Value Investing Winners — Short LOCK, Long Ashland

By Travis Johnson, Stock Gumshoe, September 17, 2013

These are the two presentations made by folks who entered the Value Investing Challenge, one short and one long.

David Swartz is the second place winner of the Value Investing Challenge, he’s from Pacific West Land, a commercial real estate firm.

His suggestion is to short LifeLock (LOCK), he has a longer report eviscerating the company (his words), but he gives his brief summary and says he thinks it’s worth about five dollars a share.

He says they’re a weak company that he thinks is violating the FTC order that restricts their marketing practices. LOCK is still using words like “Complete” and “guarantee” and “comprehensive”, the same things that got the company in trouble three years ago.

LifeLock’s basic product is far from foolproof, and is one of the weakest in the industry. They are not comprehensive.

The primary service is the identify protection monitoring service that’s supposed to alert you when credit is misused, is not even monitoring bank accounts or credit reports. The vast majority of their subscribers get this basic product.

Their $25 product does include account and credit marketing, but it’s still incomplete — and they can’t get much of the information they would need. No evidence of efficacy has ever been presented, and they provide no protection against the most common types of fraud — like tax refund fraud, which they include in their ads but cannot protect against.

They do offer a $1 million guarantee, but according to the actual terms it does not really cover anything — it’s a cheap ploy to make it seem like insurance, which it is not.

A federal judge shut down their primary business in 2009, which was placing credit freezes on all of their clients. They continued to bill those customers even after the main

One of the founders had his identity repeatedly stolen while under protection — Robert Maynard, who was in trouble with the FTC even before founding LifeLock. He was accused of stealing his own father’s identity, has been arrested for theft, and he left lifelock before he could be listed in the prospectus.

The CEO, Todd Davis, pulled off an advertising hoax in sharing his social security number in ads, and it has been used at least 13 times fraudulently without the LifeLock folks even knowing — all they could do was call the police. He has been ...

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