AGOR A FEBRUARY 2019

financial

lifetime income report

Your Exclusive Dividend Retirement Guide

“Flip This Stock!” — A Top Corporate

Rehabber Has Found His Next Fixer-Upper!
Don’t Miss Your Chance for Huge Turnaround Gains… and Collect
a Big Dividend While You Wait
A person buys a dilapidated house at a rock-bottom price.
INSIDE THIS ISSUE

A Top Corporate Rehabber Has

They hire people to update and modernize everything, transforming the house into
Found His Next Fixer-Upper! a work of art.
This month’s income opportunity
is a household name whose Then they sell the renovated home for a huge profit.
business has seen better days.
But just like one of those house-
flipping TV shows, we’ll buy
this company while it’s cheap,
watch a specialist and his team
rehab it for us, then sell it for a
huge profit — collecting great
dividends along the way. Don’t
miss your chance for huge
turnaround gains!

Making the Most Out of

Market Turbulence
With all the volatility in the market,
it’s probably been hard to watch
your stocks bounce around like
a rubber ball. So I’m sharing
three strategies for bolstering
your portfolio beyond just owning
equities… helping you generate This Month’s Opportunity Is a Little Like This…
income despite the markets’ ups
and downs. And you can start It sounds like a pretty simple premise… yet it’s the foundation for an entire genre of
cashing in on these ideas today!
entertainment.
The Ask Zach Mailbag
I’ll answer reader questions and Just Google the phrase “house-flipping TV show,” and you might be surprised how
discuss GOV’s new name… where many results turn up…
to get Social Security help… credit
card tips… and more!
Flip This House, Flip or Flop, Flipping Vegas, Flip or Flop Vegas, Flip or Flop Nashville,
Property Virgins, Flip or Flop Fort Worth, Flip Men, Property Ladder, Property Brothers,
Zach Scheidt Rehab Addict, Renovation Nation, Renovation Rescue, The Renovators and (my personal
Editor
favorite) Zombie House Flipping.

Connect with Agora Financial: And that’s just to name a few!

Steven Lerner, head of programming at the Home and Garden Television (HGTV)
network, explained why these kinds of shows dominate his channel: “Viewers’

vol. 11 issue 2 w w w. ag or a fi n a nci a l .com

 lifetime income report

appetite for real estate and renovation programming is Campbell’s Two Decades of Poor Performance
virtually insatiable.”1 20-Year Total Shareholder Return (%)
1,586%
I thought of these shows while researching this month’s
1,342%
income opportunity.

It’s a household name whose business has seen better

days. Parts of it are as dilapidated as anything you’d see 662%

on a house-flipping show… which is why its shares are 331% 359%

261% 306%
currently dirt cheap.
19%
But it just hired one of the greatest corporate renovation Campbell Kellogg S&P 500 General Hershey Smucker McCormick Hormel
specialists of our time… and he’s bringing an experienced Source: Third Point Capital
Mills

“re-habitation” team with him.

So this month we’re going to pretend we’re on one of
those house-flipping shows.
We’ll buy this company while it’s cheap… watch the
specialist and his team rehab it for us (collecting a nice
dividend along the way)… then sell it for a huge profit.
This show is already starting, though, and you definitely don’t
want to tune in too late. So here’s what you need to know!
This One Needs More Than a Facelift
The company we’re targeting this month is Campbell
Soup Company (CPB).
It probably doesn’t need much of an introduction. This
is one of the all-time great American brand names. I know
it… my kids know it. So do my parents… and their parents
before them.
In fact, I’m sure you’re picturing the red and white
Campbell’s Soup can right now.
Campbell is the kind of powerful consumer brand name
that great investors like Warren Buffett live for.
It’s unquestionably an iconic brand just like Coca-Cola,
Heinz, Budweiser and Hershey. That recognition forms
a powerful moat against upstart competition — giving
them staying power that allows them to churn out cash
flow for decades and decades.
Yet Campbell’s performance over the past 20 years has
been nothing less than abysmal, as the nearby chart
demonstrates.
The stock has delivered returns of just 19% over the past
two decades, a fraction of the returns similar well-known
names have delivered. Even S&P 500 investors have done
over 36 times better than Campbell’s shareholders.
This property is truly broken down and in need of some
serious rehab — much more than just redesigning the
can or adding more chicken to its noodle soup.
Luckily, like many of the houses on those property-flip-
ping shows, Campbell’s foundation is still solid, and its
structure can be revived.
It just needs an expert makeover to turn things around.
Enter Dan Loeb…
Our Rehab Specialist
Dan is the founder of Third Point Capital. Since its start
in 1995, his hedge fund has generated annualized net
returns of 18% for its investors.2
That is an incredible performance. And a significant part of
it is because of Third Point’s strategy of investing in under-
performing companies and taking action to improve them.
Third Point has made more than 40 “active” investments,
meaning the team has actively worked to change how the
underlying company they’ve invested in is being run.
In other words, Dan’s company specializes in activist
investing.

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 lifetime income report
And with more than $18 billion under management,
Third Point has the resources necessary to influence the
direction of some very sizable companies. Just consider
some of Third Point’s recent notable activist accomplish-
ments, as described in a recent corporate presentation:
• I t helped create approximately $15 billion of value
for Yahoo shareholders; YHOO’s share price increased
over 85% while Third Point directors served on the
board from May 2012 until July 2013
•T
 hird Point helped create approximately $460
million of value for Sotheby’s shareholders through
Sept. 20, 2018. That company’s share price increased
16% since Third Point directors joined the board in
May 2014
•T
 hird Point helped create approximately $26 billion
of value for Baxter shareholders through Sept. 30,
2018 the company’s share price has increased 143%
while Third Point directors have served on the
board since September 2015
•T
 he company helped create approximately $43 billion
of value for Dow Chemical shareholders through
September 2018. The venerable company’s price
increased 90% since Third Point began engaging with
Dow Chemical in November 2013.
In short, when it comes to rehabbing flailing companies,
Dan Loeb and Third Point are the best renovation specialists
you could hope for.
Early in 2018, Third Point announced it had taken a
stake in Campbell and immediately started pushing for
changes at the company.
On Nov. 26, 2018, Campbell finally relented. It reached
an agreement with Third Point to expand its board of di-
rectors from 12 to 14. Dan Loeb will personally handpick
those two new members — giving Third Point the power
to steer Campbell’s direction.
His team is now moving to improve on Campbell’s
strengths while addressing where it thinks the company
went wrong…
There’s tremendous value here just waiting to be unlocked.
From Fruit to Soup
Campbell has been in business since 1869, when a fruit
merchant named Joseph Campbell and an icebox man-
ufacturer named Abraham Anderson opened their first
plant in Camden, New Jersey.
Source: Campbell Soup Company
This year will be the company’s 150th birthday!
The first major change to the business occurred in 1897
— after Joseph Campbell had retired. That’s the year a
chemist at the company named John Dorrance invented
condensed soup.
Before then, soups were sold in large, heavy cans. By fig-
uring out how to reduce the water needed inside the can,
Dorrance was able to reduce Campbell’s production and
shipping costs. The consumer simply added the missing
water or cream themselves when cooking it.
Dorrance created five varieties of soup, including tomato.
Even today it remains one of the top 10 shelf-stable foods
sold in grocery stores in the United States.3
By 1911, Campbell had reached the national stage and was
sold across the entire country. As the company continued
to grow, it acquired additional brands like V8 and Pepper-
idge Farm. It also created new products like Campbell’s
Chunky soups and Campbell’s sauces.
Today its soups are still the most popular in the United
States, with a dominant 58% market share.4 And it con-
tinues to make many of America’s favorite products, split
across three different operating divisions.
A Stable of Well-Known Names
Campbell’s snacks division is built around six powerful
brands — Goldfish crackers, Pepperidge Farm cookies,
Snyder’s of Hanover pretzels, Kettle Brand and Cape Cod
potato chips, and Late July organic tortilla chips.
At last count, this division generated $1.2 billion in sales
and $154 million in operating earnings.
Campbell’s next division is meals and beverages. It in-
cludes Campbell’s condensed and ready-to-serve soups,
Swanson broth and stocks, Prego pasta sauces, Pace
Mexican sauces, Campbell’s gravies/pasta/beans and
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 lifetime income report

dinner sauces, Swanson canned poultry, Plum food and
snacks, V8 juices and beverages, Campbell’s tomato juice,
and Pacific broth, soups, non-dairy beverages and other
simple meals.
When done right, buying out other companies can be a
good growth strategy. But too many CEOs push for buy-
outs in a mistaken belief that bigger is better. They don’t
mind shelling out obscene amounts of money for smaller
companies just to expand their empires.

As shareholders quickly learn, however, if those acquisi-

tions don’t add value to the company, the stock price is
going to suffer.

Over the past six years, Campbell has spent $8 billion

buying up other companies. And you know how that’s
worked out…
Campbell’s Series of Ill-Advised Acquisitions

This division recently brought in revenues of $1.25 billion —

about equal to its snack division. But its operating earnings
were nearly double the snack division’s at $294 million.

Finally, there’s the fresh segment, which includes

Bolthouse Farms fresh carrots, carrot ingredients, refrig-
erated beverages and refrigerated salad dressings, Garden
Fresh Gourmet salsa, hummus, dips and tortilla chips Source: Third Point Capital
and the U.S. refrigerated soup business.
Consider Bolthouse Farms and Garden Fresh, a pair of
This division generated $232 million in revenue and no
mainstays in Campbell’s fresh food division. As you might
operating income. (Spoiler alert — this fact will become
recall, that division had no positive income last quarter!
important later.)
Now you have to ask, why would Campbell, which has
A Collection of Iconic Brands Generating Billions
a soup business that has a 58% market share after 150
in Annual Revenue
years, diversify into a pair of impenetrable brands?
Owns series of iconic brands Category Mix
17% 10% That’s where this story gets a little ugly.
Simple Beverage
Minds
A Bad Board
27% Campbell’s latest acquisition binge started in 2012, just a
Soup
year after Denise Morrison became the company’s CEO.
46%
Baked
Not only did Campbell add inferior businesses on her
Snacks watch, but the time required to integrate all of these newly
Source: Campbell Soup Co. acquired businesses took the focus away from the core
cash-flowing operations of the company.
All told, Campbell generates more than $10 billion annually
in sales and $1.3 billion in cash flow.5 And while the company was floundering, Morrison was
collecting $60 million in total compensation!
So why has the company been so bad for shareholders
these past two decades? Can you imagine? Getting paid $60 million for destroying
value!
A History of Bad Decisions Of course, the blame isn’t fully on Morrison. As I’ve said
Campbell’s problems start where they often do in the before, a company’s board of directors is supposed to be
world of large corporations — with a series of ill- looking out for shareholders. They shouldn’t be handing
advised acquisitions. over $60 million as the company’s business suffers.
4
 lifetime income report
And they shouldn’t have been a rubber stamp This Property Could Be a Quick Fix and Flip!
for all of these ill-advised acquisitions.
Packaged Food Comparable Transactions
It gets even worse… 25x
All of these bad decisions finally caught up 20x
with the company when it reported a disastrous 15x 13.5x 14.5x
third quarter for 2018 and lowered forward 10x
guidance — meaning it expects its bad deci-
5x
sions to affect future profits, too.
0x
In response, CEO Morrison abruptly left the
company. It was a bit late, of course. But the real
problem was that the board of directors had no Source: Third Point Capital
succession plan in place.
This is, frankly, inexcusable. If the company’s performance
under Morrison didn’t warrant a plan to replace her, the
fact that she was near retirement age certainly should have.
The board simply ignored one of its critical duties.
Thanks to their lack of foresight, Campbell is now led
by Keith McLoughlin. He has no operating experience in
packaged food and most recently served as CEO of Swedish
appliance manufacturer Electrolux!
Investors have lost patience with the company, which is
why we can pick them up very cheap.
On the bright side, we probably won’t have this opportunity
for long — because Dan Loeb and Third Point are working
to turn things around.
Replace, Improve and Maybe Sell
As I mentioned, Loeb understands the potential value
that Campbell is sitting on. That’s why he’s taken a large
stake in the company, with $819 million worth of shares
at the end of September 2018.6
He used his stake in the company to earn two new seats
on Campbell’s board of directors. Third Point will also
have a say in Campbell’s ongoing CEO search.7
Loeb hopes to attract a world-class leadership team to
the company — something that the incumbent board of
directors failed miserably at.
I expect to see that new CEO bring down costs, jettison
non-core businesses and drive returns on capital higher.
There is low-hanging fruit to be picked here that will allow
a new CEO and properly functioning board to drive earn-
ings higher.
But I also think that there is a very good chance that Loeb
will end up flipping Campbell for a quick (and quite large)
profit — one that will benefit us, too.
Independent Slate Perspective
Most relevant comparable transactions
21.0x are 3G for Heinz (2013), Heinz for Kraft
19.5x 20.0x
(2015) and Conagra for Pinnacle (2018)
15.8x 16.4x
Campbell likely to attract multiple buyers
and could fetch 12–15x EBITDA, implying
$52 to $58 per share
Campbell is an iconic asset that could
command an attractive price from
3G /
Heinz
Heinz /
Kraft
CAG /
PF
JAB / MKC / CPB / Danone /
DPS RB Food LNCE WWAV multiple parties
Loeb has openly noted that Campbell could be a very
good fit for a larger business. The incredibly reliable cash
flow that Campbell’s core soup business generates is a
very attractive asset for a number of interested parties.
In similar recent transactions, companies have been willing
to buy out other businesses for 14 to 15 times the takeover
targets’ earnings before interest, taxes, depreciation and
amortization.
If some company made a similar offer for Campbell
Soup’s shareholders, the deal would be worth up to $58
per share — 50% more than Campbell’s share price.
Wouldn’t it be fun if we got to cash out of Campbell a few
months from now with a gain that large?
I don’t know if a sale is necessarily going to happen. I do
know, however, that I’m more than happy to collect a 4.18%
dividend yield while Dan Loeb goes about his business
improving this company.
With his incredible long-term track record and the fact that
he has $821 million invested in Campbell, I feel that very
good things are finally about to happen for shareholders.
We will have to see whether those good things come
in the form of rising earnings that drive the share price
higher or through the sale of the entire company. I’ll trust
renovation expert Mr. Loeb to handle the details for us.
Still, we should make sure Campbell follows our proven
recipe for success.
How Campbell Soup Stacks up to Our
Three Pillars of Investment Success
Here at Lifetime Income Report, we put every company
through our “Three Pillars of Investment Success.” If a
company doesn’t measure up to all three, it doesn’t go
into our portfolio.
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 lifetime income report
Let’s see if this fixer-upper is built on a firm foundation.
Capital Preservation
Great investors like Warren Buffett have wonderful
dreams about consumer brands like Campbell Soup.
Can you believe that the Campbell core product is 150
years old and still holds a 58% market share? To say this
brand has a strong competitive moat around it is a mas-
sive understatement.
Even with a long stretch of very poor management, Camp-
bell still churns out $1.2 billion in cash flow per year. The
core business here is bulletproof and will only get strong
now that Dan Loeb is on the scene.
Growth
A lack of growth in cash flow and earnings per share has
been the primary problem for Campbell Soup over the
past 20 years.
In an effort to chase growth through ill-considered diversifi-
cation, Campbell’s prior management made a huge mistake
by straying outside the company’s core business.
But I believe that Dan Loeb will get this company growing
again by getting everyone focused on what Campbell
does best. The growth will come through reduced costs,
improved margins and steady revenue increases.
Growth in that core business can be accentuated by intel-
ligently using excess cash to repurchase discounted shares
instead of purchasing inferior businesses. And, as I explained
in last month’s issue, reducing the share count at attractive
prices drives a stock’s earnings per share higher.
Yield
Campbell Soup Company currently yields 4.18%.
Making the Most Out of Market Turbulence
Three Strategies to Keep Your Income Rolling in During Wall Street’s
Ups and Downs
As income investors, we’re not really supposed to worry
too much about market volatility.
We expect our companies to continue paying reliable div-
idends no matter what happens to their stock prices.
But as human beings, it’s hard to watch our portfolios’
value bounce around like a rubber ball.
6
That is a solid dividend that comes with the opportunity
to piggyback on Dan Loeb’s efforts to drive Campbell’s
share price significantly higher.
This isn’t some side project for him, either. Loeb runs a
very concentrated portfolio. He did not put $821 million
into Campbell Soup lightly. This is a high-conviction in-
vestment for him, made only because he believes that he
can attain big returns from Campbell’s share price.
I think receiving a 4.18% dividend stream while partner-
ing with Loeb is an incredible opportunity. Remember,
this man has generated annualized returns of 18% for his
investors for almost 25 years! We are lucky to have him
as a partner.
It’s Time to Buy This Fixer-Upper!
Everything about Campbell Soup reminds me of an
HGTV fix-it-and-flip-it television show.
First we buy the broken-down property.
Then our renovation expert comes work his magic.
When he’s done, we sell our remodeled investment for a
big profit.
The only difference is that while we hold our property
during these renovations, we are going to get paid that
nice 4.18% dividend!
Maybe we should start our own reality program?
ACTION TO TAKE:
Buy shares of Campbell Soup Company
(CPB) up to $43.
That’s been happening a lot lately… and will likely
continue for some time. Investors are just overreacting
to every bit of news, meaning our stocks are gaining or
losing a lot of value on any given day.
So today I’d like to share three specific strategies for bol-
stering your portfolio beyond just owning stocks. These
simple strategies can generate income for you despite
 lifetime income report
the markets’ up and downs — which could relieve any
investment anxiety you’re having.
I’ve pulled them from three of the eight services that make
up my publisher’s new initiative, called St. Paul Research.
Two will add reliable cash to your account, while the third
will give you a chance for speculative gains.
Keep in mind that these aren’t the kind of trades I cover
in Lifetime Income Report, so they’re not official recom-
mendations. They’re just ideas that could deliver enough
cash to counter Wall Street’s wild swings.
So let’s get to it!
Volatility Strategy #1: Collect Legally
Guaranteed Income
If you’ve ever bought a car or a house, you’ve probably
owed money to a bank. But what if you were the bank —
lending out cash and receiving it back with interest?
That’s the general idea behind bonds.
Corporate bonds are some of the most reliable money
generators you can buy — and they’re a great addition to
any income-focused portfolio.
Unfortunately, many investors think they’re too compli-
cated to bother with… so they essentially pass up an easy
way to earn extra cash.
A bond is nothing more than a way for companies to
borrow money from the public. It works with a bank or a
broker to create the bonds.
Much like a stock share, which represents part owner-
ship of a company, each individual bond represents part
ownership of a loan.
So if you buy a bond, the company is legally obligated to
pay you back. And until it does, it is required to send you
interest checks every six months.
It doesn’t matter whether the company is profitable or
not. The CEO and board of directors can’t simply decide
to skip a payment. Unlike a dividend, which can be cut
or even eliminated, bond payouts must be made.
The biggest danger to a bond’s payouts is if the company
goes bankrupt — meaning it no longer has money to pay
its obligations.
But even if that happens, all of the company’s assets are
typically sold and the proceeds are given to the company’s
creditors. Bondholders are creditors… so they’re entitled
to anything they can get.
That’s a far better deal than shareholders get. They’re
typically at the end of the line when it comes to a com-
pany’s assets. Not only are they left holding worthless
stock shares, but they often don’t receive anything from
the bankrupted company.
Of course, it’s best to buy bonds from a company that
isn’t headed for bankruptcy. And there is no shortage of
bonds to choose from.
In fact, I’ll tell you one you can consider. First, though,
let me explain how bonds work.
A Great Bond From a Familiar Name
When a company creates a bond, it is initially valued
at $1,000 — known as par value. It decides how long it
wants to borrow the money for — an exact date known
as the bond’s maturity. The company pledges to pay the
bondholder $1,000 on that date, if not before.
The company also decides how much interest it’s will-
ing to pay on that loan. It’s a fixed percentage based on
the $1,000 par value, known as the yield. The company
pays that interest every six months over the life of a loan,
known as a coupon payment.
Well-known companies with long histories typically don’t
need to offer bonds with high interest payouts. Investors
have full confidence they will be paid back, so the company
doesn’t have to entice buyers with a large coupon.
But newer, lesser-known or troubled companies do need to
offer bonds with higher interest rates. Essentially, investors
won’t buy the bonds unless the payouts are worth the risk.
And this is where things get interesting…
As I said, bonds are initially valued at $1,000. But once the
company sells the bond, the buyer is free to sell his or her
bond to another investor. This is known as the secondary
market — where bonds can trade above or below their par
value based on investor demand.
In other words, the price you pay for a bond on the second-
ary market is a function of supply and demand.
Many bonds were created during the last financial crisis,
when investors were wary of long-term investments. So
the issuing companies were forced to offer high coupons
to help potential buyers get over their fears.
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 lifetime income report
Then the economy got stronger — and so did the compa-
nies that issued these high-yield bonds. What seemed like
a risk back then now looks more like a sure thing. Yet most
investors have forgotten these bonds exist, so you can
buy them at or even below par value.
That means you can lock in a great yield for a low price.
Consider Iron Mountain (IRM). If you followed my
recommendation to buy this real estate investment trust
(REIT) last year, you’re currently receiving $2.44 a year for
every share you own.
But you could also buy its 5.75% bonds that mature on
August 15, 2024 (CUSIP: 46284PAP9). The company will
send you $57.50 a year for every bond you own. And at
current prices, you’ll pay around $952 for each bond, or
95.2 cents on the dollar.
That’s a yield of about 6% — just shy of what IRM’s stock
shares are yielding. And those reliable payouts are locked
in until the bond matures — no matter what the markets
do over the next five years!
Volatility Strategy #2: Earn Instant Cash
From Your Stocks Calling More Income
Stock options can be another great way to give your port-
folio some added oomph. But they tend to be even more
feared than bonds.
To be fair, options do sound complicated, involving words
like “contracts,” “strikes” and “expiration.” And if used
incorrectly, they can quickly lead to big losses.
On the other hand, few instruments on Wall Street offer
as much profit potential in such a short amount of time
— often with no more than a few hundred dollars at risk
if you’re wrong.
So I strongly urge you to consider adding stock options to
your investment strategy. And to get comfortable with how
they work, you can start with the safest form of options
trading there is.
As an added plus, volatile markets make this method
even more lucrative, as I’ll explain in a second.
But it will only make sense if you understand how options
work in the first place.
You might know that stock options trade alongside stocks
on the major exchanges. But while stock shares represent
part ownership in a company, options represent rights
and obligations.
8
Buying an option gives the buyer specific rights to 100
shares of a given stock.
A call option gives the buyer the right to buy that given
stock for a set price, called the strike price. Those rights
expire on a set date. If the person holding the option doesn’t
exercise their rights before then, the rights disappear and the
option becomes worthless.
The buyer doesn’t have to exercise their rights, though.
They can choose to close the position at any time by selling
the option, either for a profit or a loss.
But you might be surprised to learn that you don’t have
to own an option in order to sell it.
As I said, when you trade options, you’re trading rights
and obligations.
And it starts with someone selling that obligation — receiv-
ing money in exchange for agreeing to fulfill the terms of an
options contract if the buyer decides to exercise their rights.
It’s known as writing options… and it’s not as complicated
as it sounds.
Let’s say you’re holding 1,000 shares of Apple (AAPL)
right now. If you bought them when I first recommended
them, you should have paid around $118 a share for them.
As I type, they’re currently trading for $157.
So you’re sitting on a nice profit.
And somewhere out there, a trader is thinking that Apple
shares could be worth $180 or more by the end of the year.
But with the market’s volatility, he’s not willing to stake a
large amount of cash on his analysis. So he’s turning to the
options market instead.
He can buy a call option on Apple with a $165 strike price
that expires in January 2020. If he buys it now, he’ll pay
just $11 a share for the contract. Since each option repre-
sents 100 shares of stock, it means shelling out $1,100 —
far less than the $15,700 he’d have to pay if he bought the
shares outright.
With the option, he has the right to buy 100 shares of
Apple stock for $165 — no matter what they’re currently
selling for. If he’s right and Apple goes to $180, he can
exercise his rights… buying $18,000 worth of stock for
$16,500… essentially making $1,500 in the process.
If he’s wrong, however, and Apple never gets above $165
over the next year, his option will expire worthless.
 lifetime income report
But imagine being on the other side of that trade…
Like a Bonus Dividend!
Remember, for this example, you’re holding 1,000 shares
of Apple that you bought for $118 each.
So you could sell call options against your Apple stock.
You essentially create a contract saying that you’re willing
to sell 100 shares of Apple at the option’s strike price any
time before the option expires.
In this example, the strike price is $165 and the option
expires in January 2020. The option buyer pays you
$1,100 to keep your promise.
That’s instant cash for your portfolio… and there are a
few ways it could play out.
If Apple ever tops $165 a share, the person who bought
your promise — the call option — could ask you to fulfill
its terms. You’ll be forced to sell him 100 shares of Apple
for $165 each… no matter what the current price is.
But that’s not so bad!
If you bought Apple for $118.28 a share, selling them for
$165 nets you a nearly 40% gain. Plus you still have 900
shares of Apple left to capture further upside in the stock
price.
It gets even better if Apple shares never trade above $165.
Sure, you don’t see a lot of capital gains in your stock. But
you still collect every dividend Apple pays out. And if the
option expires worthless, you get to keep the $1,100 you
received for selling the option.
So selling calls against your stock shares is a great way to
earn income in up-and-down markets. During upturns,
you can sell shares for a nice profit… and you can keep
cash rolling in when the stock market heads south.
Best of all, volatility tends to push up option prices —
meaning you’ll collect bigger payouts by selling them!
Volatility Strategy #3: Use Leverage to
Profit From Earnings Surprises
Once you get a feeling for how options trading works, you
can start using them to make more speculative trades.
And in up-and-down markets like these, you could see
the most lucrative gains by using options to speculate on
earnings surprises.
You probably know that companies are required to report
their financial results every three months. They are legally
obligated to disclose to the public how much money they
made, how much they spent and how much they profited.
But before the companies make those announcements,
independent market analysts share their thoughts on how
the numbers will turn out.
Each have their own methods for extrapolating data and
crunching possible scenarios, so they may come up with
different numbers. And if enough analysts make a predic-
tion about a company, financial news organizations will
average them out to create a “consensus” estimate.
Investors then buy and sell based on those forecasts,
waiting for the official news release.
Sometimes the consensus is right — and the company’s
numbers match expectations. But other times, there’s an
earnings “surprise,” where the results are higher or lower
than what the consensus believe.
Earnings surprises usually cause huge shifts in a stock’s
price. If the company’s numbers are better than expected,
its stock price could take off. And call options on those
stocks will absolutely soar.
That’s because options are leveraged investments. In other
words, they have oversized reactions to a stock’s price
moves — which you can use to your advantage.
Small Moves Can Mean Powerful Gains
As I told you, call options give investors control over 100
shares of stock. Owning one gives the buyer the right to
buy 100 shares of the underlying stock at the options’
strike price.
And as you saw in my Apple options example, they often cost
a fraction of what it would cost to buy the stock outright.
Their prices are also directly tied to the stock’s price.
Every dollar a stock goes over the option’s strike price
increases the options’ value by at least $100.
Again, think back to the Apple $165 call options example.
If Apple shares trade for $166, the option holder can buy 100
shares for $165 apiece — making the option worth at least
$100. With Apple at $170, the option’s value jumps to $500.
(The fact that investors are currently willing to pay $1,100
for an Apple $165 option means they expect Apple to be
trading for at least $181 a share by the end of the year.)
Now, of course, leverage can work the other way, too —
a fall in a stock’s price has a bigger effect on the prices of
call options associated with the stock. That’s what makes
these kinds of plays much more speculative.
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 lifetime income report
Here’s the thing, though…
Do Insiders Know Something We Don’t?
Right now, investors aren’t sure what to think. They’re
selling on every piece of bad news, then rushing back
into the markets on any glimmer of hope.
Overall, however, things look good for companies’ profits
heading into 2019. Employment is still high… and people
are still flush with cash. While rising interest rates, trade
tariffs and other things could cut into earnings, they likely
won’t kick in until further down the line.
With so much negativity obscuring reality, the stage is set
for earnings surprises.
The trick is to figure out which companies could surprise
the markets. My colleague Alan Knuckman has developed
one way.
He’s licensed software that can detect subtle trades in the
options markets — signs that company insiders might be
trying to take advantage of their privileged information.
Yes, it’s illegal for insiders to make these trades, but
research has consistently found that odd options trades
tend to precede major corporate announcements.
In fact, a group from New York University’s Stern School
of Business discovered “pervasive directional options ac-
tivity, consistent with strategies that would yield abnormal
returns to investors with private information.”
In other words, some options traders are behaving like
they have insider information… and are profiting hand-
somely from it.
Alan’s system recently detected unusual options trading in
Microsoft (MSFT), which is set to report earnings at the
Ask Zach: GOV’s New Name… Where to Get Social
Security Help… Credit Card Tips… and More!
We have some good questions this month, but first, a bit
of housekeeping.
Back on Sept. 20, I let you know about big changes to
Government Properties Trust (GOV). Its parent company
cleaned up a convoluted ownership structure by reorgan-
izing GOV and merging it with another REIT.
The deal was completed on Jan. 2, and the company is now
trading under a new name and ticker — Office Properties
Income Trust (OPI). You should have received one share
10
end of January. So you could buy call options anticipating
a jump in MSFT’s stock price after its announcement.
Just keep in mind that Alan’s system doesn’t guarantee
that good news is coming — there could be other reasons
behind the unusual trades. So if you decide to play this
information, tread carefully.
And remember, the volatile markets are making options
more expensive, which would cut into your potential
profits. However, if Microsoft does surprise Wall Street,
you could collect a very nice win.
Your Portfolio Can’t Thrive on
Stocks Alone
I hope these ideas have opened your mind to the wide
number of strategies and opportunities available to you.
The fact is, investors are figuring out that stocks don’t
always go up in a straight line.
And while my “Three Pillars of Investment Success” will
limit the damage from any ups and downs, you should
consider padding your portfolio with investments outside
of regular stock trades.
Yes, it will mean taking some risks… and you’ll have to
judge them against the potential returns.
But if you do it right, you’ll never have to worry about
wild market swings again. In fact, you might be able to
harness the volatility… earning much more wealth than
you’re likely to see in stocks alone.
P.S. You’ll hear a lot more about St. Paul Research this
year. It’s a spinoff of Agora Financial’s best publications…
and you can be one of the first 1,000 people to experience
everything it has to offer. Discover why it’s the equivalent
of receiving $23,094 a year by clicking here.
of OPI for every four GOV shares you held.
It’s still a REIT, which means it’s required by law to pay
out at least 90% of its income. As I explained, though,
the dividend will be lower than what we received as GOV
shareholders.
Still, I think this merger and reorganization was a good
move, and I expect that its dividend payments will get
better from here.
 lifetime income report
Now, let’s answer some of the emails I’ve received at
AskZach@AgoraFinancial.com.
I am trying to collect extra funds for Social Security.
What chapter can I find this info?
Raquel S.
Hi, Raquel. I assume you’re referring to my Big Book
of Income, which can be found on the Lifetime Income
Report website.
If that’s the case, you want Chapter 28, “One Simple Trick
to ‘Boost’ Your Social Security Benefits by $570 per Month.”
But soon I’ll have even better information for you. As part
of our transition to St. Paul Research (see page 6 for de-
tails), we’re adding new members to our team — including
a Social Security expert. He’ll share specific strategies for
maximizing your checks… helping you know when to file,
make sure your spouse is covered and similar topics.
It will go far beyond anything I’ve written on the subject…
and I hope we can introduce it to you soon!
Our next letter isn’t a question, but it brings up two very
important points.
I received your email alert about Nerdwallet.com.
This is all new to me, but it makes perfect sense for
everyday living like credit score alerts and travel
streams of income. Thanks!
Marcellus S.
Thanks for the kind words, Marcellus. You’re talking
about the email alert I sent on Dec. 13.
These emails are a big part of your Lifetime Income Report
membership. Not only do I share updates on our open
positions, but I also use them to explore topics I don’t
have room to cover in your monthly issues.
So if you’re not getting these emails, let us know so we
can add you to the distribution list.
I also want to mention that our St. Paul Research spinoff
has partnered with a company that specializes in credit
matters. It offers tips for improving your credit score and
making better banking decisions.
You can expect to hear more about that, too!
Our final question is about our “Congressional Checks.”
Last October, I took your advice in your book,
Congress’ $1.17 Trillion Giveaway. I was only able
to buy six shares of BEP and 27 in GE. I haven’t re-
ceived a dividend from either company. Please help.
Monica S.
Thanks for the letter, Monica.
Congress’ $1.17 Trillion Giveaway spotlights every REIT
and publicly traded partnership in our portfolio. The
income you receive from these companies has preferential
tax treatment thanks to a last-minute addition to the Tax
Cuts and Jobs Act that Congress passed into law in 2017.
Brookfield Energy Partners (BEP), like most companies,
pays out its income quarterly. If you bought shares in Oc-
tober, you should have received your first payout on Nov.
29. With six shares, the payout would have totaled $2.94.
Keep in mind that shares of BEP have fallen in value along-
side the general market. So you’ll need to check your account
statements to confirm that you received the money.
But I’m not sure where you got the idea to buy General
Electric (GE). The company isn’t in my book. It’s a standard
corporation, not a REIT or partnership, so its dividends
don’t receive the same tax treatment.
GE used to be part of the Lifetime Income Report’s portfolio.
I recommended selling the stock in November 2017 after it
announced disappointing results and cut its dividend.
It turns out that was the right call. The company all but
obliterated its dividend in the fourth quarter of 2018,
paying just 1 cent a share. If you’re holding 27 shares of
the stock, you would have received 27 cents in December.
Since I’m not currently tracking GE, I can’t really tell you
what to do with your shares. My only suggestion is to focus
on the companies that are currently in our portfolio,
because they’re the only stocks I can talk about.
And that brings this month’s mailbag to a close. Keep
watching for upgrades to your service as well as informa-
tion on our new publications. I’ll be in touch again soon!
Zach Scheidt
Editor, Lifetime Income Report
AskZach@AgoraFinancial.com
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 Lifetime Income Report Portfolio
AVG. PAID DIVIDEND YIELD: 5.74% A/T ENTRY DATE RECENT PRICE EX DATE CURRENT YIELD BUY UNDER

Lifetime Income Portfolio

Medical Properties Trust (MPW) T 8/9/13 $15.63 12/12 6.21% $15.00
HCP, Inc. (HCP) T 11/5/14 $26.98 11/02 5.32% $48.00
CoreCivic (CXW) T 2/11/15 $17.38 12/31 9.75% $36.00
Procter & Gamble (PG)* A 10/5/15 $91.28 10/18 3.12% $100.00
Apple (AAPL)* A 12/7/15 $157.92 11/08 1.87% HOLD
Ford Motor Co. (F)* A 4/14/16 $7.90 10/22 7.64% $14.00
Citigroup (C)* A 10/6/16 $52.53 11/02 3,48% $80.00
Hilton Worldwide (HLT) A 7/7/16 $70.94 11/08 0.85% HOLD
Thomas Reuters (TRI) A 8/3/17 $47.56 11/14 3.22% $47.00
Walmart (WMT)* A 11/2/17 $93.34 12/06 2.27% $92.00
Nestle (OTC:NSRGY)* T 3/25/17 $80.17 04/16 3.04% HOLD
BP (BP) A 11/1/18 $38.59 11/08 6.45% $46.00

Current Income Portfolio

Flaherty & Crumrine Pref. Sec. Income (FFC) A 7/18/13 $17.06 01/23 7.95% $21.92
Annaly Capital Management (NLY)* T 11/17/14 $9.89 12/28 11.80% $12.50
Welltower Inc. (WELL)* T 6/11/15 $67.29 11/08 5.02% $75.00
Blackstone Mortgage Trust (BXMT) T 9/9/16 $31.54 12/28 7.62% $34.00
National Retail Properties (NNN) T 7/10/17 $47.29 10/30 4.15% HOLD
UPS Inc* (UPS) A 8/31/17 $97.21 11/16 3.72% $125.00
Iron Mountain (IRM)* T 1/4/18 $32.10 12/14 7.60% $42.00
Office Properties Income Trust (OPI)** T 11/12/12 $28.40 10/26 6.05% HOLD

Special Situations Portfolio

The Blackstone Group (BX) T 7/28/14 $30.07 12/28 8.40% $38.00
Oaktree Capital Group (OAK) T 3/10/16 $40.16 11/02 6.92% $55.00
Wells Fargo (WFC)* A 6/9/16 $46.94 11/08 3.78% HOLD
General Motors (GM)* A 8/4/16 $33.64 12/06 4.53% HOLD
Bank of America (BAC) A 1/5/17 $24.96 12/06 2.46% $32.00
Pfizer (PFE)* A 3/2/17 $43.25 01/31 3.26% $45.00
Novartis (NVS) T 6/1/17 $84.06 03/06 3.49% HOLD
Brookfield Renewable Partners (BEP) T 10/6/17 $26.32 11/29 7.73% $36.00
NY Community Bancorp (NYCB)* A 12/7/17 $9.56 11/05 7.55% $15.00
Canadian Natural Resources (CNQ)* A 2/1/18 $24.71 12/07 4.16% $40.00
Brookfield Infrastructure Partners (BIP) T 3/1/18 $35.06 11/29 5.56% $45.00
Cheniere Energy Partners (CQP) T 4/5/18 $35.83 11/02 6.48% $34.00
Tanger Factory Outlet Centers (SKT) T 5/3/18 $20.41 10/30 6.69% $25.00
Occidental Petroleum (OXY) A 6/7/18 $62.00 12/07 5.13% $90.00
Icahn Enterprise (IEP) T 7/5/18 $60.23 11/08 12.57% $80.00
China Mobile (CHL) A 8/2/18 $47.51 09/06 4.56% $52.00
Kraft Heinz (KHC) A 9/6/18 $43.34 11/15 5.78% $68.00
EnLink Midstream Partners (ENLK) T 10/4/18 $11.19 10/26 14.27% HOLD
Discover Financial Services (DFS) A 12/6/18 $59.41 11/20 2.72% $77.00
Campbell Soup Company (CPB) A NEW NEW 01/08 4.18% $43.00

Updated on 1/2/2019
Stocks in bold represent changes to the portfolio. Check the Lifetime Income Report website at agorafinancial.com for more details.
* Represents stocks owned by the Canadian Pension Pla n; A means suitable for all accounts; T means only suitable for taxed accounts (not IRAs, etc.)

Sources:
1. “Where Have All the Gardening Shows Gone?” Taysha Murtaugh, April 5, 2017, Country Living.
2. “#RefreshTheRecipe: Campbell Soup Company Presentation,” October 2018, Third Point LLC.
3. “Campbell’s History: The Campbell Story,” Campbell Soup Company.
4. “Q1 2019 Campbell Soup Company Earnings Conference Call,” November 20, 2018, Campbells.
5. “Campbell Soup Company,” July 29, 2018, United States Securities and Exchange Commission.
6. “Campbell and Third Point Reach Agreement,” November 26, 2018, Campbells.
7. “CPB 13F Hedge Fund and Asset Owners,” Campbell Soup Co., WhaleWisdom LLC.

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