Checking in on the Teasers

How have the high-hype promises done so far in 2014?

By Travis Johnson, Stock Gumshoe, November 3, 2014

Now that we’re closing in on the end of the year, and the redoubtable Lynn Clark (Queen of all detailed things that I forget to do) has managed to get our tracking spreadsheets much improved and up to date, with relative performance included for the first time this year, I thought I’d check in on how the teasermeisters are doing so far in 2014. After all, we’ve got the unveiling of our “Turkey of the Year” to come in a few weeks, so we’ve got to start thinking a bit about the candidates.

So let’s look and see what had happened if you had bought a bunch of those teased stocks on or near the day they were teased… would you in fact have turned your $5,000 into $13,000 or $112,000 or $1 million, as so many of them hint at?

Uh, no.

Now, to be fair, we knew that already. And some of these stock ideas that were pitched by newsletters were clearly shorter-term trades, while some were long-term investments that they expect to play out over years, not months. And the market was hit badly in recent months, as I think everyone realizes (though thanks to that quick bounceback rally, the broad market is now back to near 52-week highs, up 9% on the year so far).

But going by the teasers that we’ve tracked all year, which includes every one that I’ve written about that pitched a specific stock or fund as an investment, 147 in all so far this year as of the first week of October, we’ve seen 32 stocks that did better than the S&P (and none that have hit a “double” on the year), and 115 that have done worse than the S&P (so far, none have gone bankrupt or gone to zero this year, but plenty are down by 50% or more).

And you know what, even though the market has taken a hit recently, if you had bought a small slug of the S&P 500 (using the SPY ETF as a benchmark for this) on each day when a teaser stock was uncovered, every single one of those slugs of money would be in the green as of today.

It won’t surprise you to hear that most of the “most winning” stocks are in biotech or tech, nor that the bottom of the pile is littered with energy and mining stocks (and a few failed biotechs and techs, too). Biotech has been the most consistent growth stock and “story stock” sector this year, with big spurts from strong news, and some areas of tech have been pretty strong… and, as many of us are all-too-aware, basic materials have been crushed.

There’s only one mining or energy stock that has outdone the S&P this year out of our teaser solutions, and that’s the decidedly atypical Canadian diamond miner Dominion Diamond (DDC). When it comes to profiting from falling commodity prices, only one teased pick has made a big surge and that’s Louis Navellier’s tout of Spirit Airlines (SAVE) about six months ago.

Has one teaser-spinner outperformed the others? Not dramatically, at least according to my browsing of the data — some are less likely to have 70% losses given their focus on larger stocks, and the letters that focus less on energy or materials stocks, like the Motley Fool or Navellier often do, have perhaps tended to do a bit better this year… but pretty much everyone has some big stinkers (like POWR from Navellier, or TCS from the Fool, for example).

And, of course, I also own more stocks that are in the bottom of this list than are in the top personally, so I’m not claiming to be fantastically more prescient than the newsletter pundits — and, to be fair, these are the picks and stories that newsletters are using to get your attention and urge you to subscribe, they are not likely to be all that representative of the performance of any of these newsletters overall (especially given our limited sample size — we rarely look at teasers from the same letter more than a half-dozen times in a year, so these are the ones they might think will be their best stocks, or just their best “stories” to get your attention, but most of them recommend one or two new picks each month).

But I do find it useful to look at these spreadsheets every now and then as a reminder that it’s worth being patient, being a cynic, and taking the time to look carefully at the companies that are sold to us as fantastic growth stories (or, indeed, at any company that’s being “sold” to you). And if this year is any guide, every time you think you’ve found the next hot stock you should slow down, count to ten, then, if you’ve convinced yourself that this is one of the 32 out of 147 that’s a real winner in the near future, still put at least half that money into a broad index fund and do your wagering with smaller amounts.

If you want to be a real contrarian, maybe looking at the bottom half of the spreadsheets to see if any gems have been thrown out with the slurry. Let us know if you find anything surprising or fantastic in perusing the lists — you can see the whole sheet from our tracking page (which also has links to the spreadsheets from past years), but here are the top and bottom ten at the moment:

Top Ten vs. the S&P 500 so far in 2014:
topten

Bottom Ten vs. the S&P 500 so far in 2014:
bottomten

(For live prices, and much more detail, go to the tracking page or the public version of the 2014 spreadsheet — these are just screen shots taken midday on Monday, November 3).

So what do you think? Anything interesting hiding in the rubble of this year’s teaser tracking spreadsheets, or any winners who you think will continue to thrive? Any other trends or insights you’d like to share? Let us know with a comment below.


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21 Comments
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gjervis
Irregular
gjervis
November 3, 2014 4:43 pm

East West looking attractive now. in addition, they are buying back their shares heavily now. https://www.insidertracking.com/node/7?ticker=EW*CA

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vivian lewis
November 3, 2014 5:08 pm

you do not have the new ticker symbol for Benitec, now no longer confined to Down Under as BLT (bacon lettuce & tomato) or as BNIKF here, but also with a sponsored ADR as BTEBY. The company and its depositary, BNY-Mellon, paid to allow the transfer to be made without charge by American shareholders.

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Frenchy
Irregular
Frenchy
November 3, 2014 5:27 pm

It seems I am breaking even on the list with 3 in the green and 3 in the red. Percentage wise, I am slightly more in the green due to better entry than shown above. Mainly due to my BNIKF/BTEBY average price being at $0.68 vs $1.6.

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Fabian
Fabian
November 3, 2014 8:15 pm

Some beatings…. I hope they have stop loss.

twjd
November 3, 2014 11:54 pm

I noticed that 5 of the 10 in the bottom 10 had an F on the end of the symbol. Does that tell you anything?

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SoGiAm
Irregular
November 4, 2014 8:18 am

SDRL or NADL or ? Of the Drillers which is the investment?
Best-Ben

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SoGiAm
Irregular
November 4, 2014 9:11 am

CESX
Dear SmallCap Network Members,

Good morning, fellow small cap stock enthusiasts. No, you’re not crazy – we ARE sending today’s edition of the newsletter before the market opens instead of our typical post-close delivery. There’s a very good reason for the switch. There are two reasons, actually. One of them is, we couldn’t wait to tell you what we’re about to tell you! The other reason is, we wanted to give our loyal newsletter readers a sneak peak of a new opportunity we won’t be officially unveiling at the website until after the close today. It’s a big deal because, as you know, time is money.

Just to set the stage a little, imagine an $18 billion industry with high barriers to entry and government regulations that essentially mandate the industry’s success. If you’re not only already in the game but have established yourself as a qualified service provider (maybe even an approved service provider to the government), it’s a position most other companies can only dream of being in.

Oh, and did I mention this particular company is already profitable, on the verge of a major expansion, and en route to a listing on a major exchange?

Honestly, it would be unusual to be able to say any of those things about most small cap and/or OTC stocks, so when you can say all three about one particular name, you make a point of learning more. Why? Because it’s a window of opportunity that won’t likely be open for very long.

Enough fanfare. The company we’re putting on the table today as an attractive investment idea is CES Synergies (CESX), though you may also know it as Cross Environmental Services.

In simplest terms, CES Synergies – through its subsidiary Cross Environmental Services (CES) – is a specialty environmental services company providing quality environmental contracting solutions, demolition and remediation services to commercial and industrial customers, as well as federal, state and municipal entities. Some of its customers include NASA, the U.S. Air Force, the U.S. Army Corps of Engineers, the State of Florida, and a whole slew of private sector organizations.

While a little obscure, it’s a reliable and surprisingly large industry. It’s getting bigger all the time too. We weren’t kidding above when we said the remediation and demolition industry was worth $18 billion per year in the United States. More important to us right now, it’s an industry that’s growing… rapidly.

It’s no big secret the housing construction market is on the mend. What’s largely been unrecognized over the past couple of years, though, is how rapidly the commercial and heavy construction market is growing too. Industry consulting group FMI published a report at the end of September explaining its forecast for growth in office space for this year is 8%, with a still-solid 7% growth rate expected next year. Manufacturing-based construction is on pace to grow 6% this year and 8% next year. The numbers jive with those gathered by statistics and data website Statista, which suggests heavy engineering construction spending in the U.S. should grow 5.6% this year, and grow another 7.4% next year.

Great, but what’s this got to do with CESX? A huge chunk of any new industrial, institutional, or commercial construction first requires the removal and abatement of existing structures. And when it comes to cleaning up dangerous, EPA-regulated construction messes, CES Synergies has proven itself as one of the best.

Though the company only became a publicly-traded entity a year ago, it’s been up and running since 1988. It’s also profitable, which is almost unheard of within the small cap space. Then again, after 26 years we can’t be entirely surprised the veteran management team knows how to bear fruit.

Just to paint the picture with numbers, the company generated $15.5 million in revenue last year. It’s driven a top line of $8.5 million for the first half of 2014, so it’s already on pace to exceed 2013’s total. (See the revenue chart below.) Yet, that figure may understate the growth actually at hand. Gross margins swelled from 16% in the second quarter of 2013 to 28% in the second quarter of 2014 on the heels of a 38% increase in y-o-y revenue growth for Q2. The swing back to a net profit last quarter underscores the company’s growing strength. More of the same kind of growth is likely in its foreseeable future too, as the company expands to meets its growing demand.

Now, we could probably stop right there and get to some concluding thoughts on CESX and you’d be more than interested enough to take on a position. There are a handful of additional details worth exploring, however, that could make CES Synergies an absolute must-have.

1. First and foremost, CES Synergies is a GSA-approved service provider.

Without getting too deep into the technicals, being a GSA-approved contractor means any federal government agency already has the green light to go ahead and hire CES Synergies at a pre-determined rate. It doesn’t have to compete or bid for business under the GSA schedule, nor do agencies need to work through an entire procurement process in order to hire the company to do cleanup work.

2. Second, management is eating its own cooking. In fact, management has made a huge bet on the future growth of the the company and the upside of its stock.

For perspective, while there may be 46.5 million outstanding shares of CESX, the total float is only 4.8 million shares. Who’s sitting on the rest? Management. CEO Clyde Alan Biston alone owned about 2/3 of the outstanding shares as of the last look, so he’s clearly sitting on the same side of the table as the average shareholder.

3. Third, it’s practically impossible for new competition to step in and compete with CES Synergies.

CES has an extensive late-model fleet of service trucks, box trucks, vans, excavators, loaders, dump trucks, semi-tractors, and roll-off trucks that can be deployed to any project. In addition to the large rolling stock and excavators, CES has an extensive inventory of specialty equipment designed to provide demolition and abatement services inside a structure. This equipment includes (but is not limited to) skid steer loaders equipped with exhaust scrubbers, mini-excavators equipped with hydraulic hammers, automated tile removing machines, airless sprayers, and innumerable handheld power tools designed for material removal.

You get the idea. There aren’t too many organizations with the financial wherewithal or the established name able to step into the market and compete with Cross Environmental Services.

While all these details are compelling, the best part of the CESX story is the part you can’t quite put your finger on, but can sense… CES Synergies is knocking on the door of a major growth phase.

Last quarter’s reven