Every year, I scroll through the last twelve months or so of teaser picks and look for one that really stands out as the stinker of the bunch, to be called the Turkey of the Year and hold that place of honor at Thanksgiving time. Hopefully, we can all give thanks that we didn’t own that particular stock (though we’ve all got a little gobbler hiding somewhere in our portfolios, no?)
And it’s not just a falling stock price that wins you the prize — rare is the year when we don’t have a bumper crop of teaser picks that are down big. In a typical year, we usually end up with about 2/3 of the teaser picks in negative territory or trailing the S&P 500, and about one third beating the market — with a few very strong outliers that are fantastic, up several hundred percent, or horrifically down by 90%+. It’s those collapsed stocks that we’re looking through to find our turkeys.
You’ve got to be pretty bad to stick out — either because the teaser ad promise was so dramatically fantastic, or because the stock blew up in some surprising way, or what have you… mere losses do not a turkey make, there needs to be a little story behind it.
So who are our candidates of the last twelve months or so? Since it doesn’t seem fair to call out a “Turkey” just a month or two after we write about it, the time frame is roughly August 2014-August 2015 for seeking out this year’s candidates.
One potential gobbler is Abakan (ABKI), which was teased by Nick Hodge as an “End of Rust” story last year that he said would win the “Oscar of Innovation” — a really, really teensy stock, and I tend to try to be pretty open minded… but the first line of my Quick Take in that teaser solution article was “Smells a little fishy to me” as Hodge was saying that this 80 cent stock was about to “corner a $1.2 trillion empire.”
It has not gotten less fishy, as far as I can tell, though it’s sure cheaper… the business still seems about the same if you look at the financials (tiny bit of revenue, big chunk of expenses, not much change to either) and the stock is down 94% or so, from 88 cents to a nickel. So that may not quite be our Turkey, but I am getting a little hankering for some cranberry sauce.
And also from late in the Summer of 2014 we’ve got Capstone Turbine (CPST), with a dramatic fall from $20+ to a dollar after Sara Nunnally pitched it for Macro Trader… a turkey, for sure, and a terrible company that was in bad shape already and then got hit with some headwinds, too, in the rising dollar and falling oil prices. They needed 20%+ revenue growth for a few years to have a chance of getting to profitability (though they and the analysts kept saying “next year” for that profit), and now revenue is actually declining. And they’re getting delisting warnings, and so many investor lawsuits it’s presumably making their heads spin.