Gumshoe’s Monthly Review

So … only the second time I do a monthly review of the Gumshoe’s sleuthed picks, and it’s a week late. Those of you who know me will understand that this is typical, unfortunately.

What’s been happening with the stocks we’ve sleuthed out here in recent weeks? Well, a quick glance at the spreadsheet will tell you that these are the stocks that have fallen at least 25% since they were hyped in an ad:

AtheroGenix (Volume Spike Alert) -69%
GoFish (Quantum Investor) -55%
Solomon Technologies (Emerging Capital Report) -40%
Rochester Medical (Navellier’s Quantum Growth) -32%
Smith Micro Software (Navellier’s Emerging Growth) -30%
Big Cat Energy (Mike Schaefer’s Pure Energy Report) -29%
Signalife (Ann Sosnowski’s MicroCap HotSheet) -29%
Angeion Corp (Navellier’s Emerging Growth) -27%
Brookfield Asset Management (Navellier’s Emerging Growth) -25%

Those of you who are really paying attention will notice that the last one is a little screwy — that’s because Brookfield recently had a 3/2 split, so they’re actually performing quite well and I need to fix the spreadsheet. If Brookfield ever has a 25% drop, I’ll shed my rule about not recommending anything personally and tell everyone I know to buy it hand over fist.

You can see, even if we remove the unfairly impugned BAM, that Navellier didn’t have the greatest month here. Lots of suffering stocks, none of which have anything in common other than the fact that he recommended them (catheters, heart monitoring devices for exercise, and WiMax software). Does this mean that you should ignore the recent Navellier hype for Goldman Sachs and Morgan Stanley? Of course, he often ranks near the top over the long term among the newsletters Hulbert tracks, so weak performance from a couple months of his best ideas is probably not a fair way to judge the guy.

Cherry picking some other interesting stories from that list that have been very popular among Gumshoe readers (popular writeups, I mean, I have no idea if any of you actually like these stocks), Big Cat Energy and Go Fish stand out.

There was tremendous interest in the Big Cat Energy story before we were able to sleuth it out (that’s the Great Wyoming Flood one about coal bed methane, FYI), and I still think it’s a pretty interesting microcap story that may or may not ever make money, but a reader opined at one point that he thought Mike Schaeffer had actually been closely involved in the company as an early investor. Don’t know if that’s true or not, but if it is poor Mike has been losing two ways — losing his own money, and looking bad in front of his potential investors by hyping what has been, in the short term at least, a real dog of a stock.

And Go Fish was going to be the “next YouTube” — remember? I think back fondly on this because it was one of the first Gumshoe posts, but who would have thought a Web 2.0 company with a pretty big content store — and maybe less liability risk than YouTube — would fall so far, so fast? Perhaps we should have been concerned when we noted that the biggest selling point for Go Fish was that it had an exclusive arrangement with Taylor Hicks. In an unrelated note, Go Fish has recently been trying to get listed on the Nasdaq … this falling share price won’t help with that — they’re going to have to somehow get the share price back up over $5 and the market cap up to $75 million, which will take some doing and possibly a reverse split.

How about the good news stocks? If we use the same criteria, picking out the stocks that are up by at least 25% since their recommendation, we get:

ICICI Bank (Nicholas Vardy’s Global Stock Investor) 25%
Transocean (TrendAdvisor) 25%
Given Imaging (The Medical Investor, Rob Fannon and George Huang) 27%
PolyMet Mining (Greg McCoach’s Mining Speculator) 28%
Buffalo Wild Wings (Motley Fool Hidden Gems) 30%
Microvision (The Wealth Advantage, Andrew Gordon) 32%
Lenovo Group (Christof Amberger, Taipan) 36%
US Geothermal (Green Chip Stocks) 38%
Duluth Metals (Greg McCoach’s Mining Speculator) 53%
Range Resources (Christian DeHaemer, Taipan) 90%
Rusina Mining N.L. (Chris DeHaemer’s Red Zone Profits (Taipan)) 95%
Force Protection (Brian Hicks’ New America Investor) 125%
aQuantive (Motley Fool Rule Breakers) 132%
Lynas (Ann Sosnowski’s the MicroCap HotSheet) 163%

Some interesting stories in this batch, too — two that stand out are the boom in Aussie resource stocks and the power of takeovers and buyouts to make people rich.

Chris DeHaemer at Taipan has seen two near-doublers in Rusina Mining (the Phillippines nickel mine and China deal) and Range Resources (everyone’s favorite Somali oil exploration company that’s still being hyped to the rafters), and Ann Sosnowski’s pick of Lynas (the rare earth minerals miner) continues to be the single best performer in the Gumshoe universe. All of these Aussie stocks are still firmly in the speculative microcap range, of course, so this could change before I’m done typing today.

The other big news this month was aQuantive’s agreement to be acquired by Microsoft — that pretty much put Dave Gardner’s “next Google” pick at the top of this list in one day, and if any Gumshoe readers bought shares back when we looked at it (or better yet, options) they got some very nice gains. How you would have known to buy this one and not the various stinkers we’ve sniffed out, I have no idea.

On the rest of this list, Lenovo is moving up and surprising me quite a bit — I still think the “secret IPO” tease from Taipan on this one is a bit misleading, but it might well continue making money. US Geothermal surprises me a little bit, too, because it still looks to me like this one is pricing in many, many years worth of growth — geothermal power is a great idea where it works, but it seems to me like it’s going to take a while for this one to pay off its capital costs. And finally, Microvision has had a nice run late this Spring as the chatter continues to promise a significant new deal sometime before the end of the summer to get their technology into an OEM device, probably a cell phone. Folks who write about this one seem confused about whether that deal will still move the stock, or if it’s already been priced in. I, of course, have no idea.

Meanwhile, Buffalo Wild Wings is certainly in the crosshairs on Wall Street — if it was a “Hidden Gem” before, it no longer seems to be so, with an analyst talking it up this morning on CNBC as a play on the NBA Finals.

And if you’re asking me, the one of these companies that I would buy right now (though I haven’t — and why would you ask?) is Transocean … I still think the deep sea drillers are severely underpriced (though my opinion shouldn’t count for anything special, of course, and I own shares in one of RIG’s major competitors so I’m clearly biased).

This doesn’t include the stocks that have been sleuthed out here over the past two weeks — recent Navellier pick Morgan Stanley has already moved a bit in just a day, and Broadcom, PVD, and Sabesp have been pretty quiet (Broadcom was the “undervalued stock of the Month” for May … if this keeps up, it might repeat!). We’ll see how they hold up in the weeks to come. It also doesn’t include most of what I think are the compelling ideas I’ve gotten from the various newsletters — most of them that I’ve gotten at all interested in buying are still languishing at fairly near the price they held on the day I first read the ad.

Thanks for reading, everyone, and keep posting your sleuth challenges to the forum or emailing them to the Gumshoe. And let us know if you’ve come up with any favorite investments through sleuthing or reading the Gumshoe (or any awful ones), or if you think any of the ideas still percolating out there from newsletter-land might be worth a deeper look.

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June 8, 2007 7:03 pm

Hi, Here’s one from Dr. Steve Sjuggerud at Stansberry & Associates, “My Best Idea of the Next 12 Months”

“I just bought $30,000 worth of his stock,” someone whispered in my left ear as we sat listening to a speaker.

Actually, it wasn’t just “someone” that whispered in my ear. It was the CEO of a gold company.

You see, I was at the True Wealth Gold Conference in Long Beach last week, which I helped organize. We hand-selected the companies that we thought were the very best opportunities right now in gold and metal and invited them to present their stories. I thought there was a chance that one of these companies could make us many times our money in gold. It turns out, we found such a company…

The CEO who sat next to me during the presentation knows about gold deposits: I had personally invited him to speak at the conference, too! But once he heard that speech, he had to get in to the stock immediately – he couldn’t even wait until the speech was over.

Then, in my other ear, S&A geologist Matt Badiali said, “The guy next to me already owns 35,000 shares of this stock… and he says he’s buying more right now.”

Back in 2005, I recommended shares of a little-known gold company, Seabridge Gold (SA). It was a risky recommendation… and I said as much. But I said that a $50 increase in the price of gold should translate into a double in the share price.

We got lucky… The price of gold has risen by $250 an ounce since I first wrote about Seabridge. And on schedule, shares of Seabridge are up 500%.

I believe this gold company – the one that generated all the excitement at our gold show last week – has the potential to be “the Next Seabridge.”

You won’t believe what this company has in the ground…

Around 2000, the “Next Seabridge” bought eight properties at the bottom of the market. It paid next to nothing for them. The properties were cheap because they were “discards” from gold mining companies. The mining companies knew the properties had some amount of gold, but thought they would never be profitable, so they didn’t bother too much with them.

Of course, at the time, gold was selling for $250 an ounce, and it might have cost $300 or more per ounce to get the gold out of the ground.

The guys behind the Next Seabridge gambled that this was the bottom in gold. They acquired these properties, which would have been money-losers if they had tried to mine them at the time. They got lucky. Gold rose, and their gamble paid off…

Now, gold is nearing $700 an ounce. As the price of gold rose, the Next Seabridge started drilling these properties to see what it had…

Consider a gold deposit we’ll call “Spot X.” The Next Seabridge bought Spot X for $2.5 million back in 2002. Spot X turned out to be the largest undeveloped gold deposit in Canada and one of the largest in the world.

This project is worth more than $1 billion in cash flow, after all the expenses of building and operating a mine. And that billion-dollar net cash flow is based on a conservative gold price of $550, not the current price today close to $700 ($550 per ounce is the price major gold companies are using right now to evaluate future projects).

When this project was first announced in late 2005, shares of the Next Seabridge doubled from $5 to $10.

Yet the stock is still cheap. The Next Seabridge’s stock market value – today – is less than half the value of this one property alone.

The Next Seabridge was incredibly lucky with Spot X. The chances of a find like that in the CEO’s lifetime were slim to none. The Next Seabridge had acquired eight properties. So the big success at Spot X was like hitting a hole in one on one of only eight swings.

Then the Next Seabridge took another swing. It just recently started drilling at another property… we’ll call it “Spot Y.”

It hit another hole in one! Unbelievably, Spot Y has more gold than Spot X!

So now, Spot Y is the largest undeveloped gold deposit in Canada. Spot X drops to second place. The Next Seabridge now owns 100% of the two largest undeveloped gold deposits in Canada – which are also two of the largest deposits in the world!

Here’s the thing: investors haven’t figured out yet that they can basically have this huge gold deposit for free. The CEO only makes one presentation a year – at our annual conference – and this is a fairly small company. So word hasn’t got out yet.

It will soon though and when it does, four times our money in the next two years might just be conservative.

If there’s one thing I learned from the gold conference, even though gold is closing in on $700, there’s still plenty of value to be found in the gold sector. In addition to some of the plays I mentioned on Monday, “The Next Seabridge” is a tremendous opportunity right now.

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June 24, 2007 3:45 pm

i do not understand the purpose of the comment by Anonymous discussing the NEXT SEABRIDGE
As far as I can tell it is useless wothout a link or a company name

June 25, 2007 11:03 pm

Here’s one today (6/25/07) from Andrew Mickey of Breakaway Investor:

“The Wolfram Conspiracy”

Of course, wolfram is Tungsten, and he’s speaking of a find in Newfoundland that is connected (to be bought out by?) the Chinese.

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June 30, 2007 10:17 pm

RE: Andrew Mickey 6/25/07 — The stock is Playfair Mining — Canadian(RGRLF)Selling for a buck

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July 24, 2007 6:59 pm

Gumshoe: If you were a stock (GUM.BB) I would have well over 14K at this point from whatever initial investment I plunked down. That’s how much I would have SAVED by not paying for the *HOT* tips that you suss out, tips that for the most part have lost money.

Just wanted to say thanks and keep up the great work, it’s why :”we” are digital and they are “analog”.

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