I have instituted a little tradition here at Stock Gumshoe, each Thanksgiving I like to pick out my favorite “Turkey of the Year” … the teaser stock pick that promised millions, but fizzled despite the best attempts of newsletter writers to promote the stock to new subscribers.
And if you’ve been around this space for a while, you probably realize that choosing just one is pretty tough — in late 2008 the job was made even more difficult by the market malaise, and I had plenty of picks to choose from that were down by 90% or more. Though the roster of possible dreadful stock picks is a little bit thinner now, the outlandish promises are as thick on the ground as they ever were … and we do have some doozies on our PuPu Platter.
Last year around this time it was Potash North winning the “Turkey of the Year” prize, well after the newsletter editor who chose it had moved on to other pastures. That one, by the way, no longer exists as an independent company, it was absorbed into Potash One — if you bought it when Andrew Mickey touted it and are still holding the Potash One shares you got after the merger, you’re down about 75% … which is actually a bit of a recovery from the “down 95%” that you would have been fretting about as of last Thanksgiving.
This year, we’re blessed with a real doozy — the same stock, recommended by two different newsletters this year as a hot idea that you should subscribe to their service to learn about. The stock has done poorly since recent recommendations, obviously, but that’s not enough to make “Turkey of the Year” (we’ve had plenty of poor performers in the past year, no one’s got the stomach for all those turkeys) … it has also done significantly worse than many other stocks in the same sector, during a year when the sector itself has been getting a lot of favorable attention from investors; and, of course, we were promised … well, a rose garden.
The stock? Raser Technologies (RZ)
And you can take your pick of “Turkey seller” culprits, the big ones pushing RZ this year have been Nancy Zambell and the Oxford Club, who both got on board this one in 2009 while it was between two and three dollars — though, to be fair, the Oxford Club folks and others were also pushing this one hot and heavy back in 2008, with the stock nearer $10 a share. Today? It’s right around $1.25.
Nancy Zambell launched her Buried Treasure Under $10 letter not that long ago, while the markets were in abysmal shape, and she got a lot of attention quickly in this space and elsewhere — and Raser Technologies was one of the stocks she pushed hardest this year.
After teasing folks with the stock a few times this Spring, she moved on to actually claiming credit for it and promoting it as one of her good ideas, but that didn’t last too long … just long enough for us to learn that she says she picked it for her subscribers at $2.65 back in March, which means she pegged it extremely close to the lows (at the time). She wrote about it later saying that it “just hit $4 but we’re holding for $6 and maybe better,” and later ads in June and October seemed to refer more obliquely to this geothermal favorite. If you’ve looked at the charts, you’ll note that there’s plenty of reason to be shy about mentioning the name over the last six months.
The problem was, and is, that Raser has been in rough shape financially, which probably more than anything else is what has driven the shares down to these levels (along with some technical disappointments at their maiden project). Geothermal plants, even the “lower temperature” plants that Raser builds, are very expensive, and they’re sitting on huge losses over many years. So they’ve been selling additional shares to raise money, and restructuring debt, and figuring out other ways to raise cash for their expensive projects, including the pre-sale of electricity to Anaheim and other places that are hungry for green power.
Unfortunately, they haven’t yet been producing as much electricity as they expected at their one operating site, and of course the electricity they have been able to produce so far costs a lot more than they can charge for it, since they’re operating just the one tiny plant so far, and at less than expected capacity … if you want to pile on a bit, despite the fact that it seems a little cruel at this point, I’d recommend following David Phillips, he’s my favorite Raser skeptic and writes often about them on his 10QDetective blog, but he had a good piece published on BNET back in October that you can see here. That’s not to say he’ll definitely be right in the end, it’s always possible that Raser could revive themselves, get more funding, and become a market darling again … but he’s sure been right so far, despite the fact that he has been pilloried by RZ bulls for his pointed comments.
And no, sadly, for those who bought into Zambell’s excitement, it didn’t get to six. It barely held four dollars, though it sat near that point for a couple months during the Spring rally. When July came it brought with it a big dilution, taking a quick 20-30% out of the shares, then a gradual decline for most of the Summer … until, near the end of the Summer, we saw the Oxford Club get back in the Raser game …
The Oxford Club had been touting Raser for quite some time, in an ad that got rehashed a few times but, as far as I know, started heavy rotation early in 2008. Originally it was an ad about “What George Bush was told behind closed doors,” touting Raser as the company behind the discovery of “new oil” that would “single-handedly” solve the energy crisis, and “put OPEC on notice.” And as every good teaser ad does, they implied that this was the absolute best investing idea they’d ever had — in this case, the wording was, “I can’t remember another opportunity in the history of The Oxford Club that was as potentially as explosive – and lucrative – as this one.”
So they weren’t strangers to this stock, and they knew the clobbering it had taken from that first tout to the August prices of a bit over $2 (though it perhaps took them some time in the editing room to get the ad cleaned up, they touted it as a $3 stock … which sounded hopeful then, and sounds wildly optimistic now). Still, in mid-August they came back and told us that this top-secret $3 Utah company could “Bring down OPEC.”
And it wasn’t long after that we saw some more sadness for the shares, when they announced that the government had not approved their application for a loan guarantee, so now here we sit … at just over a buck.
Does this mean Nancy Zambell or the Oxford Club folks are any worse than others? Or less lucky in cherry-picking the ideas they use to sell us their newsletters? Zambell’s track record is unknown at this point, I assume she’s done well with her low-priced stocks in general this year, but her letter hasn’t been around for long enough to get a fair track record. We’ve got just a few reviews of Zambell’s letter in at Stock Gumshoe Reviews, though they’re generally positive, and a lot of reviews for the Oxford Club’s Communique that average out to, well, average. To be fair, the Oxford Club has, according to Hulbert, done far better than the market over the last five and ten years.
The folks behind these ads are really marketers, after all, not much different than the folks who sell us laundry detergent or blue jeans … and they tell us what they know will make us intrigued, or greedy, or just plain excited.
And sometimes, a story works so well at bringing in new subscribers that it doesn’t matter what the underlying stock is doing, you just have to keep using it — at least, that’s what I imagine when I picture the back-office machinations of a newsletter publisher … I’ve heard from many newsletter editors and writers over the years, the folks who actually choose the stocks and write about them, and quite a few of them are a bit embarrassed about the advertising that goes out over their name.
Geothermal power is still a hot topic — we’ve seen plenty of recent ads and punditry going out on this idea, too, but Raser has definitely not been the way to play the theme so far, just about every geothermal stock I’ve ever written about has outperformed Raser, including Ormat (ORA), the biggest “pure” play on geothermal, Calpine (CPN), and US Geothermal (HTM) as well as most of the wee geothermal juniors.
As always, it pays to remember that whether or not you like or believe the editor behind a well-known newsletter, there’s at least a decent chance that it’s not their investment strategy and timing that’s determining what marketing letters get sent out in any given month … they sell you using what works to get your attention, not necessarily using their best current investment idea.
Which probably makes them all a bunch of turkeys — but hey, without newsletter marketing balderdash your friendly neighborhood Stock Gumshoe’s favorite pastime would disappear into the mist … so bring ’em on, I’ve got plenty of cranberry sauce.
Have another turkey to nominate? Or a golden egg? Are you a friend or foe of Raser, or of either of these newsletters? Let us know with a comment below — and have a wonderful Thanksgiving!