“This Stock is Going Up, Big Time” — Porter Stansberry

By Travis Johnson, Stock Gumshoe, July 30, 2009

“A Market Insider and Lifelong Friend Hands Me the Best Opportunity of 2009

“‘I can’t imagine a better stock to buy.'”

That’s how the newest ad launches for Porter Stansberry’s Inside Strategist, a newsletter that has churned through at least two editors in the last few years, but which is now apparently run by Porter and a newer guy named Braden Copeland. And this time, Porter’s actually signing the ad letter himself and making a pretty bold claim …

“This is the best play I’ve seen in the last 3 years. I told my readers to put 25% of their portfolio in this stock. That’s how sure I am.”

Well, if he’s that certain of this one … shouldn’t we at least figure out who it is?

The ad is all about a stock that he has targeted because an old friend of his is an executive at the company, and he says that his friend told him this:

“I don’t know why our stock is trading for less than $10… it’s crazy. I know what our sales will be. I know how well our products are doing. We’re doing great. I don’t know everything about investing. But, I can’t imagine a better stock to buy than ours.”

Now, if we take off the rose-colored glasses for a moment and think back to every conference call we’ve listened to, and every CEO interview on CNBC, we might note that yes, CEOs are often shocked at the low prices of their shares. But we’ll give him the benefit of the doubt here and see what we can learn …

Porter tells us that he has turned these kinds of tips and comments into profitable trades for his investors for years, and he reiterates the claims that he was an early predictor of the failures of Fannie and Freddie and GM (claims that seem accurate, as far as I can tell).

And he tells us that he’s “confident [his friend’s] stock will be my best play of 2009. I’m talking about a potential 200-300% … in just a few short months.”

All I can say is, thank God it’s not a few of those long months — who’s got that kind of time to wait?

Let me dig through the ad and pull out some clues for us …

“His company commands 50% of the $4 billion worldwide market for heart stents.

“And now, they’re introducing a new, one-of-a-kind stent technology that needs very little drugs to protect the stent, therefore making it safer and far more effective when implanted in patients.

“The final tests are being done on the stent before it’s ready to hit the market.”

OK, so stents are a pretty oligopolistic business — this might not be too difficult.

Other clues? There are some past charts he shares, with these basic claims:

The company purchased “an angioplasty technology where catheters reopen clogged arteries in lieu of surgery. Shares shot up 220% in just over a year.”

OK, and “the last time they released a proprietary stent technology to the market …. Shares soared 411% in three years.”

They “booked $5.6 billion in profits last year.”

John Paulson, the legendary investor who made gazillions from the credit collapse, owns “about $800 million worth” of this company.

So — that’s about it for the clues on this one (though he also talks up a second special report, “A quick double thanks to the ultimate gold insider” which is all about a John Doody gold pick and its mining permits in Greece… I wrote about this for a Doody teaser back in May, so you can read up on it here if you like).

But back to the point — what is this medical stock?

Boston Scientific (BSX)

John Paulson’s investment firm does own just under $800 million in BSX shares. They are one of the major stent companies.

And be careful about that assessment that they booked $5.6 billion in profit — they did, but it was gross profit, meaning just the revenues minus the cost of goods sold … operating expenses and one-time charges have eaten up all that “profit” and more over the last three years, and it’s only now that the company is again looking like it will record real profits going forward. This is a turnaround story, to be sure, with recovery in the stent business and integration of their big, messy and expensive acquisition of Guidant.

So is it a turnaround story that you want to bet on? Well, they have been able to keep sales growing thanks to solid recent performance from their drug-eluting stents and their implantable defibrillators — these are not optional items, and these kinds of life-saving surgeries and procedures can’t easily be postponed just because you’re afraid of losing your job or paying the coinsurance, so while these markets have had problems of their own they’re not necessarily economy-related problems.

The stent business has been a scary one for several years, with lawsuits and patents and all kinds of foofaraw that I haven’t looked into in detail, but it’s worth noting that it is, at least, a very competitive business. Of course, it’s a competitive oligopoly, so they’re probably not going to kill themselves trying to cut costs, but there is always a threat that the next innovation will come from one of their competitors or that side effects or technical problems will suddenly emerge for one of their products and drive sales to competitors. Boston Scientific has been hassled by the FDA for the way it handled product quality issues, and has been battered by the market — for the first half of this decade they could do no wrong, for the second half their stock has inexorably fallen further and further each year (to go along with those several years without profits, and with the big problems that hit both Guidant’s implantable products and the stent business more broadly). That said, plenty of analysts agree with Porter that the shares are cheap here — Morningstar thinks it’s trading at about 60% of fair value and that you should consider buying around $12 (it’s at about $11 now). The forward PE is about 15, which would be exciting for those who owned this E-less stock for years, and, thanks probably to some goodwill from the Guidant acquisition, it trades at a very cheap (for the sector) price/book ratio of only 1.3. As one might expect from a company that hasn’t shown a profit for a few years, they do not currently pay a dividend.

BSX also has a whole suite of options available, so if you really think Porter’s right about big moves coming in the next six months you could look at the February call options — you can buy in-the-money $10 strike options at about 1.85, which means you have some slight downside protection (the options are worth almost a dollar if you exercise them today), or, if you want a more leveraged bet for a smaller outlay and you really think the shares will double or triple in short order, you can buy way-out-of-the-money calls pretty cheap — the February $15 strikes (which require a move of about 40% in the stock to be profitable at expiration) would probably cost you about 25 cents … of course, you might lose it all if Porter or his friend are wrong, or if the huge stock performance takes longer than a “few short months.” There are all kinds of variations and possibilities, of course, both riskier and safer, those are just some options if you want to bet on Porter’s short-term prescience and on Boston Scientific’s quick resurgence as a growth stock.

As for Boston Scientific’s new stent that’s supposed to help drive the stock higher? I haven’t combed through their pipeline very carefully, and I probably wouldn’t recognize it if I saw it — they did just get FDA approval for a new version of their TAXUS stent, and I assume that they’ve probably gone through their development pipeline in recent conference calls, you can listen to the last one (just a week old now) by clicking here and registering. There are a lot of versions of these little stents, including those from BSX’s homegrown portfolio and the different stents they acquired from Guidant, so it would take a (much) stronger expert than I to understand the stent market and new products very thoroughly and tell you whether or not there’s a breakthrough in the wings — if there are some medical tech investors or cardiologists out there who want to share, feel free to illuminate us.

Insider buying? There hasn’t been much of late — John Paulson does own a big slug of shares and was buying more as of earlier this year (his funds own about 6% of the shares), and people certainly follow his portfolio closely, but actual company insiders have done a lot more selling than buying in the last several months … though to be fair, that’s swayed dramatically by a consistent selling program by co-founder John Abele, who has been selling shares for months but still owns 22 million shares of the company. A couple other executives and board members have bought small chunks of shares in the recent past, and many have exercised options.

And if there are any investors out there in Gumshoeland who’ve got opinions on Boston Scientific, or on other stent makers like Johnson & Johnson, or other medical device companies we should look at, well, by all means, share your thoughts with a comment below.

Finally, if any of you dear people have tried a subscription to the Inside Strategist newsletter from S&A, please click here to share your thoughts — worth it? Not worth it? The people want to know!


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30 Comments on "“This Stock is Going Up, Big Time” — Porter Stansberry"

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Maureen Collins
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Maureen Collins
July 30, 2009 12:23 pm

I just want to say I love your column and that you have a great sense of humor which is always appealing. Thanks for the great work.

Louis Aarons
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Louis Aarons
July 30, 2009 12:41 pm

About a month ago a lifelong (over 60years) friend of mine had to have a stent implant and asked me about it. I checked the most recent information and a Wall St. J. article reported that for the drug-eluitng stents ( that I found in other reports to be more favored than the non-drug eluting ones)the Abbot lab’s Xience had a significantly better result than that of BSX’s, i.e. less blockages in the following months after the implant. My friend had the Abbot stent implanted. I don’t know if BSX now has a new stent coming out.

SageNot
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SageNot
July 30, 2009 12:50 pm

http://finance.yahoo.com/q/ta?s=BSX&t=5y&l=on&z=m&q=l&p=m50,m200&a=&c=

This must be a first for Porter, he’s using the same stock in his own PSIA investment letter as he’s doing here in Inside Strategist, which he’s been co-editing for months now.

Could this be classified as inside front running or just some old fashioned piggybacking I wonder?

G Brown
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G Brown
July 30, 2009 1:09 pm

I really have to laugh re Porter’s
promo. Some years ago a dear friend advised me that his friend had an insider and boy load up on such & such stock…it’s really gonna fly. We did as did many others. We lost big $. It seems the insider scammed even his son. We were ready to do bodily harm to all of ’em. So now it’s funny. It wasn’t then. Caveat emptor people!

charles zeller
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charles zeller
July 30, 2009 3:40 pm

Stansbury is a schmuck. Stents have been discredited in such strong terms by the coronary care specialists that even the dummies who still use them are having second thoughts. Short BS

cleversocks
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cleversocks
July 30, 2009 4:21 pm

I bought BSX a few weeks back after reading the PS article and it is up around 20% since pushed. The recent biotech revival has obviously helped so the timing of PS was good. Other stocks to look at are IVAX, IMMU and AVII, which are currently advised and all are penny stocks. I trade these stocks and am not in for the long run. Many financial advisors are pushing biotech as the only area to be in; time will tell.

J Wood
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J Wood
July 30, 2009 8:37 pm

I have followed Porter’s recommendations about 10 times. Won 2, lost 8. Not what I hoped for. It’s always hard to tell with Porter whether he’s doing real economic and market analysis, or whether he’s letting his political and ideological views sway him. I stopped listening to him a couple years ago when he “graded” everybody in his organization. Others he graded in totality. For himself, he graded only his safest picks. I don’t know anything about BSX, but I don’t listen to Porter on general principles.

Richard DeLong
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Richard DeLong
July 31, 2009 1:32 pm

The Oxford Club in a report that I received today that has “proprietary Research”, headlines How to claim your First “gas rebate” check on September 15. $600.00 a month starting with the next payout….
Any information on this?

Paul V
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Paul V
July 31, 2009 1:59 pm
Ive been following Porter for the last 8 years among a few other analysts, and Porter has surrounded himself with a very intelligent group of coworkers including Clark and Sjuggerud, nobody can argue Porter knows how to read financial statement like GM better than GM could, he makes great calls, if you used a little more technical analysis combined with his financial analysis than he might avoid some of the timing issues the complainers here keep bringing up, you have to know your charts, Porter Stansberry is one of the few services I will keep paying for, I always use… Read more »
Jay
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August 3, 2009 9:43 am

If the stock is truly undervalued then management should simply begin a buy back program.

Once the stock price rises they can issue the stock again at a higher price.

IMHO this is your typical pump and dump scheme.

Rony
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Rony
August 10, 2009 1:15 am

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Robert Spears
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Robert Spears
August 10, 2009 4:25 pm

What are “BSE/NSE equity picks”?

Rony
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Rony
August 11, 2009 12:24 am

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Carole Gerbovaz
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Carole Gerbovaz
August 24, 2009 10:50 am

What info do you have on “Bank Error in your Favor Collect $8,333 per month and Never have to pay it Back”? Thank you in advance

SnoopyJC
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October 9, 2009 11:57 pm
Here is the latest instance of this one from Porter. Do you think it’s the same stock?? –joe If you haven’t bought this stock yet, buy it now. (You’d be a fool not to… and there’s only a few days left) Dear Reader, My name is Porter Stansberry, founder of Stansberry & Associates. As the head of a major financial publishing company, I’ve got a lot of friends. One of these friends happens to be a top-level insider at one of the companies I recommended a few months ago. And recently, he and I had a conversation… I can’t go… Read more »
JPL
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JPL
October 10, 2009 2:26 pm

To joe or SnoopyJC,
Hi,
Yes, it’s the same stock.

JPL
10/10/2006

Dave H
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Dave H
October 12, 2009 3:56 pm

I believe that Porter has integrity and have come to trust his judgment. He is very vehement about this BSX prediction. From the PSIA newsletter:

– this is the best overall investment I’ve found since I originally recommended the shares of Anheuser-Busch in 2006.

And like I recommended with the shares of BUD, I believe you can safely invest up to 25% of your assets into this one common stock. That’s an extraordinarily large position size – more than six times bigger than normal – and something I almost never recommend doing.

Medical researcher
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October 12, 2009 5:21 pm
It’s true as one commentator noted that the stents are better than opening you up entirely, and drugs, supplements, and a very good chelation strategy better than the stents [with nattokinase, etc.] … but that is not the way of the world… and also not the exact issue with this new product. All that said, my cardiologist colleagues for example love stents and would stick them in every orifice they could if given a free hand. So does this mean Boston Sci. (BS) will actually make lots of money? No, it’s a hard slog to move the merchandise, BS is… Read more »
JT
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JT
October 12, 2009 9:47 pm

Just to clarify, the stock closed at $10 today, not $11.

Jeff
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Jeff
October 14, 2009 11:44 am
I took the following from an RTT News story about Johnson and Johnson that was posted on-line on October 13, 2009: “Among the latest events is the settlement reached on Tuesday resolving patent suits between Johnson & Johnson and Boston Scientific Corp. (BSX). According to the settlement terms, Boston Scientific will pay Johnson & Johnson$716.3 million to settle 14 patent infringement lawsuits involving coronary stents, balloon catheters and other heart devices. The settlement resolves Johnson & Johnson’sCordis Corp. unit’s Palmaz infringement suit relating to Boston Scientific’s NIR stent as well as several other cardiology-related cases relating to patents in the… Read more »
SnoopyJC
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October 19, 2009 9:16 pm

Well, today was the “day of reckoning”, as the earnings were released, and they were “mixed”.

It looks like all of the investors were expecting much better, as the stock got slammed down 7% after hours – almost down to the 200 day MA!

Looks like my Call options are gonna be pretty worthless!

Oh well!
–joe

fred
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fred
October 20, 2009 7:32 am

FYI,

GDT’s stents (vascular intervention division) went to Abbot Labs. That was Guidant’s IP and they had the best bare metal stent on the market – even outperforming some DES options at the time. It’s no wonder that Abbot is starting to clean up in the stent business. BSX coming out with something new that will change things this much? I don’t know, I suppose it’s possible, but it isn’t because they are legitimately holding onto old GDT IP that I know of…

Jeff
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Jeff
October 20, 2009 5:53 pm

“A Market Insider and Lifelong Friend Hands Me the Best Opportunity of 2009
“‘I can’t imagine a better stock to buy.’” — Porter Stansberry

I feel sorry for Porter if he can’t think of a better stock to buy. His prediction that the stock price would spike 30% to 50% today was way, way off. Didn’t it finish down 15% on the day?

Bill
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Bill
October 21, 2009 12:03 am

Porter blew it with his “lifetime friend” when he predicted Arena ARNA was going to go through the roof – a 10 bagger for weight loss and that was a total FLOP !!! Though at 4.15 a share almost a yr later and having past both phase 1&2 trials, they should be ready for FDA approval this Dec.

Bill
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October 21, 2009 12:07 am

Porter blew it with his “lifetime friend” when he predicted Arena ARNA was going to go through the roof – a 10 bagger for weight loss and that was a total FLOP !!! Though at 4.15 a share almost a yr later and having past both phase 1&2 trials, they should be ready for FDA approval this Dec. Maybe a three bagger ?

Hart
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Hart
July 30, 2009 11:20 pm

Porter is quoting his friend: “We’re doing great. I don’t know everything about investing. But, I can’t imagine a better stock to buy than ours.”

How can someone who doesn’t know anything about investing determine a fair price for a stock?

My quick estimation of normalized profits based on revenue and average profit margins in profitable times over 10 years results in a safe fair value guesstimate around $5.50. Not a bargain from a value perspective at $11. This one is for believers only.

ponce
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ponce
August 2, 2009 2:23 am
DISCREDITED BY CARDIO SPECIALIST? Maybe true but it is all about money. For a few hours work these guys and hospital charges about $100K for open hearth. By contrast stent procedure cost only $15K. Patients can go back to work a lot sooner. Open is f***ing dangerous. My cousin almost died. My daughter-in-law’s father almost died due to bleeding complication. After 2 years his doctor wanted to open him again? What? He consulted a prestigious hospital in Sacramento and advised to get stent. The procedure was successful and doing great after 12 years. So which one should be discredited? BTW,… Read more »
ponce
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ponce
August 2, 2009 3:10 am
Paul V, good take. I am sure that at the time of their research they do it with utmost effort. After that they do not have control over the company and they are into another research. So investors should watch their nest egg. Most of the teased companies that Gumshoe sleuthed are well researched. Despite of that most do not do good after the hype. So there is proper time for buying, watching, and getting out. BTW there are 3 kinds of people in investing. 1) that writes about the 2) successful investor/company and 3)that buys the report. Who do… Read more »
ponce
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ponce
August 2, 2009 3:27 am

Richard, Gumshoe already did this. Click on the report listed on the right side of this page under “most emailed”.

tbfavero
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tbfavero
October 20, 2009 9:06 am

Down $1.41 to $8.74…nice call, Porter! Almost down 14%

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