Video Update: The Secret to the Best Investors’ Success

After a healthy market correction, stocks are on the rise again.

But instead of obsessing over short-term movements, we  focus on achieving strong returns year after year.

In today’s video, Chief Analyst Adam Galas shares how the best long-term investors beat the markets and average investors… consistently and safely.

By following our model at Fortress Portfolio, we can help you keep the income rolling in and fund a comfortable retirement – regardless of where you are in your wealth-building journey.

Click below to watch the video or scroll down to read the transcript.

In today’s video, Chief Analyst Adam Galas shares how the best long-term investors beat the markets and average investors… consistently and safely.

Happy SWAN (sleep well at night) investing,

Brad Thomas Editor, Fortress Portfolio

Welcome Fortress Portfolio members to another weekly video update. Now, today, we're talking about the epic November rally and the lessons we can learn from it that can help us get rich and stay rich in retirement.

So, if you recall, for the first three months, stocks fell 10% in a completely normal, healthy correction that we should all expect roughly once a year.

And then in November, bond yields rolled over because the economy started to decelerate, and everybody started getting excited about Fed rate cuts.

And this happened:

(Source: Creative Planning vis Charlie Bilello)

As you can see, it was a 9% rally in the S&P 500. This was the 18th largest single-month rally since 1950.

To give you an idea of the historical context, the last time a 60/40 retirement portfolio had that good of a month was when the Soviet Union collapsed in 1991.

(Source: YCharts)

As you can see here, it was a great month for a 60/40. It was up 7%. The market is up almost 9%. The NASDAQ is up slightly more. And the 30-year Treasury bond, which is our zero, is, for hedging purposes, up 16%.

Now, there are some important lessons to take away from the greatest investors in history, such as Peter Lynch.

Those are wise words from Peter Lynch.

And let me share with you a few other legendary investors, such as Jim Simons, co-founder of Renaissance Technologies.

He was able to make 62% annual returns from 1988 to 2021. These are the best-recorded investment returns.

And Harvard statisticians say we’re not likely to see anything that good.

Joel Greenblatt was able to make 40% per year for 21 years at Gotham Capital.

Peter Lynch made 29% annual returns for 13 years at Magellan Fund.

Bill Miller is the greatest value investor, at least when it comes to streaks from 1990 to 2006.

He made 23% per year in annual returns and beat the S&P 500 for 15 consecutive years, which no other human has ever accomplished.

Warren Buffett, of course, made 21% annual returns for 55 years.

And Ben Graham, Buffett's mentor, made 20% for 22 years.

Ed Thorp, who invented card counting, made 20% for 30 years.

Charlie Munger - rest in peace - was Buffett's right hand at Berkshire Hathaway for 40 years. He also made 20% annually.

And Howard Marks, coming in at number ten, made 19% annually since 1995.

These are the ten greatest investors in history, and they all have one thing in common: time in the market, not timing the market.

They were not market timers. They bought great companies at great prices and held them for the long term.

That's how they made their fortunes. That's why they're billionaires.

And that is the key to time in the market and long-term buy-and-hold investing like Fortress practices.

Why is it that many people know this but don’t implement it?

Because many don’t now what “long term” means.

This is where our research makes some shocking discoveries. In any given year, just 5% of stock returns are explained by fundamentals and 95% are sentiment, luck, and momentum.

(Source: BofA Global Research via The Daily Shot)

But as you can see here, by the time you get to about ten years, it rises to about 90%. By 30 years, a standard retirement timeframe, it's 97%.

Why does that matter?

What if you're 70 years old and you think, “Ten years is all I need… Five years is all I need. I'm not going to live that long.”

Statistically speaking, if you're 70 years old, there is roughly a 25% chance that you or your spouse will live to 100 years old.

So, yes, you still need a plan for 30 years. In other words, you need 30+ years for almost all of our time horizons.

This means that what happens over six weeks, six months, or even six years doesn't really matter.

The long term is what counts.

And this is where the power of Fortress’ 7% yield and 12% dividend growth over five years is so powerful.

Because in the short term, luck is 20 times as powerful as fundamentals. That's why crazy stuff can happen, like what we are seeing during this pandemic era.

But over the long term, fundamentals are 33 times more powerful as luck.

This means that you can make your own luck on Wall Street.

And that's where Fortress Portfolio steps in with our shark tank-like focus on safe high yield. And receive royalty payments that allow us to live our dreams without having to sell our stocks.

As I like to say, "Stock price is vanity, cash flow is sanity, and dividends are reality.”

When you can live on your income, stock price is irrelevant. Only the fundamentals matter. And that's why we are the masters.

So, to show you an example, let's do an update on one of our Fortress Portfolio companies, U.S. Bancorp (USB).

U.S. Bancorp was not one of our launch recommendations. We recommended this on May 18th.

At the time, it was trading around nine and a half times earnings.

The key to remember is this: The regional banking crisis was in full swing. People were freaking out.

They said things like, “Oh, my God, 200 banks are going to fail.”

And U.S. Bancorp was trading as if the economy was on fire.

Now, notice the pink line.

This is approximately nine and a half times the earnings where it was trading at that time.

(Source: FAST Graphs)

Cllick to expand

The red line shows that we didn't catch the exact bottom, but we came relatively close. And now we are up 26% annually. This is on par with the greatest investors in history.

These are Buffett-like returns.

Remember the reason we pointed out the opportunity was that the last time U.S. Bancorp traded at this level was during the pandemic. The time before that was coming out of the Great Recession. And also during the debt ceiling crisis and the U.S. downgrade.

So, you can see that this stock trades at 9.5 times earnings very rarely. When it does, that's the time to go all in.

We just saw 26% annualized returns in a few months.

And there are still growth opportunities remaining.

The historical fair value of U.S. Bancorp is 14 times earnings. And we expect a strong earnings recovery.

Already, the earnings have been impacted as if we had a recession. And you can see a potential 61% upside and 26% annualized returns.

U.S. Bancorp yielded 5.5%. It was trading as if the economy were on fire – when in fact the economy was growing at the fastest rate in 83 years.

That kind of disconnect between reality and fundamentals is what Buffett calls a “fat pitch opportunity.”

So, you made 26% annually. And you can make another 26% annually for 2.5 years.

Now, for context, hedge funds charge you an average of 5% per year in fees. This is the famous two and 20 model. They target 12-18% returns.

But U.S. Bancorp could potentially generate 26% annual returns as you can see below (highlighted in green in the black box).

(Source: FAST Graphs)

Cllick to expand

Hedge funds, markets, the NASDAQ, and even the Magnificent Seven have been smashing returns for 2.5 years. And they'll pay you a 5.5% yield.

And if you buy U.S. Bancorp today, you will still be able to lock in more than a 5% dividend yield.

So how would you like to get paid to own a world-class quality company that can earn you Buffett-like returns?

U.S. Bancorp is a company that many people have heard about.

Maybe Jim Cramer will mention it. Maybe you'll hear about it on Bloomberg or CNBC.

But at Fortress Portfolio, we don’t know just about the larger high-quality companies like Allianz (ALIZY), we also know about the smaller companies, like Manulife, Keyera (KEYUF), and Pembina Pipeline (PBA).

Companies that industry experts know are wonderful companies trading at wonderful prices.

The ones you will not find anywhere else in financial media.

That is the point of Fortress: Finding the world-class companies that can get you these incredible returns while paying you enough dividend income to ride out these periods of market craziness.

And that is ultimately the secret to the greatest investors in history. They were able to focus on the long-term fundamentals and ignore price long enough to be proven right.

And that is what dividends are allowing us to do so that we can all retire rich and stay rich in retirement.

I've spent eight years studying what works and what doesn't.

I have researched how to build our systems so that you can live your dreams and not have to worry about any of the nonsense.

These videos are here to remind us why the market is going crazy and why we shouldn’t go crazy.

So thank you for joining me.

I hope you'll join me next week for another video update where we'll further cover what's happening in the markets.

And we’ll discuss why the long-term buy-and-hold ultra-yield safe dividend approach is simply the smartest way to retire rich and stay rich in retirement.

Please send us your questions and feedback so I can respond to them in these videos and in our monthly issues.

Just remember, I can't provide personalized investment advice.

Until next week – this is Adam Galas, wishing you and your family safe investing and a healthy and relaxing holiday season.