Issue #70, Volume #3One Way To Avoid A 40% Price DropBy Marty Fridson • Tuesday 5, May 2026View in browser

Inside today’s Daily Journal…

• Essay: One Way To Avoid A 40% Price Drop
• Revising earnings upward
• Central banks buy more gold
• Viper’s strong quarter
• Chart Of The Day… BWXT
• Today’s Mailbag

Art Is Not Widely Viewed As An Investment… But It Can Hold Value

Editor’s note: Porter has turned the Journal over to Marty Fridson, lead analyst for Porter & Co.’s Distressed Investing. For nine consecutive years, Marty was ranked No. 1 in high-yield strategy… He is also the author of The Little Book Of Picking Stocks. Today, his investment versatility extends to the world of art.

Here’s Marty…

You can’t punch a hole into a share of stock…

But you can jam an elbow through a $100 million piece of art… Just ask Las Vegas casino developer Steve Wynn.

Although it’s less widely covered than stocks or bonds in the financial press (and at Porter & Co.), fine art is an asset class that attracts a great deal of institutional money. Besides being an inflation hedge, it’s a diversifying asset. Over the long run, art has a low correlation of returns with the S&P 500, although over shorter periods it sometimes moves together with equities.

Notwithstanding those perceived attractions, art will probably strike some investors as being out of place in the investment world. After all, what sorts of objective quantitative criteria, analogous to price-to-earnings (P/E) ratios or operating cash flow, can be applied to evaluate the Mona Lisa or Girl With A Pearl Earring? In fact, though, experts in the field have developed methods that depend much less on aesthetic considerations than you might expect.

Two authorities in this field, Arturo Cifuentes and Ventura Charlin, offer the following examples, based on the works of French Impressionist painter Pierre-Auguste Renoir (1841-1919).

• Up to a point, the bigger a Renoir painting is, the higher the price per square centimeter (“P/cm²”) it will sell for at auction. Above a certain size, though, prices decline because very large works are displayable only in museums or palaces, limiting the universe of potential bidders.
• P/cm² increases, everything else being equal, if the painting includes one or more human figures, but nude figures have the opposite effect
• A Renoir portrayal of a landscape in a vertical (“portrait”) frame will fetch a higher P/cm² than one in a horizontal (“landscape”) frame
• Selling your Renoir in New York will probably get you a better price than if you put it up for auction somewhere else

Being able to quantify all this is reassuring but there’s a catch. The experts don’t have any useful methodology for valuing a Renoir versus a Rembrandt or a Van Gogh versus a Warhol. It comes down to the taste of collectors. Tastes change. And do they!

A decade ago, securities analyst and author Zac Bissonnette wrote about Jean-Louis-Ernest Meissonier (1815-1891). The Frenchman’s fellow painter Eugène Delacroix called him the undisputable master of the age, predicting that his work undoubtedly would stand the test of time better than the works of any other contemporary.

About 150 years ago, Meissonier’s painting Friedland sold for the then-staggering sum of $60,000 ($1.5 million in 2026 dollars). But over the next century, his historical precision and nationalism came to be seen as pedantic and out of date. In 2012, Meissonier’s Un Cuirassier à Cheval sold for just $1,075.50.

Wide price swings play a role not only on works and artists, but also on the art market as a whole. For example, art-evaluation firm ArtistIP reported a 28.4% price advance in the five years ending 2021. The comparable figure for the five years ending 2025 was negative 21.8%. As with other investment categories, interim volatility comes with the territory.

There is one important way, though, in which investing in today’s securities market differs from investing in art. Few current investors have ever touched a physical stock certificate or clipped a bond coupon from a piece of paper that confers ownership. (Once, at my first job in the late 1970s, a customer arrived in our bond-trading office with $50,000 worth of bonds stuffed inside his shirt. Lucky for him that he hadn’t burst some buttons along the way.) Some highly valuable art does nowadays exist in digital form as non-fungible tokens (“NFT”), but pigment on paper still constitutes the bulk of the market.

The downside of that characteristic became apparent in October 2006, when the casino mogul Steve Wynn told some friends that he’d decided to sell Pablo Picasso’s 1932 oil-on-canvas Le Rêve to hedge fund manager (and now New York Mets owner) Steve Cohen. The agreed-to $139 million price tag was to have been the highest ever for an artwork.

Before the sale, Wynn was showing the painting to some friends. And according to the screenwriter Nora Ephron, Wynn makes wild gestures when he speaks, which seems to have been the case on this day. While showing off the work, Wynn accidentally rammed his elbow through the canvas, producing a six-inch tear.

After Wynn spent $90,000 to repair the damaged masterpiece, it was re-valued at $85 million – a 39% drop in price. Even the best stock investors have suffered losses of $54 million or more in securities, but not as a result of puncturing a physical asset.

Fortunately for Wynn, after several years of litigation with his insurance company, he finally unloaded Le Rêve to Cohen for an inflation-adjusted $134 million, cutting his loss to $5 million.

In summary, art is unlike more conventional investments in many ways. But don’t be deceived into thinking that security values are immune to changes in taste.

Stocks are subject to fads that can leave them vulnerable to running down as quickly as they ran up, without any change in their earnings prospects or financial soundness. Meme stocks that skyrocketed during the COVID-19 pandemic, only to plunge back to Earth shortly afterward, are a case in point.

To build wealth over a lifetime, focus on objective factors that reliably drive valuation. Reserve “Beauty is in the eye of the beholder” for buying a painting that you’d like to see hanging in your living room, not because you’re looking for it to fund your retirement.

Marty and his team at Distressed Investing have come across many bonds and stocks that have lost 40% of their value before they’ve made a recommendation to invest in them… for various reasons. In fact, later this week, they will be sharing a report on a company whose shares and bonds have declined due to financial chicanery – but Marty still sees value ahead.

To be among the first to see this month’s Distressed Investing, following a track record with a 90% win rate, click here to learn more.

Tell us what you think of today’s Journal: porterstansberrydirect@gmail.com

Martin Fridson
New York, New York

3 Things To Know Before We Go…

1. The earnings boom continues. Aggregate Q1 earnings growth for S&P 500 companies are on track to increase 27%, the fastest rate in nearly five years. And the trend looks set to continue. Wall Street analysts normally start out with an optimistic view of future earnings, then revise their numbers lower. But analysts are bucking this trend and revising their estimates higher for both 2026 and 2027. The earnings momentum is concentrated among technology companies supplying the AI boom.

2. Central banks’ gold buying streak continues. Global central banks purchased 244 net tonnes of gold in Q1 2026 – the 11th time in 11 quarters above 200 tonnes, and more than double the 2016–2020 average of 115 tonnes. This happened during a quarter when gold crashed 18% as the U.S.-Iran war drove higher inflation expectations. Central banks are choosing gold as monetary insurance in a fractured geopolitical system.

3. Viper Energy delivered strong Q1 results. Complete Investor recommendation Viper Energy (VNOM) reported Q1 revenue of $511 million – a 109% year-over-year increase – on production of 130,711 barrels of oil equivalent per day, above expectations. In addition, the company announced an agreement to acquire mineral and royalty interests from Riverbend Oil & Gas, a move expected to bolster production through 2026.

Shares of VNOM are up nearly 10% since we recommended them to Porter & Co. Best Buys subscribers on February 26. To learn more about our Best Buys service – and be among the first to receive our latest recommendations when they hit inboxes later this month – click here now.

Chart Of The Day… BWX Technologies (BWXT)

BWX Technologies (BWXT) posted a strong Q1 yesterday, with revenue up 26% year-over-year to $860 million, and a $1.12 earnings per share representing a 20% consensus beat. Backlog doubled to $8.6 billion – a reminder that the nuclear renaissance thesis continues to compound.

We first made BWX Technologies part of Porter & Co. Best Buys in March 2023, and it has risen 250% since then. To subscribe to our monthly Best Buys – where we share the three Porter & Co. recommendations that are at what we consider the most attractive buy prices – click here to sign up.

Mailbag

“Berkshire Hathaway”

Kevin L. writes:

Porter,

Great job in exposing the Berkshire shortcomings. I’ve owned the stock since 2004, but I’m going to sell because I have no confidence in Windmill Boy (great name for him, by the way). I’ve also watched Occidental Petroleum’s underperformance in amazement over the past 10 years. Like a lot of people, Buffett probably wanted to show how open-minded he was by investing in a female CEO of an oil company! Just my opinion.

“Warren ‘Too Good To Be True’ Buffett”

Chris H. writes:

A couple of points –

1. Not fair to value the warrants at zero, with no intrinsic value. The OXY June 2027 calls struck at $60, are trading around $10 a share. So there is another $830 million in value you left off your table.

2. At the time he made this investment, the S&P 500 was getting highly concentrated in technology, something we both agree that Warren Buffett hates. He also had a large position in one of those Mag 7 consumer/tech stocks, Apple. Buying the S&P might have added increased exposure to Apple. When we build a portfolio, it might just be that any one holding or group of holdings might not outperform the benchmark over any given time period. The prop/casualty group in Porter’s Permanent Portfolio is in that category now, but I buy them because of the long-term business and investment characteristics they possess. Buffett wasn’t buying a pure equity investment. He bought preferred stock, and waited for some other stimulus to buy a lot of the common stock.

3. What worries me is Warren always praising everybody and the emergence of traditional corporate doublespeak at Berkshire in his absence. Whitney Tilson had some video clips of Berkshire CEO Greg Abel at the meeting. I struggled to be impressed (ok – personal doublespeak on my part). I worry this will prevent the new CEO to redirect, as you say, I worry he will re-direct according to his poor past track record.

4. A lot of your partners have a lot of low-basis Berkshire. Given our ages, we need great alternative uses for our capital before selling it. If you followed Buffett, what would you do?

Editor’s note: If you’ve been following along with Porter’s recent Daily Journals about Berkshire’s recent troubles, you may be interested in his new book: Warren’s Mistakes. This is a book Porter has been writing for 10 years. But Warren’s Mistakes isn’t only about where Berkshire has gone wrong. It’s also the most thorough explanation yet published about how Buffett compounded at 24% a year for 50 years. If you want to become a great investor, you must know how he did it – and why it all went wrong. That’s exactly what Porter’s new book – which will surely become a best-seller – delivers. Get your copy here.

“Your Book: 2029 The End Of America”

Chet M. writes:

Porter,

First, let me inform you I’m a voracious reader, often reading five to eight books a week. I have to tell you I have never read a book as fast as I have 2029. One of the best books I have ever read. Thank you – the knowledge transfer and the direction on what to do going forward are appreciated.

Thank you for the great work!

To get a copy of Porter’s book Chet is referring to, 2029: The End Of America, click here.

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Porter & Co. Market Snapshot

PriceYesterday’s ReturnYear-to-Date ReturnS&P 500 Index$7,200.75-0.045.6%Gold per ounce$4,521.91-2.08%5.6%Bitcoin$79,9351.30%-7.2%Oil (West Texas Intermediate) per barrel$106.426.71%79.3%Berkshire Hathaway (BRK)$702,790-1.06%-6.9%Porter’s Permanent Portfolio–0.58%-1.6%The Better Than Berkshire Index–0.22%1.3%Total ReturnAnnual ReturnPorter & Co’s Top Ranked*32.2%14.8%YieldYesterday’s ChangeChange
Year-to-DateU.S Treasury 30 – Year Yield5.02%6 bps17 bps

Prices as of 4:00 pm ET May 4, 2026

bps = basis points (or 0.01%)

*A Complete Investor risk rating of 1 is defined as a “low risk, high allocation” security, while positions rated closer to a 5 are higher risk. Porter & Co.’s top-ranked positions include those rated either 1 or 2 in Complete Investor portfolio.

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Porter & Co. Top Positions

PublicationTickerDescriptionTotal ReturnComplete InvestorBWXTBWX Technologies279%Tech FrontiersQUREuniQure237%Complete InvestorBTC/USDBitcoin196%Tech FrontiersSGMTSagimet Biosciences146%Tech FrontiersQUREuniQure131%Tech FrontiersROIVRoivant Sciences126%Complete InvestorPMPhilip Morris111%Tech FrontiersTGTXTG Therapeutics104%Tech FrontiersSGMTSagimet Biosciences100%The Big Secret on Wall StreetVNOMViper Energy97%

Prices as of 4:00 pm ET May 4, 2026

Please note: The investments in our “Porter & Co. Top Positions” should not be considered current recommendations. These positions are the best performers across our publications – and the securities listed may (or may not) be above the current buy-up-to price. To learn more, visit the current recommendations page of the relevant service, here. To gain access or to learn more about our current recommendations, call our Customer Care team at 888-610-8895 or internationally at +1 443-815-4447.

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