A Pirate's Life For Me...
Investing Like a Buccaneer
Not many investors know the story of Benjamin Hornigold...
Best known as Blackbeard’s mentor and all-around cutthroat buccaneer, he was dubbed “the Pirate’s Pirate” by many a historian.
Hornigold had very humble beginnings. He began his legendary pirating career with a couple of canoes – yes, canoes – and terrorized merchant ships off the coast of Nassau. He continued adding to his fleet and within a couple of years, he was captaining a 30-gun warship called The Ranger and pillaging merchant ships with impunity.
The famed pirate was a rather eccentric fellow as well. In one memorable escapade, Hornigold captured a merchant ship in Honduras... but he didn’t steal their goods or kill their crew – he simply demanded the hats of everyone on board.
Apparently his crew had enjoyed too much grog the night before and thrown their hats overboard. In any case, we can learn much from a man who started with only a few small assets and deftly grew his floating portfolio into massive riches.
The takeaway here is that you too can turn a few modest stocks in your portfolio into a huge fleet of profits by utilizing one simple technique that your scurvy broker won’t dare tell you about.
As the publisher of The Crow’s Nest – a pirate-themed newsletter that focuses on both long-term success and short-term plundering – I often take cues from outsiders like Benjamin Hornigold.
Pirates simply knew how to get things done…
But some pirates were also greedy and shortsighted. I am not. I’d much rather captain a fleet of stocks for many years than risk it all on one big score. I wouldn’t risk that one raid unless I had a full fleet to back me up in case the whole operation perished into a watery grave.
In other words, as far as stocks – or merchant ships – go, you need to be picky in terms of what to plunder and what to leave alone.
You know as well as I do that all stocks are not created equal, and very, very few are solid enough to hold indefinitely — especially during times of market turmoil and uncertainly. And we're staring down that blunderbuss right now…
The Trump administration has already shown that it is rather unpredictable and volatile.
We’ve seen executive orders to withdraw from the Trans-Pacific Partnership trade deal, a hiring freeze for federal employees, a promise to kill ObamaCare without any details as to how to replace it, and two orders to revive the Keystone XL and Dakota Access pipelines — all within a couple of days.
Oh yeah, and a possible trade war with Mexico — capped off with a threat of a 20% import tariff that could cause the price of goods to skyrocket.
These are all huge initiatives without very clear paths to carry them out. It screams uncertainty to me, and the market tends to hate uncertainty.
If I were a pirate, I wouldn't dare risk life and limb for booty that may not even be on board. That’s why when the market gets uncertain, I turn to my most steady artillery — stocks that I could conceivably hold forever.
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So what makes a stock worth holding forever?
One way pirates carved out their fortunes was to threaten violence and terror on those who wouldn’t “pay tribute”.
Barbary pirates from North Africa plundered ships, abducted slaves and attacked ports as far away as the Netherlands and Iceland. Most seafaring nations found it far easier to pay off the pirates then to go to battle with them. For over 150 years, this bribery took place – until Thomas Jefferson finally had enough and the U.S. Navy decided to fight back against the pirates instead of paying tribute.
But I digress...
These days, there are plenty of stocks that regardless of how they are performing, will still pay you tribute.
They are called dividends and the company must pay them out or face the wrath of shareholders.
Much like a maritime merchant, there isn't a stock out there that won't go through ups and downs: infighting, restructuring, splits, spin-offs, etc. But there are some stocks that you are better off sticking with through the thick and the thin...
In my opinion, those stocks are the mighty “Dividend Aristocrats”.
I'm not talking about some foppish member of the pirate-fearing aristocracy here: I'm talking about solid blue-chip companies that have raised their dividend each and every year for the past 25 years...
And right now, those are the stocks that I am comfortable owning, even if the market goes through a serious correction.
The list is full of the usual suspects: Coca-Cola Co (NYSE: KO), Exxon Mobil Corp (NYSE: XOM), McDonald’s Corp (NYSE: MCD) and Wal-Mart Stores (NYSE: WMT) to name a few. All of those companies have been no-brainers over the long haul.
But there are some lesser known companies on the list that are great for building and most importantly — diversifying — your fleet.
Our office is located in Baltimore, once known as a "Nest of Pirates". Maryland also offers a slew of dividend arisctocrats that make for a fine fleet indeed. They include McCormick & Co (NYSE: MKC), T. Rowe Price Group (NASDAQ: TROW), and Stanley Black & Decker (NYSE: SWK).
These are all great additions to a long-term dividend fleet…
But for my money, I wouldn’t pay any tribute to brokers – who are basically stealing your money for actions you can take yourself.
There is a secret trap door you can take that will not only allow you to avoid broker fees entirely, but also provide you the opportunity to grow your fleet of dividend stocks without having to raise a cannon or lift a finger. What's more, if you buy one of these dividend stocks using this "trap door", you'll pull in a much bigger haul...
And like Benjamin Hornigold and his tiny canoe, you can start a massive fleet of profits starting with as little as $50.
I have an entire report on these companies that you can access right here.
The rougher the seas, the smoother we sail. Ahoy!
Jimmy is a managing editor for Outsider Club and the Investment Director of the personal finance advisory The Crow's Nest. You may also know him as the architect behind the wildly popular finance and investing website Wealth Wire, where he's brought readers the stories behind the mainstream financial news each and every day. For more on Jimmy, check out his editor's page.