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2021 Turkey of the Year

This year's Turkey reminds us that it's OK to be an optimist... but not to over-promise.

By Travis Johnson, Stock Gumshoe, November 23, 2021

For our 14th annual Turkey of the Year we’ve got a little something new… I always include my worst pick of the year when I’m covering the Turkey of the Year, too, to be fair… but this time around, they are one and the same. I too bought the Turkey, and I too paid the price.

What am I talking about, you ask?

Around Thanksgiving time each year, we identify the Turkey of the Year — the teaser pitch that provided us with the worst-performing, most-overhyped, or otherwise just the goofiest gobbler of the past twelve months.  We try to avoid those that were just bad luck or bad timing, like maybe a hotel or travel stock that was recommended a month before COVID hit, but, like creating a great Thanksgiving dinner, it’s not exactly science.

This honor is not bestowed lightly — to be named Turkey of the Year in Gumshoedom, you must have been a truly awful stock idea, chosen within the last twelve months, and, preferably, you should stand for all that is entertaining (and misleading) in stock newsletter teaser ads.

Most years, we’ve got plenty of candidates… over-promised technology names, failed biotech trials and over-hyped mining stocks tend to fill out the bottom of the Teaser Tracking spreadsheets here at Stock Gumshoe in any given year, with the occasional smattering of fraud and bankruptcy, so who are the most promising nominees for our annual prize?

The time frame we work on is “about a year”… but it wouldn’t be fair to call out a Turkey just a month or two after it is teased, so we actually usually use the September-to-September period to find a qualifying bird.

And I should start with the standard caveats — we don’t subscribe to all these newsletters, we just review their promotional materials, so we don’t usually know when they first recommend a stock to their subscribers, whether their commentary to subscribers is more nuanced than their promotional materials, or if or when they might recommend selling it… all we know is when and how they dangle a recommendation as bait to recruit new subscribers. More on this in a minute.

Last year was an oddity, if you recall — the stock market was on such a high going into the Winter that there were many fewer terrible picks than usual.  Teased stocks tend to be story stocks and interesting names, not the boring “old economy” stocks that are harder for copywriters to “sell”, and the past two years have definitely been favoring “story stocks” in general, so the performance of the teaser stocks we track was actually quite phenomenal last year. For the first time in the life of Stock Gumshoe, more than half of the teased stocks in 2020 beat the market (it’s usually more like a third that do so, often less), none were down 80-90% or went bankrupt, and we had an unusual number of massive gainers in that list.

This year? We’re pretty much back to normal. Still no bankruptcies or 99% losers yet (we used to see at least two or three of those a year), but still pretty weak for an average return from teaser world. Roughly a third of the stocks teased so far in 2021 are beating the market, but about 2/3 of the stocks teased are trailing the S&P 500, and there are a few big stinkers to choose from.

If you bought all of the stocks teased in equal amounts at the time they were pitched by a newsletter promo, you would have “underperformed” the S&P 500 by about 10%. The top of the teaser tracking spreadsheet for 2021 still looks unusually strong relative to history, with almost a dozen stocks that have doubled or more over the past year, (led most recently by the renewed enthusiasm for anything related to electric vehicles), but, on average, we’re back to about “normal” for this story stock subset of the markets.

There is, however, one clear loser — there’s not a lot of competition this year at the very bottom of the performance rankings, so there’s no a big judgement call for me to make: the Turkey of the Year is… Intrusion (INTZ).

Sometimes the numbers don’t lie, and INTZ is simply the worst performing teaser pick of the past year. It actually sneaks under the wire with a couple different entries, since it was first pitched in September of 2020 at about $16.60 (so that pick is down 78%), then aggressively re-teased in January of 2021 at about $25 (down 84%). Those two separate pitches that I covered for Intrusion are the worst two teaser stock recommendations out of the 250 or so we covered between September of 2020 and September of 2021.

And yes, I usually have to write a separate little comment about my worst personal stock pick of the past year — but my work is halved today, because Intrusion is my walk of shame to take, too. I bought shares of Intrusion because the SHIELD product that they were introducing (a network intrusion-prevention device, hardware that is connected to Intrusion’s system for blocking malicious connections and sold primarily as a per-seat subscription), had some obvious promise if they could sell it — and there was some indication that they were getting customers, with one or two deals announced publicly.

Those early sales announcements turned out to be some pretty aggressive “overpromising”, so I sold out of Intrusion (INTZ) near $10. I didn’t enjoy the full power of the drop from $30 to $3… but I bought around $24 and sold for $9.95 when the wheels came off the bus back in May, so this time I did get a pretty full Turkey treatment. That’s the worst stock purchase I’ve made this year, so that’s why the Turkey of the Year and my personal turkey are one and the same, for the first time.

Here’s how the company was first pitched to us, in case you’re curious:

“Over 20 years of analyzing cybercrime, this company has amassed what industry experts are calling the most valuable database in existence.

“The company reports that this database has more than two trillion rows of data…

“And starting this fall, they’re set to turn that data into an offensive weapon against the worst cyber criminals….

“Per Bryan’s call with the CEO, none of the big-name cybersecurity companies have anything close to this amount of data.

“He says that while big names like Cisco Systems (CSCO) or Palo Alto Networks (PANW) can block anywhere from 200,000 to 800,000 known cyber threats, this company’s product can block 2.7 billion – right off the bat.

“It’s this kind of competitive advantage that pushed mass adoption of Salesforce and Zoom…”

That “Bryan” is Bryan Beach over at Stansberry, and this “cloud SaaS stories that nobody knows about yet” idea was one they used a few times (per the Thinkolator’s ID work, at least) in selling Stansberry Venture Value over the past couple years.

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Intrusion wasn’t in the first crop of the stocks they sold this way, the first round of “hidden cloud” stocks primarily focused on GAN (now GAN, though at the time it was listed in London) and PAR Technology (PAR), so it’s not just a coincidence that I bought Intrusion… I also bought both GAN and PAR at various times over the past two years, thanks to my general fondness for small SaaS companies, and the performance has been middling. GAN is still showing a gain from those early purchases, since it was teased before it moved its listing from London to New York, but also became a stock market darling for a brief while and was later the focus of some poorly timed teasers, including a couple that put it close to the running for Turkey of the Year (there was a Motley Fool tease of GAN back in February at close to $30, and that same Stansberry tease of INTZ in January also included another pitch of GAN at about $24, so with GAN opening this week below $11 there are several down 50-70% teases of GAN out there… not quite as bad as INTZ, but surely bad and not that far behind on the tracking spreadsheets). PAR’s performance has been much more average coming out of those more recent Stansberry teases, but they also earn some good will because they picked it a bunch of times earlier in 2020, too, with much better returns. I still own both PAR and GAN, in case you’re curious, and PAR is a large position for me.

What’s been going on over at Intrusion? As one might imagine, that kind of stock performance indicates something bad is happening. They started out in early 2021 promising a big pipeline of orders, including one signature order for Kimberly-Clark (KMB) that we were led to expect would be a big deal, at ~50,000 seats, and that had the potential to be genuinely transformative. Getting a few tentpole customers for a new product can spur dramatic growth as adoption spreads through an industry. As the tease from Stansberry indicated, that’s the promised land — getting in early on a company with strong subscription revenue.

So what’s the “something bad” that brought INTZ down by 80-90% from its highs? The first catalyst came from the work of some short sellers, including White Diamond Research, who dug into the company and highlighted what they saw as some meaningful product weaknesses, along with a suspicious lack of outside interest because the named customers all had some relationship with the company. The company responded to some of the claims, and short sellers are not always correct or honest, of course, but that hit near the highs and helped drive the shares below $20. In the following months, the company failed to come up with any more specifics on their order flow or their prospects for signing large customers in their first quarter call, and I took that as my signal to listen to the stop loss alert and get out of the position.

And that can be a bit of a lesson for us: Parsing the promises of management and applying speculative math doesn’t always work. The company’s CEO, as I saw it, led us down the garden path, talking up the Kimberly-Clark deal and implying that the prospects were strong — the info we parsed from the press releases and conference calls was that the rollout to KMB’s ~50,000 employees, at $20/seat/month, would mean revenue of a million dollars a month and a strong foundation on which to build a microcap business. They never got more specific than those headlines, though, so as time went by we were left to wonder — was KMB coming on just to test the software? Are there no promises? Where they getting it for a dramatically lower price as the first tentpole customer? How long would it take to roll out to all of their employees and networks? Is adoption just slow, or is the market exaggerated?

In the end, my conclusion was that they just over-promised — CEO Jack Blount tried to pull an Elon Musk, implying great and rapid progress that had not yet actually been nailed down, and he learned, as so many have before him, that there’s only one Elon. Most CEOs can’t get away with the overpromise/underdeliver dance.

That may be putting too much blame on one person, but by July Blount was out, abruptly so, and they were talking about the sales ramp being “slower than anticipated” and the fact that they might well need to raise some more money. They’re trying to rebuild now, and earlier this month they got a new CEO, so perhaps we’re now past the era of bold overpromising that they enjoyed under the previous guy… but the new CEO is starting from awfully close to zero, with revenue of just $1.8 million last quarter as the new Intrusion Shield product continues to get very, very slow adoption and their legacy products continue to see falling sales (that’s down from last quarter and down from the year-ago quarter, though not dramatically).

Shield revenue last quarter was $234,000, though they did say they added five new customers last quarter (“varying in size” and unnamed), and they’re spending heavily to try to build the company so they lost quite a lot of money (as one would expect, if revenue is $1.8 million and expenses are $7.2 million). They had $7.2 million left in cash, so unless they’ve raised some more cash recently or have some big-money contract getting paid right now, that means they’ll effectively have burned through their cash by January or so. They still name Kimberly-Clark, Lippert and a few other early customers, but clearly the most optimistic take you can have for this one is that adoption is slow. With $234,000 in revenue for the SHIELD product this last quarter, that would mean an average of $78,000 per month, and at $20 per seat that would mean they have something like 3,900 seats — or 3,900 end users.

So yes, the biggest challenge for the stock was that in the April Q1 press release they claimed that “Intrusion SHIELD is now protecting over 50,000 seats,” 8X the company’s Q1 goal. And here, six moths later, it appears they actually have something less than 10% of that number paying for the product — if the goal was to have 7,000 “protected seats” in Q1 (1/8 the 50,000 they claimed at the time), then here in Q3, when it comes to actual paying customers, we’re probably at about half of that.

Just going by their two largest named customers, Kimberly-Clark (46,000 employees, deal announced in January) and Lippert (11,000 employees, announced in April and then “accelerated deployment” announced in October), that 3,900 would be only about 7% of the employees at those companies — and their customers are not all at those two companies, they also have a dozen or so named corporate customers who are much smaller. A lot of Kimberly-Clark and Lippert employees are factory workers, I imagine, so how that might limit the number of computer “seats” is anyone’s guess.

So what’s going to happen next? I don’t know. The company has continued to talk about expanding distribution, including some partner deals around the world, but at this point, after the vast wave of overpromising, I wouldn’t be surprised if investors are feeling a little bruised, and might be waiting to see actual sales pick up before they think about trusting Intrusion again.

And there’s still be reason for caution in the lack of other large, named customers — they did get at least a psychological boost, I’m sure, from the announcement that Lippert is accelerating their adoption of SHIELD now, six months after that deal was made public… but, again, there’s a back story, too — Lippert is the primary operating division of LCI Industries (LCII), the large RV parts manufacturer, and two people from LCI are on Intrusion’s Board of Directors.

I’m not an expert in all of the fields I write about, of course, so there are many areas in which I have to depend on outside endorsement of a company’s products to give me some confidence that there is real customer appeal or real demand. Having a large order is a nice endorsement, but the real evidence that it’s working comes in the financial filings, when orders are actually in the books and cash comes in the door and proves that the company is actually selling something that customers want to buy.

Maybe they’ll get there, but Intrusion isn’t there yet — and while initial order announcements and press releases can be enough to get me interested, I’m not against speculating on possibilities, it’s also true that once I’ve been burned by a company’s failed promises, it becomes a “show me” story, not a “tell me” story. Once trust is broken, it’s hard to put it back together, even with a management change. Don’t tell me in your press releases that cash is going to come and business is picking up, not when I’ve good reason to not believe your promises — show me in your income or cash flow statement.

So welcome to the club, Intrusion… I hope this is the bottom, and you learn to fly from here, but I’ll remain skeptical. I used to live in the woods, and I know wild turkeys can fly a little, but it’s not their strong suit. In my experience, it only seems to work for them for a few minutes, and usually only if there’s a strong wind… when the dogs scare a flock of turkeys, there’s certainly a wild flapping of wings, but it always sounds like someone dropped a truckload of bowling balls down the hillside.

If you’re newer to Stock Gumshoe, we’ve been tracking heavily promoted teaser stocks since 2007, and named our first Turkey of the Year in 2008 — and you can go all the way back to see how those Turkeys matured, in case you’re tempted to bottom fish.

OK, that’s not a good blending of metaphors, we don’t fish for turkey — maybe we’re really looking for some baby turkeys to have grown into swans? That’s not much better, sorry… but in my defense, nor is the performance of the past 14 Turkey of the Year winners. I guess we should stick with the “learn to fly” bit.

A visit with past Turkey of the Year winners can take us down some depressing rabbit holes (another animal! What is going on with this dude?) — here’s the list, and where they now stand:

Last year’s winner was LimeLight Networks (LLNW), teased by Andrew Snyder at Manward… it earned that prize in a generally strong year because it was teased near the top in the 2020 “work from home” excitement and fell into the end of the year, but it was also a company that certainly had better fundamentals than the average Turkey of the Year — mostly just a firm that has been unable to keep up in a relentlessly competitive sector (they run a content delivery network, not unlike Akamai or Fastly). Still, as usual, the Turkey of the Year award was not the marker of the bottom, it’s down another 30% or so in the past year.

In 2019, marijuana pretender Crop Infrastructure (CROP.CX, CRXPF) won in a photo finish over biotech story stock resTORbio (TORC, later became Adicet (ACET)). Crop became Vert Infrastructure (VVV on the CSX), but got delisted last year — every once in a while a few thousand dollars worth of shares still trade OTC in the US, who knows why, but they looked “done” last year… and I guess double-done now, as the share price rounds to zero even if you go out three decimal places. Adicet/ResTORbio has held up a little better — it’s still down 75% or so from where it was teased, but it remains right around where it was two years ago.

The 2018 winner was Indivior (INDV.l, INVVY), teased by Chris Mayer… whose work I often like, and who shortly thereafter retired his newsletter, coincidentally.  That was down about 65% when we covered the “win,” and it fell another 80% or so over the following year — it did get a little surge in recovery, so this is now one of the very rare turkeys that has come back to eventually post gains after winning the award (it’s up about 25% since Mayer won the Golden Gobbler three years ago… though still, of course, way below where it was when he teased it).

Cabot’s pitch of Aqua Metals (AQMS) won the prize in 2017… a business model that sounded appealing but never quite worked as teased or turned the promise into revenue, kind of like Intrusion, and a stock that had fallen about 80% or so before it got the “Turkey” win.  And has fallen another 50% or so in the four years since then, though it did get a little burst of attention earlier this year when they started mentioning EVs in their press releases.

And for posterity’s sake, here are the previous winners… most of them are gone now, either reverse split to infinity or shedding shareholders through a bankruptcy or two. A couple of the names still exist in some form, but I’m pretty sure that all of them ended up being 100% losses for investors who bought anywhere near when they were initially teased and held through to the bitter end:

SunEdison in 2016 (Kent MoorsEnergy Advantage)
CT Partners in 2015 (Louis Navellier)
Solazyme in 2014 (Jimmy Mengel and the Motley Fool both pitched this one
HRT Participa in 2013 (Byron King)
Gasfrac in 2012 (Sean Brodrick and Keith Kohl) (even the company that bought Gasfrac’s assets out of bankruptcy several years later, STEP Energy (STEP.TO), has lost most of its value since)
Tengion in 2011 (Steve Christ)
SuperMedia in 2010 (Hilary Kramer) (that one recovered briefly when merging with Dex One, and the ashes persist as Thryv Holdings (THRY), but in the meantime it went through at least one investor-destroying bankruptcy)
Raser Technologies in 2009 (Nancy Zambell and the Oxford Club both teased this one)
Potash North in 2008 (Andrew Mickey).

A few caveats for this whole exercise, just to be clear:

  1. As I noted above, we don’t know what the specific advice was from any of these newsletters — maybe they doubled down on the stock when it dropped, maybe they stopped out or changed their minds the day after we covered the tease, we don’t subscribe so we don’t know… because all we know about a stock is when it was teased as a world-beater, we set our tracking to just assume that you bought the stock on the day the newsletter teased it and held it forever.
  2. And as a corollary to that, this is not necessarily a reflection on the newsletter pundit who promoted the Turkey — yes, we should use this moment to remind ourselves that the marketing pablum skews our perception and has to be actively ignored, but sometimes the newsletter editors don’t even really have anything to do with the teaser pitches their publisher uses… and the overall performance of a newsletter’s portfolio is presumably often different from the performance of their most actively touted “teaser” stocks.
  3. I am far from perfect, of course. I make dumb decisions and choose bad investments sometimes, too (though I at least don’t promise anyone they’ll get 5,000% gains by following my ideas), and this is not necessarily meant as a criticism of those particular newsletters — I think of the annual Turkey Award as being a bit more light-hearted than that, since we all do dumb things sometimes, but also as a reason to be cautious about exciting stories. The best way to do that is by pointing out, at least once a year, a few of those moments when the emperor, at least in retrospect, wasn’t wearing any clothes.

Past Turkey of the Year winners have won for lots of different reasons — sometimes they ended up being actual frauds or scams, with management who lied… sometimes they just borrowed too much money at the wrong time. Often they were sold as a story but hadn’t yet gotten past the first chapter and turned that story into a real operating business, and occasionally they were bets on a big event that failed (like a hoped-for oil discovery). What’s missing? There has (very) occasionally been a little bit of revenue growth behind a Turkey finalist, and once or twice one of them even reported a profit, but the winner has never been a company with any kind of history of rising revenues or growing earnings.

So what’s the lesson? So far, I’d say that it’s this: Stories disappear more easily than dollars. If you stick with companies who have proven their promise to some degree, with evidence of actual growth or meaningful profitability in their financial results, not just in their future daydreams and their investor presentations or in the minds of optimistic pundits, you can avoid bringing a Turkey home.

Happy Thanksgiving, everyone! Stock Gumshoe will be closed for the holiday, so enjoy your break from my blather — we’ll be back to dazzle you with more stories of promise and peril on Monday… thanks for reading!

P.S.: yes, for those who are no doubt already wondering, we do have an optimistic version of this look-back as well… right around the end of the year, usually between Christmas and the New Year, we’ll highlight the BEST teaser stocks picked over the last year. You can always peruse the Tracking Spreadsheets to give you a good idea of what’s coming, but we do try to highlight the winners, too.

Disclosure: Of the companies mentioned above, I own shares of Fastly, PAR Technology and GAN. I will not trade in any covered stock for at least three days, per Stock Gumshoe’s trading rules.

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wazuzu17
wazuzu17
November 26, 2021 11:10 pm

Always enjoy your “Turkey of the Year”,” Travis. Wish there were a way you could do a real service to your subscribers to somehow keep track statistically of the Newsletter promotors and name your “Newsletter Promoter Turkey of the Year” as well!…From everything I’ve read over the past year, Ray Blanco, Michael Robinson and the folks over at National Institute of Cannabis would be surely among the head of the pack. While naming the worst stock promoted is interesting, knowing who were the worst among the hucksters could save your subscribers one heap of a lot of hard-earned money and really earn you kudos.

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jonfitzg1
Member
jonfitzg1
November 29, 2021 11:08 am

My 2021 turkey is Appian (APPN). Made the rookie mistake of buying near ATH and currently riding the -65% total return wave. Guess I’ll just keep holding 🙂

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troars
troars
November 29, 2021 1:15 pm

What a fun read, and informative, as always. My personal Turkey buy is IZEA (Izea Worldwide) a so-called influencer project. What a bum buy! Thanks for the laughs.

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Dan Roseland
Dan Roseland
November 29, 2021 2:31 pm

I fell for the lifetime Louis Navalier deal. What a mistake I must admit. His track record in the last year is below the market. Not surprising that he was a past turkey of the year. If anyone wants the trading history I will be glad to provide.

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alexmoney
Member
alexmoney
December 8, 2021 6:30 pm

Luke Lango’s Power Portfolio 2022 released today – any idea about the 8 best class stocks ?

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alexmoney
Member
alexmoney
December 8, 2021 6:32 pm

Today I watched Luke Lango’s pitch together Lous Navellier and Eric Fry called Early Warning Summit 2020. Those guys joined forces to identified 8 best class stocks for 2022 on , they put them in a product called power Portfolio 2022 at the cost of US$ 1,799 today only (or US$ 3,00 after today). It is too high cost for me now.
Does anyone here subscribed to this and could share these 8 recommendations here ?

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Bryan
Member
Bryan
December 9, 2021 8:14 am
Reply to  alexmoney

I listened and would like to know the 8 stocks myself. Agree the $1800 is way too much. I’d probably be willing to pay $100 for them. Can we get 18 people and split the service?

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#Power Portfolio
Last edited 2 years ago by bmcdani
Bryan
Member
Bryan
December 9, 2021 8:22 am
Reply to  alexmoney

They also teased a cloud based operator that is taking share from Microsoft, Google, and AWS. Anyone have any ideas on that one?

drk_horse
Member
drk_horse
December 9, 2021 3:32 pm
Reply to  Bryan

Maybe DOCN…not sure exactly.

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segudge1
segudge1
December 9, 2021 10:59 pm
Reply to  Bryan

DOCN

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steve12556
Irregular
steve12556
December 8, 2021 7:15 pm

Motley fool tease: insiders say this technology will be bigger than internet

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Lewis B
Lewis B
January 7, 2022 12:06 am

I have been with Stock Gumshoe for two years and I enjoyed this annual Turkey event. For 2021, I picked CLVS. Travis, what do you think?

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Lewis B
Lewis B
January 9, 2022 10:53 am

One past turkey may turn into a phoenix one day. That will be LLNW. Let’s watch.

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