Yes, the title of this article is misleading, dangerous crap. Sorry, but I just took it directly from the ad — the ad I’m writing about today is from Patrick Cox for his Breakthrough Technology Alert, a relatively expensive ($895) newsletter that focuses on, well, breakthrough technologies, mostly stocks that we’d classify as biotechs or leading edge tech stocks, and almost all very small companies. I had a short list of several interesting teasers to focus on for you this morning, and the fact that this is being pitched as “The Last Stock You’ll Ever Need” pushed me over the edge.
So which is this last stock that you’ll ever need to buy? The ad is a very similar pitch to what Patric Cox has used before — his ads almost always talk about being in on the ground floor of universe-shaking ideas, of building generational wealth through incredible breakthroughs. Nothing boring in here about solid balance sheets, dividends, diversification, or even patience — though of course, most of the stocks he writes about are far from becoming large and profitable enterprises.
This is the most tempting kind of stock pitch: that there’s an idea so good that it can change the way you live, so good, indeed, that it can change the way your grandchildren live as you build a generation-spanning cache of lucre. The most prominent pitches from him in recent years have been for stem cell stocks like Geron (GERN) and BioTime (BTX) or early-stage biotech stocks fighting cancer or alzheimer’s, and occasionally for cutting edge stocks in other areas, like Lightbridge (LTBR) for their thorium reactor technology or NVE Corp (NVEC) for their spintronics patents. The same stocks tend to repeat themselves from time to time in his pitches, so a few of those (and maybe also today’s, we’ll find out soon) were also pitched in his ad a couple months back that promised a revolution whose impact would rival that of the printing press.
Today? We’re told, of course, that it might be the last stock you’ll ever want to buy — so who is it?
I’m not going to do a lot of direct quoting, since Cox doesn’t make the transcript of his “video” presentation available, but I’ll give you the gist. Here, at least, is the bold type intro:
“Only a Handful of Researchers and Experts In the Entire World Know What You’re About to See…
“The LAST STOCK You’ll Ever Need
“You’re about to witness a shocking, hidden story.
“This could also be the biggest market story in history.
“You must act on this urgent wealth creation event before Midnight, Monday, May 30th.”
The urgency of May 30 is not that there’s necessarily going to be any news out of this company … it’s that they’ll be taking down the ad presentation. Which will be a horrific loss to all of us, I’m sure.
But Cox does indicate that there are good things ahead in the near future for this company — partly because of his sunny interpretation of their actual work, and partly because of insider buying, which provides our first clue.
He says that the CEO recently bought 500,000 shares with his own money and now owns about 9% of the shares, and that insiders overall own about 30% … which does sound promising.
And he names an impressive list of institutional investors who also own the shares, like Goldman Capital, BlackRock, and Vanguard … though of course all good little Gumshoes know that finding a decent-sized stock without an impressive list of institutional investors is almost impossible. So that’s another hint, though not a particularly exciting factoid.
We get more hints as well — including that researchers at a “famous institute in Florida” and at Johns Hopkins University are “absolutely floored” by the breakthrough potential of this company … potential that Cox applies most urgently to Alzheimer’s Disease but that he says could also be a “supertreatment” for a baker’s dozen of big diseases and nasty conditions, including cancer, macular degeneration, stroke, obesity, erectile dysfunction, allergies, Crohn’s Disease, rheumatoid arthritis … well, you name it.
Why? Because he describes this company’s breakthrough as a potentially life-changing treatment that gets at the core problem behind many of these diseases: inflammation. He says that the “supertreatment” fights this core cause of pain and disease, and that it is derived from, among other things, tomatoes and red peppers.
So what’s the stock?
Well, if you decide this is the “last stock you’ll ever need” and throw all your money into it, please don’t come crying to me if that turns out to be entirely wrong, but this is …
Star Scientific (CIGX)
This is a company I’ve briefly mentioned in other articles on Patrick Cox teaser picks and he seems to have liked it for at least a few months now, which has helped the stock get some attention … though the far bigger news has been their ongoing patent litigation with the big tobacco companies, which was the spur behind much of the stock’s move earlier this year. It’s also a stock that I hold some call options on, so do keep in mind that I have a conflict on these particular shares (though now that I’m writing about it, I can’t trade in the stock or options for at least three days).
And yes, it’s a pretty small company — market cap now about $500 million, so not infinitesimally small like some Cox picks, but certainly small enough to move based on discussion board posts, minor news items, or even the comments of yours truly. Volume has certainly been quite high ever since the stock doubled following their latest good news from the courtroom in early March, so the stock is very liquid (ie, plenty of buyers and sellers) compared to some little biotech-y stocks that I write about.
There are basically two core businesses at Star Scientific — one is making healthier tobacco through their patented curing process that helps to reduce or eliminate toxins; and the other is, for lack of a better term, nutraceutical research. The first part is what moved the stock earlier this year, when a judge upheld Star’s patent on that curing process in a long-running dispute with Reynolds; and the second part goosed that a little bit when the FDA ruled that new versions of some of their “modified risk tobacco products” (basically, “hard snuff” lozenges with fewer carcinogens — the products are called Stonewall and Ariva) didn’t require FDA approval as tobacco products, but neither of those really gets at the heart of Patrick Cox’s pitch for the company.
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The real potential is that the alkaloid they’re isolating and producing from tobaco leaves, anatabine, will be a “supertreatment” for all kinds of inflammation, with the most exciting and lucrative one probably being Alzheimer’s at this point (since Alzheimer’s is probably the largest and most costly disease on earth that doesn’t have anything like an effective cure — it’s enough to give biotech investors paroxysms of greed, but the search for an Alzheimer’s cure has also brought down plenty of hope-filled biotech stocks and stymied pretty much every big pharma company at one point or another). And yes, anatabine is also present in tomatoes and peppers, though apparently it’s a huge ingredient in tobacco leaves so that’s a natural source.
Star Scientific’s pharmaceutical/nutraceutical arm, Rock Creek Pharmaceuticals, recently introduced a smoking cessation pill called CigRX that sounds like it’s basically made of anatabine — the theory being, I guess, that anatabine will help quell the nicotine cravings since both are present in tobacco and the anatabine is not considered addictive. They’re selling it directly online now, and presumably through other outlets as well, and I have no idea if or how it works. Beyond that, the hope is more exciting but also more ephemeral — Cox’s argument for near-term news seems to revolve around the fact that anatabine might get some attention as the next can’t-miss nutraceutical, and then everyone will start taking it and the demand will go through the roof. The stuff itself isn’t patented, just like you can’t patent vitamin C or nicotine, but they have filed a patent for an isolated anatabine isomer. No, I don’t really know what that means.
The potential is out there in “big picture news” and has inspired some excitement among researchers — the institute he refers to in Florida is the Roskamp Institute, and they’re doing a study now (or at least planning one — not sure on the timing) on anatabine that seems to be pointed at general inflammation and C-reactive protein. The compound’s name, in case you’re reading up, is now RCP-006. Roskamp’s focus is largely on Alzheimer’s Disease, and they’ve previously indicated that they’re beginning clinical trials in Alzheimer’s using RCP-006, but that more specific study seems to still be in the planning stage, according to the latest quarterly report.
And yes, the big dog at Star Scientific, and the man credited with discovering the tobacco curing technology or process that has been the core of the company, is CEO Jonnie Williams, and he did indeed buy about 500,000 more shares in early March, just about a week before they got the good legal news on patents. The price has more than doubled since then, and he does indeed own roughly 9% of the company (just under 12 million shares). The Tradewinds Master Fund is the largest single owner, they’re some kind of hedge fund operation and they own about 16 million shares — they say they’ve been buying for years and are invested for the long term based on the eventual potential greatness … and like Jonnie, they also bought the week before the patent decision (both buys were apparently part of a fundraising effort, they didn’t just buy on the open market).
I have no idea whether CIGX will really change the world — but I sure as heck wouldn’t call it the last stock I’m going to need, and my speculation in the shares through some options holdings is just that, a speculation in a stock that is very aggressively driven by news. If news is good, I might do very well, if news is weak or there is no news, I’ll probably lose my investment. Which is why it’s far less than 1% of my portfolio and I’m speculating with call options to strictly limit the amount of capital I have at risk … so if this turns out to be the biggest medical story ever, I’m probably going to miss my chance to create generational wealth. Dang.
Oh, and if it turns out to be just a story of blue sky potential that doesn’t pan out in the clinic or the marketplace? Well, I won’t have lost any sleep.
And just to finish up — yes the financials are terrible, and I have no reason to suspect that there will be any company news of substance before the date of May 30 that Cox throws out as the deadline (earnings came out about ten days ago). This one is really all about the “story,” whether you think the story is the potential for huge licensing fees from the tobacco companies (that was what caught my attention a while back), a revolutionary move toward healthier tobacco-derived smoking and snuff products, or a potential breakthrough someday for Alzheimer’s or inflammatory diseases and conditions.
They had less than a million dollars in revenue last year and posted losses of over $20 million, which is not the kind of company you’d want to buy for half a billion dollars unless you think the story is really, really exciting (as Cox certainly seems to) … and their most prominent current product, CigRX, which generated a substantial amount of those revenues and is in some kind of broader test marketing rollout, generated just $46,020 in the quarter. That’s thousand, I’m not leaving out any zeroes — Yahoo Finance tells us that the company currently trades for 662X sales … so no one is buying them for the present, this is all about the future.
Got a thought or a feeling on CIGX? I’m sure we’d all be delighted to hear it, just chime in using the friendly little comment box below.
P.S. I know you’re not asking, but just in case you didn’t read the whole article above and skipped straight to the P.S. … no, I do NOT think this is the “last stock you’ll ever need.” I don’t give financial advice and I’m not making recommendations here anyway, but if you’re tempted to sell your car and a kidney to buy CIGX shares, please slow down. And if you ever decide to bet your entire portfolio on a single story like this, please do not home school your children. A fun or speculative wager is one thing, going “all in” is another thing entirely.