Personal Finance ($39 for the first year) is a relative low cost “entry level” investment newsletter, the kind that all the big publishers use to recruit the wave of new subscribers who get fed into their marketing “funnel” that generates leads for their higher-priced services… though, to be fair, we also often hear from readers that these “entry level” newsletters are where the real value is. The cost is low, the coverage usually interesting and sometimes profitable, and the editor doesn’t have to reach for ludicrous gains to justify a $2,500 subscription price (which often ends in tears, of course, since the potential for high gains is inexorably linked to the potential for 100% losses).
You can see how subscribers say they feel about Personal Finance here, but the letter been around for several decades, with a handful of different pundits at the helm — these days it’s Jim Pearce who signs the ad letter as “Chief Income Strategist”, and he’s promising that he has a “hidden rollup” for us that’s going to save TV and make you a 2,049% windfall.
Sound enticing? Well, of course — that’s the whole point. So let’s see if we can unravel that enticement, name the investment for you, and send you on your merry way with a little start on your research. Ready?
The basic spiel is all about how streaming television will create a crisis for the internet, with more and more high-bandwidth video data being transmitted every which way as every player starts their own streaming service… he throws the term “World War Stream” around a lot… and that the only way to solve this is with more data centers that are more closely connected. Here’s a taste of the ad:
“To save TV, the internet, & modern life as we know it… plus cash in on all the profits…
‘We’re going to need a bigger boat’
“Put simply, we need every data center around the world to be glued together…
To make one giant network.
“In other words, the biggest digital heart this world has ever seen.
“It would save TV. It would save modern life as we know it.
“And it could make investors (that’s you) incredibly rich.”
So that’s the backdrop, then we add in the hero CEO…
“… there’s one exceptional man who can take on a problem this BIG… And get it done fast.
“His name is Bill.
“… over the last 6 years, he’s manned the helm of this mega data center provider…
“The stock has already grown by 137%.
“So, you can see why investors love him already.
“What’s his superpower?
“He has a special knack for closing a very profitable type of business deal called a ‘roll-up.'”
The ad also harps on the idea of something big coming down on February 20…
“The future of TV will be decided on Feb. 20 — but the fallout (and the profits) will last for a CENTURY….
“Just make sure you get in before February 20, okay?
“Because that’s the day I fully expect…Are you getting our free Daily Update
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“The secret puppet master behind World War Stream will shower well-positioned investors with cash”
And, not to put too fine a point on it, also says that you’ll be getting guaranteed cash…
“This one’s a guaranteed payday… It’s the law!
“Thanks to a little-known government document called PL 86-779…
“If the profits go up, down, or sideways… you still get paid.
“Better still, all that’s required to secure MAXIMUM profits is one simple stock trade.
“No complicated options. No ‘leverage.’
“No constantly watching out for alerts.
“Making money on this unusual growth play is dead simple…
“You don’t need to know much about streaming TV.
“You don’t need to know much about investing, either.
“In fact, all it takes is 1 easy ‘click’ to secure your chance at a fortune.”
So what’s the story here? This pitch is all about Digital Realty Trust (DLR), which has indeed been very acquisitive in recent years under CEO Bill Stein — they bought DuPont Fabros, another data center REIT, about two years ago, and they are in the middle of a deal to get a much larger presence in Europe as they acquire the ~$7 billion InterXion (INXN), the one large US-traded data center operator that hadn’t yet converted to REIT status. That still won’t make Digital Realty the largest data center REIT, giant Equinix (EQIX) will continue to have an easy hold on that title, but it will remain second largest, and is one of the dozen or so largest REITS in US markets (half of the huge REITs are telecom or tech related, including the three major cell tower REITs as well as Equinix and Digital Realty).
There’s even some hinting that “this is what Warren Buffett would do” … which, of course, is what we all want to hear.
“You don’t hear this much, but ‘The Oracle of Omaha’ has quietly invested in TV companies for years.
“One of the hidden patterns in his current portfolio at Berkshire Hathaway — remember, this is the largest public financial company in the entire world…
Is a series of deals he’s made with a shadowy “TV hedge fund.”
“These actually make up 5 of the 47 positions in Berkshire Hathaway’s dealbook… more than ANY other investment.
“And that hedge fund?
“Its performance record is simply staggering.
“According to a research study conducted by Edge Consulting Group…
“These classic, TV-related investments turned a modest $500 starting stake into a $1,576,685 fortune.”
That’s just a reference to the fact that Berkshire Hathaway owns several of the John Malone stocks — Sirius XM, Liberty Global and Liberty Latin America, in several different share classes. And yes, you would have done very well if you had held the various Liberty companies since the beginning of John Malone’s empire, but, of course, Warren Buffett didn’t do that… and it also has nothing at all to do with the basic “we need more data centers” pitch (Liberty does own some critical telecom infrastructure in its various associated companies, particularly with the Liberty Global cable companies and the Liberty Latin America wireless and subsea cable firms, but data centers are definitely not a focus).
So that’s all well and good, but it’s largely irrelevant to the main point. Is Digital Realty an exciting buy, and will it generate massive returns as they continue to try to increase the size and efficiency of their global network of data centers?
Remember, this is the immediate, gotta get rich push from Pearce:
“Sorry to break it to you…
“You will not make 12 figures on this deal, BUT…
“The 275 hours of financial analysis I’ve devoted to this one profit play led me to conclude that it could start sending you a 2,049% profit windfall as soon as this Monday…
“That’s why I’m writing you this message as fast as I can.
“Because a money-making opportunity as exciting as this only happens once.”
And he implies that there’s another “roll up” coming soon for Digital Realty, a deal that would be even larger than the InterXion deal, which is not even finalized yet but would be the largest data center acquisition so far.
“The underground MEGA roll-up that will save TV…
“Just make sure to get in BEFORE this deal closes to cash in on the huge profits
“Everyday investors stand to pocket huge profit from this MEGA roll-up — even a modest stake could turn into a fortune.
“There are nearly no Wall Street bankers involved… only 0.08% of the Street is watching this data center play.
“This deal has all the right conditions for a 2,049% surge in profits.”
I don’t know what this could be, but there aren’t that many real targets in the public markets — the data center “pure play” stocks that are smaller than DLR are GDS Holdings (GDS), which owns Chinese data centers and is pretty richly valued, but is big enough to make a dent at about $10 billion, and CoreSite (COR), QTS (QTS) and CyrusOne (CONE), the midsize US operators which are all in the $4-7 billion neighborhood and quite a bit smaller than InterXion (I’ve owned COR for a long ti