“The Secret of White Caps: A Sure-Fire System to Profit Before Wall Street Even Has a Clue”

By Travis Johnson, Stock Gumshoe, November 13, 2008

Does calling something an “index” automatically make it sound safe? That seems to be part of the premise for the recent swath of ads from the Oxford Club for what they’re calling their “Recession-Proof White Cap Index.”

The ad, from Louis Basenese, is about a new investment newsletter service that they’re calling the White Cap Report. They go to some length to explain that their proprietary screening system allows them to find the stocks, usually smaller capitalization stocks with high growth rates, that will be the big winners. And he claims that they will release the “index” on January 2.

I don’t know what they’re talking about in terms of “releasing” this index, but from the looks of it they’re really just selling another newsletter — this one appears to have the normal price of $150 a year, though it’s of course “on sale” right now as they try to get it off the ground.

But more importantly, for us, Louis spends a fair amount of time in the letter teasing us about some of the picks this “system” or “index” has identified. He also gives some examples of past picks that would have met this criteria, like China Life and Intuitive Surgical, so we know that they can at least identify past performers — can they do the far more difficult thing, identify stocks that will perform in the future? We’ll see.

And no need to subscribe to this new “White Cap Report” if you’re just curious about what their top picks are right now — the Gumshoe is on the case, so let’s see what they’re teasing …

The first stock that comes to the forefront in this ad? It’s a robotic surgery company.

What comes to mind when those words are uttered? Yep, Intuitive Surgical, everyone’s favorite growth company for a few years (cut in half this year, but still growing nicely) — everyone is still looking for the “next Intuitive Surgical”, and the White Cap Report folks are no different.

So what do they have for us?

Well, they’re spinning it as a special report, “How to Cash In on the Next Robotics Revolution.

“Days ago, our White Cap strategy identified a company poised to outperform even Intuitive Surgical (recall Intuitive Surgical surged 1,628% since being added to the White Cap index).

“It operates in the cutting-edge robotic surgery industry, too. But it doesn’t compete against Intuitive Surgical. It’s blazing trails in the entirely separate, $3 billion, non-invasive heart surgery market, with a technology that goes way beyond angioplasty.

“The firm’s FDA-approved product allows surgeons to operate on a beating heart, cutting away dead tissue and fixing problems as they’re discovered.

“And it does it without opening up the chest!

“The Cleveland Clinic, ranked one of America’s best hospitals by U.S News and World Report, dubbed the company’s invention “the top medical innovation of 2008.”

“Yet, this new technology has only penetrated 1% of the heart-surgery market. (Some 2.2 million Americans are in need of this company’s life-saving device.)”

Ring any bells? I could have sworn that I had written about this company, but if so I can’t find those old comments — maybe I was talking in my sleep.

This is, in all likelihood, Hansen Medical (HNSN)

Hansen Medical is a maker of another surgical robot, but their specialty is intralumenal robotics, essentially surgery done by robots that are tiny enough to be inserted into the body through catheters. I’m certainly no doctor, but it’s sort of similar to a balloon angioplasty — only instead of snaking in a balloon, you snake in a little prehensile robot that can perform more complex maneuvers. Intuitive Surgical’s da Vinci, by contrast, does an advanced type of laparascopic surgery, the traditional version of which looks like operating with chopsticks — fewer and smaller incisions, but still surgery through holes in the body cavity.

And if this is going to be the next Intuitive Surgical, they’ve got a looooong ways to go. Still, there are some similarities — beginning, perhaps, with the fact that Dr. Fredric Moll was involved in the founding of both companies (he’s the CEO of Hansen, I don’t think he’s directly involved in ISRG any more … and he also is on the board of MAKO Surgical, which seems to do surgical robotics for knee operations).

So where are they? Well, they’re still burning cash, and still losing market cap — the shares are down significantly from when they hit their highs of about $40 a bit over a year ago, and they’re down from when Jim Cramer anointed them the “next Intuitive Surgical” back in March of 2007. Of course, we can’t blame anyone for that — put ‘near every other stock is down during the past year.

Like Intuitive Surgical (and Gillette), they employ the “razor and blade” business plan — they hope to make some money on the sale of the initial machine/robot, but much of their revenue in the future will come from recurring sales of disposable tools that are used in the machine. They have only installed about 35 systems so far, and at this point it costs about twice as much to build and sell the devices as they get for selling them, so they’re going to have to get to an inflection point where the installed base is big enough to build margins for the disposable attachments. Intuitive Surgical is at that point now, but it took many years to get there.

Revenue growth has been good, but this is still the tiniest of niche products — their device has an installed base of 35 machines (20 in the US and 15 in Europe), and has been used in a bit over 1,000 procedures so far. In the year that Intuitive Surgical first became profitable, 2004, they had nearly 300 robots as an installed base, and those robots were used in about 20,000 procedures. Obviously, the numbers will be different for each company — I don’t know what the inflection point will be for Hansen Medical, but I would like to make a guess at that before considering buying shares. If you’d like to start looking into these guys, you could do worse than beginning with the last conference call — you can see the transcript of that call is here.

Personally, in this uncertain environment I have a bit more fondness for the proven growth of Intuitive Surgical — perhaps because I enjoyed some nice profits from ISRG over the past few years before I sold my remaining holdings some time ago. ISRG is still priced as a Cadillac in a Yugo market, but they have an installed base that just went over a thousand machines, each of which cost over a million dollars, and they have a huge market share in a surgery (prostatectomy) that should demographically be expected to explode in the coming decade. I don’t now own intuitive Surgical shares, but do have a lowball order that has been in for ISRG shares for a while now, though the shares haven’t dropped down to my buy price yet. At the rate the market’s declining, however, I may again be the proud owner of a small ISRG position by the time you read this.

They teased a second stock in this first “White Cap” report, one of the “dark pool” order facilitating brokers that handles large, anonymous institutional stock trades, but the best match for that teaser seems to be a company that has filed for an IPO but has not yet gone public (Liquidnet), so I’ll have to dig a little deeper on that — they did say in the ad that they’re looking in part for new IPOs, but I doubt they’d be writing about a stock that hasn’t even finalized a date for going public (as far as I know). And there were a few other little hidden goodies in there, so I’ll keep an eye out for anything worth sharing.

Oh, and if you’re really looking for an index? I don’t know of anything in this ad that makes it appear that there will really be an “index” tradeable product based on this, despite the fact that they say they will “go public” with the White Cap Index in January. There are “intelligent” ETFs that use various stock picking strategies and try to adapt and use some similar screening strategies, if that sounds like your kettle of fish — Powershares uses their own “Intellidex” indexes for their Dynamic ETFs that cover almost every sector and other broad market segment, for example, and others like Wisdom Tree use fundamental criteria to weight their indexes (this is not meant to endorse either ETF family, just wanted to give you an idea of what’s available). Neither of those, nor their competitors, in all likelihood, will create the kind of highflying return you can get from a single aptly (and luckily) chosen growth stock, but if you’ve got your eye out for an index-based investment you might find that ETFs like those might give you enough sexiness to keep the heart beating, and possibly even a market-beating return.

In the meantime — happy investing!


Related Gumshoe Articles

Leave a Reply

29 Comments on "“The Secret of White Caps: A Sure-Fire System to Profit Before Wall Street Even Has a Clue”"

avatar

Carlo
Guest
0
November 13, 2008 10:38 am

These guys always talk about “revolutions”. And 9 times out of 10 it is junk…

jeff
Guest
0
November 13, 2008 11:08 am
“put’near”? Should be “purt’ near”, Southern for “pretty near,” since many Southerners don’t pronounce “pretty” so that it rhymes with “city” or “petty,” eg, “a purty gurl.” Sorry, but if people wish to mimic Southern, it’s not as easy as it may sound. BTW, the South is absolutely despicable and populated by backwards, inbred hicks by and large (although we try to wait for a stop sign to open our truck doors and spit “backer juice” caws it prevents brown stripes down the sides of our vehicles if done while driving fast out on country roads), so Yankees should avoid… Read more »
Don Routledge
Guest
0
Don Routledge
November 13, 2008 12:44 pm

Travis, Have you checked out the IVO-TV promo? Would you please comment. Thanks,Don

Don Routledge
Guest
0
Don Routledge
November 13, 2008 12:46 pm

I mean INO-TV

Jean Samson
Guest
0
Jean Samson
November 13, 2008 12:54 pm

Dear Travis,
I am a french canadian person, so my English is not very good.
I just want to tell you that you make a wonderful job and I want to thank you very munch.
Beaucoup de francophones lisent votre chronique et apprécient votre excellent travail. Vous nous aidez à éviter les pièges qui surgissent de partout quand on recherche des conseils financiers. Merci infiniment !
Best regards,
Jean Samson
Québec, CANADA

allen l smith
Guest
0
allen l smith
November 13, 2008 12:55 pm

Thank You for the info.,Well done.

womanwithportfolio
Guest
0
November 13, 2008 2:27 pm

Another interesting surgical-robotics company is MAKO. Their devices so far are limited to knee replacements — and in fact just one part of the knee. But their devices apparently prevent mistakes and may eventually have a wider application. Still losing money, though. But could be worth watching for the future. (An insider just bought beaucoup shares.)

Simon
Guest
0
November 13, 2008 10:46 pm

Hansen medical, I think that’s the same one that had an incredible run a few years ago? They say that the leaders coming out of a recession probably will not be the leaders of the next boom.
I’m checking it out anyway.

tt tan
Guest
0
tt tan
November 13, 2008 11:15 pm

Travis,
I am a Malaysian Chinese, very new to e-trading and investments. (just getting started) and I am very glad to have stumbled upon your website.
Your columns are very exhilarating. informative and unbiased. Thanks a million for
opening a door for my entry into the world of
exciting ferry-wheel rides.
investments

Michael
Guest
0
Michael
November 14, 2008 12:07 pm

Gumshoe , your comments do not address whether their other past picks were selected early and really made big profits ,or whether the $10K to $164K (in 4 years) is bogus.

who noze
Guest
0
November 16, 2008 10:26 am

isrg has a machine at st lukes hosp in nyc they used it on me taking away some of my lung

curious
Guest
0
curious
January 20, 2009 7:57 pm

Hey Gumshoe… thank you for encouraging people to bring reason back to all these never-ending promises from so many investment companies. Would you consider subscribing to these newsletters in order to show whether or not they work? If you did you could have some really serious evidence of how many failed picks they have for every good pick. These newsletters never talk about failures…. a sure sign they are hiding a lot of stuff.

Patch
Guest
0
Patch
January 21, 2009 11:22 am

Hi Travis,
I’ve noticed a few of these “reports” popping up from time to time. I thought it odd that a research firm would be “releasing an index” so I bookmarked the page and sure enough every month or so the “release date” changes.

Google was my friend in finding your website. Nice work. Look forward to reading more. Thanks.

curious
Guest
0
curious
January 21, 2009 2:39 pm

True… absolutely, but I’m not talking about revealing their picks, I’m talking about tracking a virtual portfolio using their information as though you were an actual subscriber and then reporting to the readership whether they are really as great as they say they are — you can summarise without revealing. What is unethical is the way they make all these claims trying to dupe people into sending them their money. Its sickening.

farley 5
Guest
0
farley 5
January 21, 2009 7:06 pm

Curious – I get EVERYTHING that Agora publishes. Pick a newsletter and I’ll publish the Track Record only. Fire away!

Cameron
Guest
0
Cameron
February 15, 2009 5:35 pm

The latest release date for The White Cap Index is now March 2, 2009

p@pdx
Guest
0
February 15, 2009 11:17 pm

on the Whitecap Report website they also tout a wallstreet company witout naming it after googling around I came across it: NEON

http://www.wallstreetandtech.com/story/mag/WST20000601S0047

The Top 10 Financial Technology Innovators of the Decade by Wall
———
Now Adam is heading up his own technology company, New Era of Networks (NEON). ….. “It has changed the balance of power on Wall Street.” … As Larry Tabb, head of Investment and Securities
Practice at The TowerGroup, puts it,

the change the balance of power quote would match the tout verbatium

p@pdx
Guest
0
February 15, 2009 11:25 pm

just looked at the stock and its $0.0200 OTC something about parent co bankruptcy and nasdaq non compliance…. sorry

charlie
Guest
0
charlie
March 22, 2009 2:02 pm

I took some of the recomendations that some sites gave to purchase certain stocks. Altho I never bought any out of the 20 I kept track of 17 are down from 85-99.9% and only three are up. Wow what a record. They only want your money.

captainkirko
Member
-4
captainkirko
December 19, 2013 10:23 am
I consistently get flyer info from WSIDaily, about Louis Basenese and how a new fire discovery use will put thousands in our pockets if we buy their $4500 subscrption, or take a check for $2805.00 and pay $1695.00 to subscribe to “Micro-cap Tech Trader”. This price is to be paid in order to get the secret company that we are not to divulge until January 2nd,2014, concerning a new invention for the use of fire to stop Global warming and purify air pollution. I think that $4500 is a darn crime to get info on one company with other unknowns… Read more »
Gravity Switch
Admin
11
November 13, 2008 11:38 am

A thousand apologies.

Rick
Guest
0
Rick
November 13, 2008 4:53 pm

Not to add any fuel here, but I come from the West. Gummy, that should be “prit near.” Just pick up a John Wayne Western. Chances are you’ll hear it.
And thanks for the good work, Gummy.

Gravity Switch
Admin
11
November 13, 2008 12:53 pm
They’re not really teasing anything and they advertise on the site, so I’m not unbiased. I like the fact that, like Elliott Wave, they give free access to some useful information without a credit card, and I recognize the names of some of the traders whose work they sell, but have not actually viewed the video seminars. Charting and trading techniques and technical analysis are outside my realm of expertise most of the time, which is part of why I’m comfortable giving access to advertisers who specialize in such (since I wouldn’t be writing about them anyway). That includes Carrot… Read more »
Gravity Switch
Admin
11
November 13, 2008 12:56 pm

Your English is far better than my French, merci beaucoup.

Gravity Switch
Admin
11
November 14, 2008 12:15 pm

That’s because I don’t know — the past examples were not from this newsletter, since it didn’t exist then, but it’s certainly possible that the editors did pick ISRG and the others at good prices and ride a nice huge return if they sold at the right time.

Equally possible, if not more so, is that they had several very bad performers for each excellent one, that’s often how it works when you look for fast breakout growth companies.

Alan
Guest
0
Alan
November 14, 2008 2:39 pm

You are the best Gumshoe,Thanks

Ian Bryant
Guest
0
Ian Bryant
November 14, 2008 10:22 pm

Impressed with your in depth knowledge in your comments-great. By the way, do you have a solar energy pick?

farley 5
Guest
0
farley 5
January 21, 2009 9:26 am

Curious – Ethics come into play. It is not cricket to take copywrited material and distribute it to the masses. If I post on Agora, I never use the symbols, just the track record.

Gravity Switch
Admin
11
January 21, 2009 9:40 am
I agree, to some extent — stock picks cannot be copywrited, nor can ideas, but obviously it wouldn’t be kosher to re-distribute the bulk of these newsletters without permission — and certainly there are ethical concerns that don’t touch on the legality of sharing ideas. Digests distribute sample picks and commentary from newsletters, and Hulbert does very rigorous tracking (but can only handle about 200 newsletters, of thousands). I can’t imagine developing a tracking system as sophisticated or comprehensive, but thanks for the idea (and I am working on some ways that folks can better share opinions about the newsletters… Read more »
wpDiscuz