We have a charming little tradition here at Stock Gumshoe of picking out the stinkiest stock to have been teased over the past year, and calling it our “Turkey of the Year” come Thanksgiving time.
It’s not particularly fair — certainly not to turkeys everywhere, and probably not to the newsletter folks who use breathless, hype-filled teasers to promise massive gains from stocks that turn out to be dreadful. After all, we’re basing our assessments on a moment in time when a newsletter editor unleashed his or her copywriters on a tempting story stock — perhaps that newsletter sold it soon after, or perhaps the ad was just a trick to get you in the door and it doesn’t really represent the picks of a particular advisor’s portfolio very well.
But we do it anyway — both because it’s fun, and because it serves as a good reminder to all of us of the fragility of the “stories” pitched by many of these newsletters. Investments can fail for lots of reasons, and rarely are those failures mentioned by the folks you pay for investing recommendations … so let’s take a moment to give thanks for the “sell” button as we name our Turkey of the Year for 2011.
The rules are simple: It has to be a pick that has performed right at the bottom of the pack since it was teased. And we’d prefer that it have been teased as the next best thing since sliced bread and iPods, or, in the best of all Turkey worlds, that it was pushed and pushed and pushed over and over by a newsletter without regard for what was happening to the company or stock.
And it has to have been teased in the past year, since our 2010 Turkey was unveiled — that last one, by the way, was SuperMedia (SPMD), a freakishly overleveraged business whose depleting worth eventually became reflected in its horrible stock performance in 2010. SPMD did actually rebound a bit last Winter after attaining Turkey status, but gravity and sanity returned and the stock again is far below where it was when it was “turkeyed.”
And even with those rules, we’ve got lots of attractive candidates this year …
There’s Christian DeHaemer’s Petro Matad (MATD in London, PRTDF on the pink sheets), which he re-touted a few times this year … but that was first recommended and teased by him back in early 2010, so although it’s Turkey-worthy that he pitched it again this year as being at a good price after a fall (after his first tout it went from about 20 pence to 200 pence in 2010, then back to 20 pence again in a spectacular 90% collapse this year, mostly on bad drilling results) it doesn’t really qualify as a 2011 pick. Still, honorable mention because this went from being one of the best performing teaser stocks I’d ever seen … to one of the worst, and in a pretty short period of time.
Likewise, there have been plenty of large, well known flameouts that have had eager newsletters all over ’em before they collapsed, like everyone’s current favorite punching bag Netflix (NFLX). That was an oft-touted pick of the Gardner brothers over at the Motley Fool since at least 2007 — but though they breathlessly took credit for its performance many times in ads this year, and it was also one of the best performing teaser picks ever for a while (it’s still not too bad if you forget about the 1,000% gain they had for a spell — it’s now up 300% or so over the last four years), they didn’t actively tease it as a hot pick much this year. So that’s not ready for trussing, either. Though the fact that David Gardner was still saying that you have “time to get in for the next leg higher” back in April when it was around $250 does perhaps deserve at least a turkey leg.
We can spread the Turkey pain around to many of the well-known newsletter publishers — Netflix may not really cut it as a Fool pick in this category, but Dave Gardner was touting Rosetta Stone (RST) as holding the key to China’s future earlier this year, and that’s been just about straight down since the IPO, losing 2/3 of its value and counting.
And over at Cabot Heritage, they promised quick doubles in both Sky-Mobi (MOBI) and LDK Solar (LDK) earlier this year, both of which are instead down by about 75% (and incidentally, both were touted as near-term doublers when they were very close to their highs for the year).
Kent Moors over at Money Map Press was even more aggressive for his Energy Advantage, telling us that his favorite equipment stock in the alternative energy biz, Satcon, should quadruple in 8-12 months … it’s been eight months, and it’s instead down about 80%. Really good gobbler candidate there.
And if we go back a full year, as we should to be fair, we can include Frank Curzio from Stansberry for his Phase 1 predictions of 3,000%+ gains for Groote Resources once they started “tapping” their deposit of manganese … since it doesn’t look like the permitting folks or the native population are all that eager to let them tap that deposit.
Or from Lombardi’s stable, we can note that Mitchell Clark’s touting of last December as the “last chance” to buy Wonder Auto under $10 is surely ready for a ladle of gravy — the stock never actually got up to $10 for even a moment after I wrote about that ad. Like so many other small Chinese companies that enjoyed boom years, Wonder hit accounting problems, was in a trading halt for several months, and got delisted this year … and now trades under one dollar on the pink sheets. Of course, I reluctantly admit that I’ve suggested stinkers that got trapped in the accounting/delisting Chinese stock hell and short-selling cycle, too, so I can’t take too much joy in folks who were overconfident about the compliance of Chinese accounting.
And I hesitate to even include the occasional articles I write about the really shady side of the business — stock promoters, the folks who pump and dump microcap penny stocks and actually make money on the other side of the trade they talk you into making (or just get paid by other investors to inflate a stock price) — those stocks obviously almost always go to zero, since there isn’t really any “there” there for most of them, so that’s too predictable. But it’s worth remembering that yes, every Jammin’ Java and CleanPower goes down … but it was only greedy little dollar signs in our eyes, and our innate belief in human decency, that obscured our certain vision of that future in the first place.
No, for our Turkey of the Year we’ll stick with stocks that generally legitimate publishers (though some push the envelope on that front, too) really are selling as investment ideas that they really think are worthwhile, and publishers who make their money by getting newsletter subscribers and, hopefully, making those subscribers happy.