“Hidden Government 100-F Documents Easily Predict Gains or Losses”

Today we have the pleasure of yet another ad that includes a made-up name that sounds official …

This time, it’s the “100-F Document” — something that is filed in Washington, D.C. that will give you inside information into a company’s troubles, and let you bet against the company before it makes headlines.

And it’s all part of an ad from Dan Amoss for his Strategic Short Report newsletter — we’ve looked at these before, when we dug into what he called the “Paddle Strategy” for profiting in a bear market. To tell the truth, this ad is actually quite similar to that previous one, though I’ve not heard a lot from Dan Amoss in the interim (that Paddle Strategy campaign was back in January).

So what are we looking for?

Here’s the lead-in to the ad:

“Hidden Government ‘100-F Documents’ That Let You Predict Which Stocks Will Go up or Down

“Discover how one small group of Americans uses government-mandated “100-F Documents” to easily predict gains or losses for any household-name stock in America…

“On at least 58 different dates, each year…

“And how you can now use these same “secret” documents to post returns as high as 400–600% over the weeks ahead”

What the heck could that be? You know that we loooooove secret government documents here at StockGumshoe.com … even if you put the “secret” in quotes.

But unfortunately, this secret is just a little silly, and not all that secret. You see, 100 F Street NE is the street address for the Securities and Exchange Commission right here in my home town of Washington, DC.

So yes, 100-F documents are just SEC filings. You know, the same stuff you see almost every day if you’re an active investor — 8K reports, 10-K annual reports, Form 4 insider trading filings, etc.

It’s valuable stuff, but it ain’t secret. And despite what Dan tells us in the ad, the SEC filings of this magnitude do in fact have a big impact on stocks, regardless of whether or not the news makes the front page of the paper — the active and institutional investors who most influence prices are obviously watching SEC filings of all types.

And these are not particularly secret kinds of filings, either — for the most part, he’s just talking about the SEC-filed versions of the quarterly reports that we all hear about four times a year for virtually every US public company.

Here are a couple examples he gives of how one could have potentially profited from these “100-F” document filings:

“On Sept. 5, 2007, shares of Krispy Kreme would have set you back $6.26. Sounds like a bargain for a doughnut maker that once traded near $50 — but on Sept. 6, 2007, a “100-F document” filed in D.C. revealed it could go lower. And it did, sliding to $3.24 just four days later.”

“For nearly 14 years straight, Starbucks shares looked like portfolio caffeine…soaring to $41 per share. But a deeper look at the company’s “100-F documents” revealed a slip in store traffic…and the steam was off the mug. By November 2007, shares hit $24…when “100-F documents” filed on Nov. 15 and Nov. 29 exposed more bad news. By April this year, shares hit a low of $15.66.”

We’ll take them in turn, shall we?

That Krispy Kreme filing on September 6, 2007? That was their normal quarterly earnings report, their 10-Q. And it was awful. It was filed after the market close, and any KKD investor would have doubtless noticed it. The shares collapsed the next morning, closing the following day at $3.91 (they had been over $6 before the earnings release). They did dip further after that, and were at $3.24 a few days later — but you would have been hard pressed, as an investor, to decide whether the shares would dip further from $3.91 in the next few days, or whether they might recover a little bit, and there was nothing secret about the contents of the 10-Q.

Dan Amoss is implying that the information in the SEC filing would have enabled you to profit by betting against the stock when it fell by buying put options (which is certainly less risky than shorting stocks). That’s true, to some extent, but those put options would not have been cheap when the shares had already fallen 30% or so in a day, and he does not promise to have a time machine that could take you back to the prior trading day to bet against the shares at $6.

Essentially, this is an assertion that stocks that get clobbered by very bad earnings reports or similar data releases will keep going down after they get the initial clobbering. That’s certainly frequently the case, as investors who held through the first few hours of cataclysm lose faith in the following days and the herd of analysts downgrades the stock, but it’s far from guaranteed. That particular stock had big intraday moves of 10% or more for quite a while following the earnings release, so it would have been a wild ride trying to pick entry points for short trades.

And the next one? Starbucks?

That filing was also nothing secret — the earnings release for Starbucks came out on November 15, and the more detailed 10-K annual report on the 29th. Both were bad.

And one needn’t have looked deep in the bowels of those SEC filings to note that the store traffic had slowed for the first time, freaking out investors — that was in the lead paragraph of a large number of articles from pretty much every source you could pick in the financial press (Forbes, Motley Fool, etc.) by the next morning. And the share price did fall, by about 8% the next day (it had already fallen about 40% in 2007, so that wasn’t a huge shocker). And they continued to fall … if you had decided that the fact that Starbucks had a bad year, and was losing store traffic, meant that the shares would continue to founder, you could indeed have profited (and continued to profit until today) by buying some put options or shorting the stock. But that basic trend in the company’s business was publicly known, and widely discussed — some people thought it was important, other folks thought that SBUX would recover and that this was a buying opportunity, but the point is that the information wasn’t hidden in an SEC filing that few people read, it was in the regular annual and quarterly reports, and it was well-covered by the press.

So what does that mean?

Well, this is just a long-winded way of saying that Dan Fuss is apparently using fundamental analysis to decide which stocks to short — he claims to be going off of data in the SEC filings, which is smart, but his ability to read SEC filings (something you could easily do, too) does not mean that he has secret information that promises a declining stock.

If you’re looking for someone to supply you with recommendations for stocks to bet against, you might want to give Dan’s service a shot — I think he charges about $1,000 a year, and I don’t have any idea what his record is (everyone has some good picks they can cherry pick, as he does mightily in this letter, but he doesn’t say anything about his average returns and I know of no third party who could verify that record, anyway). Just don’t think that he’s going to show you secret 100-F documents that you couldn’t easily get yourself, what he’s selling is his ability to make bets against stocks based on the information in their official filings.

If you’d like a little chatter about the criteria he talks about as reasons why he bets against a stock, you could start with my earlier writeup on the Paddle Strategy — he isn’t all that specific about his strategy or what he looks for in a short bet, but I made a few guesses … of if you have things you look for that are particular stock-moving negatives, feel free to share them here.

I will say, though that Dan brings up an important point — when you’re interested in a stock it always pays to read those “100-F” filings — especially the 10-K (annual report), since it always includes, among many other things, a pretty honest assessment of what the company thinks are the risks that could impact their stock or their business. Unless you’re a technical or short-term trader who doesn’t much care about a company’s long-term fundamentals and business prospects, reading a company’s annual report should be at least the very minimum level of work you do before buying shares of stock.

Oh, and Dan also briefly teases his next put pick: “The Single Best ‘Short Report’ Play in the Market Right Now.” He only provides one clue, that this is a business that lends to small businesses, so I can’t tell you what that is — I can tell you that it is very likely to be a Business Development Company like ACAS or ALD, both of which have been discussed in this space, or one of a dozen or so fairly similar competitors, most structured as BDCs but some as REITs or corporate banks … almost all of whom have plenty of folks betting against them already.

Oh, and if you ever do want to read those 100-F filings yourself, just go to the SEC Edgar database, put in your stock ticker, and you’ll get an eyeful (the SEC also has a pretty decent guide to basic company filings and research in Edgar, if this is all Greek to you).

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Related Articles:

“I Gave up my FBI Security Clearance to Send you This Letter!”

“Retirement Recovery Insurance uses 100-F Documents”

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“$3 Gold Stock … Could Triple in the Next Six Months” John Doody

"Like Buying Starbucks in 1992"

1. Just want to say thanks for things like the F-100 stuff. Being a newbe I appreciate that.

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   sue ww Reply:
   October 12th, 2008 at 4:25 pm

   Thanks I thought it would be some kind of loss filing. appeciate your honesty.

   sue alaska

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   Posted by ron martin | August 8, 2008, 10:10 am

2. I got a tease on this “100-F” the other day, and was trying to ‘google’ it, and came up empty handed. Travis, Thank you SO much for covering this! Like ron above, I really appreciate the research guidline in this message. Thank You, for the work that you do! You are a HeavenSent Angel, for the Neophyte, and the more ’sophisticated’ investor, as well.

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   Posted by EYOUNG | August 8, 2008, 10:41 am

3. Thanks for the info. The teasers always waste my time, and i appreciate you helping to debunk some of the mystery and intrique behind them.

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   Posted by Tater | August 8, 2008, 10:46 am

4. Can someone give a update on how the Carrot trader is doing. I would try them but i cannot use my Visa Card. Thanks, Paul

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   StockGumshoe Reply:
   August 8th, 2008 at 6:55 pm

   Paul, the Carrot folks tried to respond to this comment but we had technical difficulties — will try to get some info for you. Looks like the best performer on their current screen is a short on Gazprom, which was certainly well timed.

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   Posted by Paul Yoquelet | August 8, 2008, 12:31 pm

5. carrottrader is $ 4.95/month or $49.00?

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   StockGumshoe Reply:
   August 8th, 2008 at 7:03 pm

   It’s $49 a month for Carrot Trader, but they let you have a ten day free trial before you are charged. Gumshoe Irregulars membership is $4.50/month or $49/year, if that’s the confusion. Carrot Trader subscribers can get the Irregulars membership as a bonus for as long as they subscribe to CT, if they choose.

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   Posted by singh | August 8, 2008, 1:20 pm

6. Does Dan stay up all night reading SEC reports so he can e-mail you by 6:00 am ET – giving you a chance to short ?????? he didn’t say that in his tease

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   Posted by jimarb | August 8, 2008, 3:38 pm

7. Back when Dan Amos was writing for a newsletter
   that recommended stocks to buy, (I forget the name,
   maybe stategic something) the majority of his picks
   did very poorly. Lost $ on a few of them but many I
   didn’t buy also tanked. This was several years ago. I’m not a fan. Have no idea about his
   current project.

   David

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   Posted by David Hathaway | August 9, 2008, 6:29 am

8. I WAS READING YOUR SITE ON MONDAY AND RAN ACROSS THE F-13 DOCUMENTS, WHERE CAN I RESEARCH THOSE ONLINE? S

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   Posted by suzannah | August 9, 2008, 7:09 pm

9. Dear gumshoe: Don’t want to get “technical” on on you (as my wife would say) but 100 F Street NE is a very unlikely address for the SEC. The local (DC Metro Verizon) phone white pages lists the address of the SEC as 450 5th Street NW. Not the citing a correct or incorrect SEC address would have any bearing on the point of your message.

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   andy Reply:
   November 6th, 2008 at 4:30 pm

   typical “old ass” trying prove “something” that he doesn’t know….again. Stay retired and eat oatmeal

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   Posted by An Old Guy in Northern Virginia | August 10, 2008, 1:15 pm

10. Ooops, sorry – 100 F might be just admin offices for processing filings, not hq.

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    StockGumshoe Reply:
    August 10th, 2008 at 2:47 pm

    Nope, I was right the first time — just checked, SEC HQ is at 100 F. St. NE, just behind Union Station. A new building, if memory serves.

    http://www.sec.gov/contact/addresses.htm

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    Posted by StockGumshoe | August 10, 2008, 1:27 pm

11. Dan Amos’s teaser is exactly the kind of more-thatn-somewhat-dishonest marketing stuff that displeases me greatly and destroys all trust that I might have had in the teaser. I do believe the Fools are more honest, or so they appear to me. I greatly appreciate your discussions and your dismantling the hype of guys like Dan Amos. What you said in your article about this teaser, made perfect sense to me.

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    Posted by M. Elizabeth Theron | August 11, 2008, 12:54 pm

12. Listen. You people are being played for suckers. And apparently it’s working because these con artists continue their lies and crap. Number one – DO NOT READ ANY INVESTMENT NEWSLETTERS OR ANY OTHER CRAP FROM EMAIL LIKE DAILY RECKONING (where I first saw this 100F crap surface).

    Number two – DO NOT WATCH CNBC – that crap is for sheep.

    Number three – if you people realized there is no easy money or free lunch and started focusing on your career and personal lives, you wouldn’t bve tempted by this trash.

    Number four – Always contact the SEC when you see this crap. And I mean call them.

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    Posted by Guru | August 18, 2008, 6:11 pm

13. i got this too. thanks for the research. just proves that if it sounds too good to be true it probably is.

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    Posted by as | August 19, 2008, 3:15 pm

14. What I find interesting is that there’s an ad for these guys at the top of this page: PennySleuth.com is run by these people at Agora Financial.

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    StockGumshoe Reply:
    October 14th, 2008 at 8:57 am

    Yep, they turn up from time to time — most of the ads come through Google or other aggregators and agents, and certainly many of the newsletter publishers participate in those advertising programs.

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    Mila Reply:
    October 27th, 2008 at 9:42 pm

    What is a connection between Agora Financial and Daily Reckoning.com ?
    Thanks.

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    StockGumshoe Reply:
    November 6th, 2008 at 4:40 pm

    Agora is a fairly large publisher in this business, Daily Reckoning is largely written by Bill Bonner, who founded Agora. I assume the actual ownership is still intertwined but don’t know the precise details.

    Posted by Shali | August 21, 2008, 12:02 pm

15. Agora Financial suckered me into spending 995.oo for thier Strategic Short Report when I responded to thier 100F document promotion back on August 8th.After calling to complain that I still have not gotten any information about 100F’s and requesting a refund, I have not heard a word from them.How can I get my refund?

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    StockGumshoe Reply:
    October 14th, 2008 at 8:55 am

    Hi William — I don’t know what Agora’s policies are off the top of my head, but in general I’ve found that the big publishers (and they are one) do honor their promised trial periods or money-back periods. If you’re beyond that period and disputing the subscription because you didn’t get what you thought you were paying for, I have no idea what’s likely to happen — sorry! Perhaps others who’ve subscribed to Agora stuff might have more details.

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    Jonathon Reply:
    January 10th, 2009 at 9:26 pm

    Dear Gumshoe,
    I just wanted to thank you for separating the Good from the Bad, personally you have saved me thousands, more importantly it has made me concentrate on researching my own picks as opposed to relying on Guru’s… I am 37 years old, and recently quit my job to make a living playing the market… Because of your straightforwardness I feel compelled to ask you a question, if you had 150k to invest and play the market, what strategy would you play in 2009 if you wanted to turn that 150k into 1 million by 2010? taking into consideration real estate hasn’t bottomed yet, financials are scary, and commodities are flimsy to say the least… All responses welcomed… In closing, you can invest in a $3 magazine like forbes, money, or fortune and do as well, if not better than any guru can. Again, I can’t thank you enough for saving me and the people not so “in the know”…

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    Posted by William Nichols | October 14, 2008, 8:45 am

16. After purchasing the New Technology Alert, or whatever it was called, from Agora for $495 in November during the Patrick Cox hoopla over BioTime, I did get my money refunded when I complained that only traders who were in weeks before the “big” Nov. 19 announcement actually made money and that I was totally dissatisfied with the Cox report. I am the real sucker, though, I still bought the three stocks and watched them tank. I was born at night, and I guess it was last night.

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    Posted by Douglas Bowers | March 24, 2009, 3:02 pm