to own assets and raises funds by issuing shares. It then pays out dividends to shareholders from its cash flows.

[Note: BEP is the symbol it trades on the Toronto stock exchange and has been for 20 years. However, we’re recommending BEPC. It has a 0.3% lower yield, but a much easier tax treatment of the dividend.

The nice thing about BEPC is that it’s a corporation. So there are no K1 tax forms to complicate your tax preparation. All the dividends are qualified.]

What makes Brookfield Renewable special is that no has more experience with green energy investing than its parent company. Brookfield got its start in 1902 with investments in Brazilian hydropower. Renewable energy is at the core of its DNA.

Brookfield is the world leader in infrastructure investing. And Brookfield Renewable is its primary way to invest in green energy. It owns 120GW (gigawatts) of solar, wind, hydro, and storage capacity in 20 countries on four continents. For context, 1 GW can power 750,000 homes.

Almost 4,000 employees run its 8,700 facilities. And it’s all overseen by CEO Bruce Flatt.

You may also have never heard of Bruce Flatt. But he’s a legend in this industry, having delivered 20% annual returns for investors for the last 21 years.

Each of Brookfield Renewable’s projects uses long-term power purchase agreements (PPAs) to generate stable and inflation-adjusted cash flow. Its 900-plus customers are mostly investment-grade utilities all over the world.

70% of its revenue is automatically inflation-adjusting. So no matter how high inflation goes, Brookfield and its investors are protected.

The company’s average remaining contract is 14 years long, and new projects have contracts for 20 to 25 years. This is some seriously stable and predictable revenue.

Brookfield Renewable has enough capacity today to power 90 million homes. That’s 63% of all the homes in the U.S.

But the opportunities in green energy are so vast that Brookfield Renewable’s new project pipeline is 102 GW, almost enough to double its capacity in the next five years.

And its backlog is growing exponentially because this is a $150 trillion growth market. Why? Because the green energy transition isn’t just about solar panels and windmills. It involves every part of the economy.

To give you an idea of just how large an opportunity this, consider this: Over the last 20 years, $300 billion per year was spent on green energy. And Brookfield Renewable has delivered 16% annual returns while it’s been operating over those two decades.

Now that the market is expected to soar to $3.5 trillion to $5 trillion per year, that’s almost 12X the opportunity.

Now that doesn’t mean Brookfield Renewable will grow 12X as fast. But management says it can deliver 10%-plus long-term growth… and a 4.6% safe dividend… for years or even decades to come.

Based on its current backlog of projects – which is enough to almost double its capacity in a few years – analysts expect Brookfield Renewable to grow its cash flow at 13% annually. When you add in that 4.6% yield, you get a potential return of almost 18% per year.

We believe this is attainable for a company led by Brookfield operating in an unstoppable trend.

Brookfield Asset Management is a powerhouse in raising growth capital, with a BBB+ credit rating that’s by far the strongest in its industry.

This environment of rising interest rates benefits Brookfield because all its rivals must pay far higher interest rates than it does. This means Brookfield has a cost of capital advantage, which serves as one of its wide moats. It can do deals no one else can afford.

It has another wide moat: its exceptional management and skilled investors. This includes 3,400 expert operators who run the actual assets out of 20 offices around the world.

This team has delivered 16% annual returns and 6% dividend growth for the last two decades.

Source: Brookfield

Put in different terms, $1 invested in Brookfield in 2001 was worth almost $23 in late 2022. That’s compared to $1 invested in the S&P 500 becoming $4.15… and $1 invested in utilities becoming $5.

Not only that, but Brookfield has a plan to deliver 5% to 9% dividend growth long into the future. At the same time, it expects to grow cash flow (what drives the stock price) by 10%-plus.

Its goal is to deliver 12% to 15% annual returns, or 20% to 50% more each year than the S&P 500. All while enjoying 3X the safe yield of the stock market.

Brookfield Renewable plans to spend a minimum of $6 billion growing its green energy assets over the next five years. It already has $3.5 billion ready to go and is a master of raising money for new opportunities.

In fact, Brookfield Asset Management, which owns Brookfield Renewable, raised $14 billion in Q4 of 2022 alone and $93 billion in all of 2022.

Now, no investment is without risk. So let’s lay out what could potentially go wrong with Brookfield Renewable’s prospects.

Remember, if a company breaks our original investment thesis or cuts its dividend, we’ll immediately reevaluate and remove it from our model portfolio if our research suggests that’s the best way to protect our capital and maximize our gains.

Any of these factors might slow down Brookfield Renewable’s trajectory. So we’ll be keeping a close eye on them and will update you on any material changes in future issues and alerts.

Brookfield Renewable is the largest green energy producer in the world, and it’s been investing about $1 billion annually. With the sector expected to grow 12X, that allocation should increase exponentially, too.

With the most experienced, proven, and trustworthy management team in the industry – and massive growth potential ahead of it – Brookfield Renewable offers 15+% long-term returns for as far as the eye can see.

But you don’t have to wait decades to make a great return with Brookfield Renewable… Here’s what it offers investors over just the next five years:

For context, the S&P 500 is expected to deliver about 45% returns by 2028. With Brookfield Renewable, we can earn 3X the safe yield of the S&P 500 today, and potentially 4X more money in the next five years.

It has the expertise, fundraising power, and most of all, operational experience from doing this for 120 years. Operating in other countries can be tricky, especially in Latin America, and no one does it better than Brookfield.

That’s why we’re happy to give this resilient company harnessing a multitrillion-dollar trend a spot in our Fortress Portfolio.

Action to Take: Buy Brookfield Renewable Corp (BEPC)Buy-up-to Price: $32.82Stop loss: 30% hard stop from the point of entry ($20.63 for our portfolio tracking purposes)Position size: 4.4% of your Fortress Portfolio. Up to 7.5% in individual portfolio.

When I was 12 years old, I remember asking my mother – in all seriousness – “What will I do with my millions?”

I had gotten sucked into the tech bubble like many people in the late 1990s. And the first stock I bought was Network Appliance in late 1999… at a price/earnings (P/E) ratio of 400.

Back then, I didn’t know what a P/E ratio was. And like most people, I didn’t care.

All I cared about was that I made 25% in four months, and I felt like a stock market genius.

This was a time when companies with no plans to ever make a profit would go public – and sometimes triple in a day. During the tech bubble, a few companies even doubled every year for a decade.

Network Appliance was one of them, which is why I bought it.

Needless to say, I never became a preteen millionaire. The tech bubble burst, Network Appliance fell 95%, and I felt lucky to get out with "just" a 50% loss.

Even the smartest people in history have made painfully silly mistakes that cost them fortunes.

These unfortunate stories inspired me to build the Fortress Portfolio in the first place.

You see, great fortunes aren’t made purely by being right.

The greatest investors in history, people like Peter Lynch and Warren Buffett, are only right 60% to 80% of the time. But they’re still able to become legendary billionaires for two simple reasons: safe portfolio construction and smart risk management.

That’s what Fortress is all about. Helping regular people like you, who might be new to investing or rattled by a terrible 2022. Our mission is to help you get on the right path to a rich retirement.

One built on the bedrock of maximum safe – and growing – dividend yields. The ones that are protected by strong balance sheets, skilled and trustworthy management, and some of the world’s best long-term risk management.

Fortress is built to stand the test of time. It’s the ultimate ultra-high-yield sleep-well-at-night retirement portfolio.

In 2022, it fell a peak of 15%, which was half that of the S&P 500. That’s exactly what we expected Fortress to do because it’s the result of eight years of research, development, and studying what works and what can sink a retirement portfolio.

Whether you’re trying to buy a house, or a new car, send your kids or grandkids to college, or retire in safety and splendor, Fortress was built from the ground up for people like you.

Thank you for joining us on this dividend-fueled rise to riches in the coming months and years. We look forward to helping you make your financial dreams come true.

Because if there’s one thing I believe in, it’s that everyone deserves financial freedom. And that’s what Fortress Portfolio can help you achieve over time.

So let’s dive into an overview of what’s going on with the markets and overall economy. And then I’ll share material updates from our portfolio holdings.

Remember, I send out weekly video updates every Wednesday covering these topics, too. They’re a quick way to learn about what’s going on, what you should focus on, and what it all means for your portfolio.

I watch Bloomberg, so you don’t have to. As an economics major, I’ve always loved tracking the economy and the stock market.

So I can go through the headlines and data and explain what it all means. Not so you can time the market based on things like interest rates, inflation, or recessions.

In fact, the stock market isn’t the economy. And not only is economic market timing impossible, it’s unnecessary.

According to Charlie Bilello, director of research at Pension Partners, and our own analysis… Outside the Great Depression, a buy-and-hold strategy would have beaten perfect market timing.

Annualized Returns for Recession Timing Since 1928

Source: Charlie Bilello, Wide Moat Research

In fact, since 1928, buy-and-hold investing delivered almost 3X the wealth of perfect economic timing and 10X better returns than “waiting for the dust to settle.”

The companies in the Fortress Portfolio are all carefully chosen because they are time- and battle-tested. They don’t fear recessions, and neither should you.

So if we’re not trying to time the market, why bother looking at what’s going on in the economy and comparing it to the past?

The goal of these economic updates is simple. If you know what is likely to happen next in the big picture, you’re less likely to be shocked and make a painful and costly investing mistake.

Let’s start by recapping the previous year.

2022 was certainly an exciting time, with many investors glued to their computers and TV screens. Here are the kinds of things we lived through:

For anyone who wants to safely build wealth and income, it was a terrifying time. Many investors who bought speculative stocks or sold good ones at the wrong time got burned.

So we’ll take a look at what market indicators are saying for the foreseeable future. By being prepared and holding the strongest Fortress stocks defending your portfolio, you’ll be able to stick through the volatility and grow your wealth over the long term.

Here’s what’s happening with the economy today and what that could mean for the stock market in the next few weeks.

The Fed’s fastest rate hiking cycle in 42 years has economists predicting the most anticipated recession in history. And they have been for the last six months.

That’s the bad news… The good news is that this could be the mildest recession in U.S. history.

Since WWII, the average recession saw the economy contract by 1.4%.

But the FactSet consensus is that in 2023, the economy will EXPAND by 0.1%.

And Bloomberg’s consensus is that we’ll have zero growth for the full year.

Granted, economists historically underestimate the size of contractions. But even if they are off by a factor of 2X or even 3X, this would still be the mildest recession in history.

Right now, thanks to the Pandemic stimulus boom, corporations have never had more cash, $7 trillion.

States and local governments, which are also flush with stimulus dollars, have never had better finances.

And consumers still have an estimated $1 trillion in excess savings that are expected to be gone by the end of 2023.

Meanwhile, the job market is the strongest in 54 years.

Wage growth of 4.3% might be below the rate of inflation, but it’s still some of the strongest in two decades.

Big Tech might be making headlines with job cuts. But remember, they hired 1.5 million people in the last four years. And they’ve laid off 138,000 so far.

Plus, Big Tech employs 3% of Americans. The rest of the economy can’t get enough workers.

The January jobs report blowout of 517,000 – 3X the 185,000 analysts were expecting – means the three-month average job creation rate is 350,000.

Now, it’s important to remember about 200,000 of those jobs might be due to seasonal adjustments. Most economists think we actually created around 300,000 jobs in January.

But that’s still 10 times the amount Bloomberg estimates is needed to keep unemployment stable. And today, unemployment is 3.4%, the lowest since May 1969.

Meanwhile, weekly new unemployment claims have fallen to 183,000 per week, which is the lowest in recorded history when adjusted for population.

Last month, the number of open job positions shocked economists by going up by 1 million. There are now 11 million job openings in America, two for every person looking for work.

Some economists, like Apollo Management, think we’re in for a "no landing" scenario. One in which the economy might not slow at all but keep chugging along at 2% to 3% growth rates.

In other words, a recession isn’t a sure thing. Moody’s, the second most accurate economist team, estimates a 50% chance of a recession in 2023. And if we do get a recession, it’s likely to be the mildest in history.

So what does that mean for the stock market?

Let’s consider earnings and what will likely happen to those.

S&P Bloomberg Consensus Bear Market Bottom Scenarios

Source: Wide Moat Research, Bloomberg

The possible range of outcomes for the economy in 2023 is wide. From 2% growth to moderate or severe recession that stretches into 2024.

Earnings growth in 2023 is expected to be anywhere from 0% to -5% in a mild recession to -20% in the case of a "hard landing."

This is why the stock market could fall by about 10% to 30% from here.

That sounds scary. And you might be tempted to sell everything now and go to cash.

But remember what I said earlier: The economy isn’t the stock market. And economic market timing doesn’t work and is unnecessary.

Consider this surprising fact. The median 30-year return for stocks since 1928 is 2,200%, which turns every $1 into $23.

And remember that Fortress is built to deliver long-term market-like returns with 50% smaller declines than stocks in even the worst crashes.

What if you could perfectly time the market and the stock market does end up falling 20% in the next few months?

Perfect market-timing abilities would deliver only an extra 25%. Not 25% per year. But 25% over 30 years.

Meaning, instead of 11.02% annual median returns, you’d earn 11.06% annual returns.

To me, it’s absolutely not worth it to risk 11.02% returns by waiting on the sidelines trying to get the perfect entry… just to get an extra 0.04%.

According to Bank of America, since 1929, 99.96% of the stock market’s gains come from just 10 of the best single daily gains of each decade.

In other words, on average, if you miss the best day of the year, instead of earning those life-changing returns and income, you’ll earn nothing at all. In fact, after inflation, you’ll lose everything.

Since 1928 anyone who misses those 90 best days has lost 94% of their wealth adjusted for inflation.

That’s what Fortress was built to avoid. Our goal is a 6%-plus yielding portfolio made up of the best high-yield blue-chips with overall volatility so low, you won’t panic sell.

So continue following along in these economic updates and my weekly video updates. I’ll let you know what to expect, so you can prepare for the inevitable corrections and bear markets.

We’ll hold through them, since that’s the cost of owning the best-performing asset class in history… And we’ll come out on the other side with no regrets.

Blue-chip dividend stocks can make you rich if you let them.

In this section, we’ll cover any important updates from our Fortress companies.

Important updates involve material changes to business or anything you need to be aware of that will change our investment advice.

Whether or not a company meets or beats earnings estimates in any given quarter isn’t what you should focus on. What matter is if the core business is sound, and the dividend is likely to remain safe and growing.

The key to telling the difference between the next big dividend cut and the next great life-changing deep value opportunity is all in the fundamentals. That includes the balance sheet, cash flow outlook, and fundamental risk of bankruptcy.

And we monitor these things by harnessing the best experts and data on Wall Street. That includes:

We analyze all this data and incorporate it into our 1,000-point safety and quality model. And that’s how we can turn a sea of data and noise into something that regular investors like you can easily understand and trust with your hard-earned savings.

Please note: We update our fair value estimates (buy-up-to prices) once a week on the Portfolio page.

Source: Gurufocus Premium

I welcome your questions and will try to answer as many as I can in the weekly update videos and these monthly newsletters.

Just remember I can’t give individual investment advice. I can provide information about the broader economy, companies, and reasonable and prudent investment advice for the average investor. Please write in with your questions here.

Answer: Currently, Fortress yields 6.6%, 2.4% more than a 60/40.

Yield and growth in the next five years are expected to result in about 70% total returns, plus another 25% from valuations returning to normal. So roughly a double over five years, which is 14% annually, compared to about 47% for a 60/40 retirement portfolio or 8% annually.

Over 10 years, a 60/40 is expected to deliver about 100% total returns or about 7% annually.

Over 10 years, Fortress is expected to deliver about 160% total returns from yield and growth plus 25% from valuations returning to normal. So that’s about 185%, or potentially almost tripling your money.

Fortress is designed to compound at 3% more than the 60/40 with 3X the safe yield for decades.

Answer: The dividends arrive in your brokerage account on the payment date automatically. Each monthly issue has a table near the Portfolio Update section that shows the upcoming payments for the next month. As long as you hold shares by the dates indicated in those tables, you’ll be eligible for the next dividend payout.

Safe investing,

Adam Galas Chief analyst, Fortress Portfolio