As a reformed academic, I have it hard-wired in my brain that work should cease for the week between Christmas and New Year’s Day — Stock Gumshoe will be running on autopilot starting this afternoon, and we’re not likely to have much in the way of new articles posted until next year (unless you want to write something, of course — Irregulars are always welcome to start their own discussion topics or submit their longer-form musings here).
So I’ll say Merry Christmas and Happy New Year now, with a Happy Kwanzaa in between, but I want to send you away with some thoughts for the quiet days ahead… so, as I often do, I’m taking a look back at the hits of 2015 in hopes that we’ll all learn something. It seems only fair, since I make a point of identifying the “Turkey of the Year” each Thanksgiving, to also give the biggest winning stock picks a little attention… to take a quick follow-up look at some of the anti-turkeys.
First, I should explain our methodology: As most of you know, we’re operating from just the teaser ads that newsletters send out — we identify the stocks that are hinted at, defuse that marketing a bit so you can think more clearly about the investment in question, and keep track of how that investment does on our Tracking spreadsheets.
That doesn’t mean we’re tracking the actual success of the underlying newsletter — newsletters don’t send out crazy hyped teaser ads when they sell a stock or otherwise update us non-subscribers on their portfolios, so it’s quite possible that many of the stocks are only “held” by those newsletters for a few weeks or months and that the change in the stock since it was teased doesn’t necessarily reflect the returns a subscriber to the newsletter would have enjoyed (or suffered through). Our spreadsheets also link back to the original article, so you can get an idea of what kind of time frame the pitch was aimed at, or what kind of dreamy visions of returns the editor put in our heads.
Our tracking, by necessity, is simply a “buy and hold forever” tracking for that teased investment, and what we’re most interested in is providing some evidence that will help you short circuit those little gremlins that bounce around your head and mutter, “hey, maybe this stock will really get me a 10,000% return!”
No, we haven’t seen any 10,000% returns yet… not ever. And it’s been almost nine years, so our sample size is pretty big.
The closest we’ve seen is the roughly 4,000% return from Netflix (NFLX) shares after the Motley Fool teased that one back in 2007… and a couple 2008 teaser stocks would have you sitting on 1,000% gains today, Skyworth Digital in Hong Kong and Biovail (before it became Valeant). Those are the only current “10-baggers” among the 1,853 stocks we’ve tracked as of mid-October (yes, I went back and counted… and no, I didn’t own any of those stocks). Those returns are not annualized, that’s the total increase in price since the stock was teased. And the folks who pitched those have also all pitched stocks that have fallen 80, 90, 100% as well… so there are no Midas candidates in our universe, everyone has their hits and misses.
The overall success ratio of these picks, if you’re curious, has been fairly consistent since we started identifying teaser stocks for you and tracking their share prices in 2007. Roughly one third of the stocks that have been teased tend to be in positive territory each year, with a few doubling and an occasional stock rising by more than 200% on the year, and 2/3 fall in value, including a dozen or so that are usually down by more than 90%… typically with a couple 99%+ losses thrown in from bankruptcies.
In the last two years we’ve started comparing stock performance to a benchmark (the S&P 500 index), which adds a layer of understanding, perhaps, but hasn’t made a big difference yet (mostly because the S&P hasn’t made a big move over the last two years — this would probably have made a difference to past returns from picks made during market troughs, like in 2009, but we haven’t gone back to add that data). And yes, if you’re wondering, we do go back and try to keep the spreadsheets accurate by adjusting for takeovers, name changes, bankruptcies and the like — though we miss things, too, so feel free to let us know if you think the numbers are off or you notice a takeover or split that we missed.
So… what have we seen over the past year? By way of comparison, I’ll remind you that the broad market has been “violently boring” this year, closing out 2015 very close to where it started but offering a lot of uncertainty and bounces, both up and down, that might have provided opportunities for well-timed investments by the wise and/or lucky.
Well, the hands-down winner for stocks teased in 2015 is Pacific Biosciences (PACB), hinted at as a favorite by Frank Curzio in ads for his Disruptors and Dominators newsletter back in September. That was fantastic timing, in retrospect, because it was just a couple weeks before PACB introduced their new, lower cost DNA sequencing machine that’s intended to be stronger competition for Illumina’s market-dominating products, and that announcement helped PACB to really take off after a very moribund couple years.
What was Curzio’s hinted promise on this one? This is from his ad:
“With all the money this firm is marshalling, it wouldn’t surprise me to see it jump to $10 … even $15 in the near future … and as high as $20 or $25 after that.
“We’re talking about a potential 500% gain within the next 12 to 24 months”
So, credit where credit is due, it did jump to above $10 “in the near future” with that 180%+ gain since September (it’s around $13.50 now). The jury will probably be out for a while on that 500% potential, but that’s a good start.
Of course, Curzio hinted at three stocks to play this trend toward more DNA sequencing and “personalized medicine” — Illumina (ILMN) was one, and I concluded that the third was probably Fluidigm (FLDM). Those two are flat since September, so if you had split your investment among the three ideas the return would have been lower at ~70% — but still certainly market-beating so far.
What can we learn about this? Well, for one thing, price matters… whether by luck or by great insight or instincts, Curzio aggressively touted PACB at very close to the trough price. But he wasn’t the first one to tease or pick the stock — Marc Lichtenfeld pushed it pretty aggressively early in the year for Oxford, in both January and April… but the stock was around $8 the first time we looked at his ad, then at about $6 when we re-checked it early in the Spring. That means you only get a 50-100% return from those prices, not a 200%+ return.
For what it’s worth, Curzio also may have picked PACB several years ago when he worked at a different newsletter, though the teaser ad back then was primarily about another stock and only obliquely referred to PACB as a secondary idea — that was in August of 2011, when PACB was newly public and was being crushed as a flop of an IPO, and it was around $6 back then as well.
Second place for the year on our spreadsheets goes to a new newsletter… and a stock that wasn’t even a 100% certain match for the Thinkolator (so, the horror, we might be giving credit where none is due) — that’s Ophthotech (OPHT), which is developing a wet AMD drug called Fovista. That stock has doubled since its September lows thanks to licensing deals and progression of their second Phase III trial (results in a year or so, most likely), and Matt McCall teased it for his FUTR Stocks (or so the Thinkolator concluded) pretty close to those lows. Another stock that had predicted catalysts coming, and the catalysts fell their way and the interest level steadily increased — as with many biotechs, sometimes the catalysts go the other way.
And what’s the third most successful teased stock this year? This one came as a big surprise to me: New Flyer Industries (NFI.TO in Canada, NFYEF OTC in the US). This is a stock we’ve covered many times, it was often teased in its prior incarnation as a hybrid income investment, and it became a “regular” corporation and started to get its balance sheet in order a couple years ago. Throughout that long transition they’ve been an important manufacturer of transit buses, and it look like their latest products are getting some real traction — they’ve had some very large orders this year, they sell to municipalities that aren’t quite as broke as they were a few years ago and that are pushing for more efficient and environmentally friendly bus fleets, and they’ve made some acquisitions… and they get to sell in US dollars but incur their costs in Canadian dollars, which has worked out well lately. I thought it was a good company but a fairly expensive stock, relative to the industry, back in April when David Dittman’s Canadian Edge was teasing the pick at about $11. So far I guess I was right about the company but wrong about the “expensive,” the shares are up more than 70%.
So those are our three victors on the year — a reminder that sometimes good things can come of a “story stock” even if the hype and the silliness surrounding them can be painful distractions. None of these are phantom businesses, none are built on imagined fantastical potential — they’re real businesses with real assets that are seen as valuable even by some folks who don’t write investment newsletters, so perhaps that’s our real lesson: Even if you’re pretty sure a newsletter pundit is on to a valuable idea, make sure to look beyond the newsletter hype and get a second opinion.
Have a wonderful final week of 2015, and we’ll be back to sleuthify all your favorite teaser stocks in 2016!
PS: None of those newsletters costs $5,000, either. Throughout the years we’ve seen no real connection between the quality of a teased pick and the price of the newsletter… though many of the higher priced letters focus on tinier stocks that can sometimes be super-volatile, including small biotech or junior mining names, so those pricier letters do lead the pack in some years (and there are a few of them in the top ten for this year).
P.P.S: Yes, the most successful stock pick over the last year-plus-a-little was not actually PACB — that honor falls to Anavex, the Alzheimer’s Disease hopeful… but the huge “winner” teaser pick on that one that’s still up by close to 800% came out in December of last year, so I didn’t count it as a 2015 idea (it’s been teased every year or so by someone, ever since it was in the $80s, split adjusted, in 2007 and 2008). By the time Ray Blanco started actively teasing it this year, near the end of October when it was being uplisted, it was already around $8-9 and up close to 1,000% for 2015. It got up another 50% from there, very briefly on their next news release, but fell back down again as the “sell on the news” crowd sold and the data that they released was critiqued more closely, so this year’s tease of AVXL is actually down 20% or so. And yes, every time I mention Anavex with any skepticism its fans get in an uproar… so you can feel free to discuss that one too, if you like. It’s certainly been an exciting stock this year, and has been inching its way up again over the past month.
P.P.S. OK, OK, for all those who are asking this morning: A quick teaser answer. The Money Map Press folks are selling their $5,900 Passport Club service (lifetime access to all their newsletters for one price) by pitching what they call a “remarkable new Tinnitus drug recommendation we’re reserving for our most loyal readers… The little $4 stock that could be on a path to $911 once Phase 3 study results are announced early next year.” I’ve done no analysis of it at all, but the stock they’re teasing is pretty clearly Auris (EARS). Which is already up 25% or so at the open today, so lots of folks already figured that out. Is it really worth a look? Discuss among yourselves….
Happy New Year!