You are invited to the Billionaire Investors Club

Tom Yeung here with today’s Smart money.

Well, the Federal Reserve certainly surprised some people yesterday when it opted for a jumbo rate cut. Markets rose 1% to 2% today after the Fed cut rates by 0.5%. Only one major bank (JPMorgan) got the prediction right.

The size of the September rate cut was 50-50 coins. The data was too unclear, and the Fed purposely hid its intentions while waiting for greater clarity that never came. I didn’t make speculative bets here or in Eric’s paid services that led to the cut, because the Fed could have easily cut rates by just 0.25% in an alternate universe.

However, here we are. The start of a new rate cut cycle.

On the plus side, there is palpable excitement in the stock market.

Suffice it to say, Wednesday’s Fed action — and further tapering is expected later this year — should be positive news for health and technology firms, commodities, small-cap speculative stocks, gold, cryptocurrencies and a host of others investment vehicles.

For example, companies will need to refinance nearly $2.2 trillion in debt over the next 12 months; lower rates will make this cheaper, which reduces the risk of bankruptcy and leaves more money for shareholders. Lower rates also reduce market discount rates, which increases the value of “long-duration” stocks with returns further into the future (ie, speculative growth stocks).

However, the jumbo rate cut suggests the Fed is not so confident about the labor market. According to the Federal Reserve in St. Louis, eight of the last 13 rate cut cycles have had a two-year recession. This current board is aware that past Fed chairs have cut rates too slowly, and they clearly want to avoid repeating that mistake.

That’s why we’re excited this week to introduce something akin to the “Billionaire Investor Club.” By studying the trading patterns of dozens of successful wealthy investors and combining it with a proprietary quantitative formula, Eric’s special guest at the upcoming Excellent sale in 2024 event leads a team that has created a way for investors to outperform the markets in good times and bad.

(This event is scheduled for this coming Tuesday, September 24th at 8pm ET. You can learn more about it and sign up by going here.)

Not all of these transactions are obvious. In fact, some will seem downright strange at first. But that’s what makes this type of investment so different.

So today, I’d like to explore one of these billionaire trades and share with you how you can access a free report that reveals “seven stocks billionaires buy with both hands.”

Let’s dive into…

Taking a billionaire

In the 1980s, hotel chain Marriott Corp. went on a shopping spree. The company acquired the hotel firm Host International, several restaurant chains (including Howard Johnson’s restaurants) and built an enormous portfolio of locations.

However, the best part of Marriott’s business wasn’t owning the hotels…it was the high management fees it charged for running them. The company’s strategy soon evolved into building hotels, selling the properties, and then keeping the lucrative hotel management contracts.

This bonanza ended during the housing market crash of the early 1990s. In the blink of an eye, Marriott was suddenly saddled with more than a hundred unsold hotels in an overbuilt market and saddled with debt it had incurred from its decade of purchases.

To save the firm, CFO Stephen Bollenbach created a breakup plan for the hotel chain in 1992. Under the deal, Marriott would retain its profitable management business (the “Marriott property”) while shedding its assets and liabilities less profitable (“bad” Marriott) into a new entity known as Host Marriott.

So which one would you choose to buy?

Most investors would opt for the “good” Marriott. After all, why buy a toxic waste dump when there is a profitable, debt-free alternative?

But billionaire investors think differently. As Joel Greenblatt of the $6 billion hedge fund Gotham Asset Management wrote about the Marriott breakup in his 1997 book, You can be a stock market genius…

Obviously, I was excited about… toxic waste. “Who the hell is going to want to own this thing?” was the way my thinking went. No institution, no individual, no one and their mother could hold on to the newly created Host Marriott after the spinoff took place. The selling pressure would be tremendous. I would be the only one to collect the stock at a bargain price.

He was clear to point that out not necessarily contrarian investments. He had done the research, knowing that the true value of Host Marriott’s assets probably exceeded the book value, and realized that CFO Bollenbach was actually moving in to manage the spinoff.

The result was absolutely incredible. Over the next three years, the company will divest its airports and toll road concessions, add 55 hotels to its portfolio and complete the sale/leaseback of all Courtyard and Residence Inn hotels. By 1999, it had become the largest hotel real estate investment trust in the US (REIT).

These improvements also translated into share price gains. Within five months of the spin-off, Marriott’s “bad” stock had tripled…and the stock would rise another 80% by the end of the decade.

The Billionaire’s Club

This is a pattern we see again and again. Well-informed hedge fund managers often make decisions that seem counter-intuitive…and then go rogue after their reasoning is known.

Some rely on intelligence. Warren Buffett was a sage, graduating college at 19 and then earning a master’s degree from Columbia University before his 21st birthday. As biographers have documented, he does virtually all of his calculations in his head.

Others simply have enormous research budgets. Bridgewater Associates earns more than $3 billion annually from its asset management fees alone, which it uses to buy lots of data and hire top talent.

However, history tells us that skilled investors tend to continue to outperform. This is true at both the institutional and individual level… and some studies have even found that following these experts on social media is enough to improve performance. There it is an ability to beat the markets and follow those who have previously demonstrated success is often enough to help you increase your performance.

Fortunately, you don’t have to go to X (formerly Twitter) and hope to come across these recommendations.

On Tuesday, September 24th, 8:00 PM ET TO The big sale of 2024Eric and a special guest of his will reveal a unique way to grow your money fast while being safe from any devastating losses going forward. They performed extensive back-testing on the stocks of more than two dozen billionaires—such as Warren Buffett, Bill Gates, and Ray Dalio—and found ways to improve even this billionaire’s investor club.

The next Marriott

In the meantime, here’s your chance to access a free report featuring seven companies that the world’s smartest and richest billionaires are buying in bulk today. (Reserve your seat for that event and find out how to get that report by going here.)

I’m particularly excited about one of these companies because it has similarities to the Marriott spinoff…

Earlier this year, one of the companies in the Dow Jones Industrial Average decided to spin off its slowest-growing department into an independent firm. It would also “donate” $8.3 billion of its debt to this new entity, creating a “toxic waste dump” with negative tangible equity and relatively low growth prospects.

The effects were as you’d expect: Shares of this new entity fell 40% in early trading as index funds liquidated their holdings. The spin-off was not part of the Dow Jones index, so the tracking funds were forced to liquidate their shares.

But since then, the stock has rebounded. In August, management changed its guidance for 2024 from a decline in revenue to a slight increase in revenue. And billionaires are now buying stocks in huge quantities. If history is any guide, this firm looks set to continue to grow over the next few years.

To find out how to get 7 Stock Billionaires Buy With Both Hands free report with the name of this company and six others, be sure sign up at Eric’s Big Sale 2024 special event. At this event, Eric and his special guest will unveil a revolutionary technology that will help you keep your faith in the markets, making as much profit as possible… while warning you before the next big sell-off.

You can click here to reserve your spot at Eric’s special event.

Until next week,

Tom Yeung

market analyst, InvestorPlace