by Travis Johnson, Stock Gumshoe | November 18, 2008 11:53 am
This particular teaser ad is the most popular and intriguing one that has come across in several months, if the number of forwarded copies and questions I’ve received is a reliable indicator. Though many ads now promise protection from calamity, and systems that can provide income or steady the waves for your portfolio, it appears that the “greed” impulse has not been eradicated. Promises of incredible returns are the mother’s milk of the financial newsletter industry, and amid the many teases for stable dividends, reverse ETFs, and MLP investments, it’s nice to see a teaser that promises real wealth creation in a hurry.
Nice for me, of course, because that good ‘ol stable stuff gets boring for a Gumshoe. Nice for your portfolio? Well, let’s have a look ..
The letter comes from Patrick Cox, who is trying to sell subscriptions to his Breakthrough Technology Alert newsletter for the (steeply discounted, of course) low low price of $495. He seems to focus on early stage technology, from biotech to semiconductors to robotics. Agora, the publishers, say they’ll give you back your money if you don’t like it after the first two months, so you can always give it a shot if you like. The special report that they’ll send you, “Three Generations of Wealth from Four Breakthrough Companies” apparently goes into, you guessed it, four companies with new technology that could make us rich.
Or you can stick around, and see what wisdom comes out of the Gumshoe community …
Here’s how this sell comes screaming out of the email:
“Your Great-Grandfather Saw the Railroad Come to Town, But Did He Profit From It?
“Your Grandfather Watched the First Model T’s Roll Down the Street. Did He Get Rich?
“Your Father’s Generation Witnessed the Rise of Computers. How Much Did He Make On Them?
“The Next Massive Wealth Creation Starts NOW. Here’s How YOU Could Give Millions to Your Family’s Next Three Generations.”
We’ll forget for a moment that these particular comparisons are fairly frequent — I remember seeing WiMax compared to the railroads, too, and many new industries have been described as the next great wave that will compare to the birth of the personal computer, from GIS systems to smart phones. And of course, just last week we looked briefly at the company that’s building the “next Model T,” India’s Tata Motors.
These kinds of massive commercial and societal shifts are not so easy to predict in advance, of course — and even if one can predict them it can be extraordinarily difficult to flag the particular companies that will become the profitable survivors of these new industries. That’s not only because the emergence of industrial leaders often seems obvious only in retrospect, but because commercial success rarely goes to the first-level inventors or innovators.
Bill Gates didn’t invent operating systems, or, later, graphical interfaces or web browsers, and some claim that Microsoft’s products were far from the best available — but he led his company to take better advantage of the personal computer revolution than anyone else. Henry Ford invented neither the car nor the assembly line, but he improved both and managed his company to a goal of mass car ownership better than anyone else (including, depending on your perspective, a paternalistic capitalism that formed the basis for Detroit’s economy for almost 100 years — that his workers would be the first market for the cars, and must be able to afford them). Like Gates, Henry Ford spent much of his life as the world’s wealthiest man. Buying the best emerging manager is probably better than buying the company with the best product, but that, too, is a crap shoot most of the time.
Will that happen to one of the companies this newsletter is teasing us about? It’s possible, I suppose, but I do hope we’ve all seen enough of these ads that our enthusiasm is at least somewhat tempered by a healthy measure of doubt.
Now that I’ve been a killjoy, let’s look for some stocks!
The tease is that there is a massive revolution in human medicine, a way to help the body to heal itself … here’s an excerpt:
“Imagine a sick person. This person can have one of a hundred illnesses or diseases.
“Now imagine the diagnosed person getting a few shots. Or taking a few pills. The disease goes away. The patient is free and clear.
“Then, doctors give the patient a few more shots, and whatever organ or system in the body that was harmed by the disease repairs itself. Just like new.
“Better yet, after the disease is gone, the shots given to the now healthy patient could turn whatever organ or system was damaged into that of a stout 20-year old person.
“For example, let’s take a retired gentleman who has a heart attack. This man receives a series of shots that rebuild his heart — make it young again — giving him the heart and vascular tree of a healthy, vibrant 20-year old.
“I know that sounds strange — but, then again, so did the railroad. And so did the idea of mass-producing an affordable car — until the Model T rolled out of the factory.
“And you know that no one thought almost every American home would have a small, personal computer in the 1980’s…but it happened.
“What I’m describing could reverse cancer — wherever it may occur. Then repair the afflicted organ or organs.
“Imagine giving sight to the blind. Memory and vitality back to those with Alzheimer’s. Cures for Parkinson’s…Type II Diabetes…the list is endless… Just imagine the potential…
“Pills and shots. That’s it. Simple. Safe. Painless. Quick. Revolutionary. Profitable.
“And a way to cure, rebuild, and repair the human body.”
This could be a few things, but one thing that is definitely part of this regenerative medicine revolution is stem cells — the unidfferentiated cells, whether from embryos, genetically engineered, or created from existing adult tissue, that can transform themselves into whatever kind of human tissue is required to cure sick organs, repair damaged bones, etc. We’ve all heard the promise of stem cells — and, for embryonic stem cells, the political debate — for decades, and stem cell pioneers have won the Nobel Prize.
Today, since we have “only one day left” before the big catalyst, I want to look briefly at the main company that’s teased by Patrick Cox in this ad. I’ve got a sick child on my lap as I type, so I apologize if I’m unable to get into the same detail as I usually like to. Plus, I don’t understand half of this stuff — we may have to get the Gumshoe doctors and researchers involved here to explain the details for you, if they’ll be so kind (or at least, the people who didn’t fall asleep in biology class).
The only company that this ad really teases in detail is one whose leader is presenting a talk on November 19, and the ad makes a lot of hay out of the fact that Cox believes this Nov. 19 speech will be the first massive catalyst for the industry — so, of course, you MUST subscribe to the newsletter and get the instructions for buying the stock NOW, there’s only one day left!
Or, of course, you could just read a bit more. I know I can tell you the name of this November 19 company, and perhaps soon we’ll something useful about the other three stocks teased, too.
“This Patent-Protected Advance is a Win-Win For You — But Only if You Act Before Nov. 19
“One of the brilliant men I will introduce to you in Three Generations of Wealth from Four Breakthrough Companies controls key intellectual property directly related to the development of the shots I’ve been telling you about.
“Each and every one of these patents could hold millions in value. They could be the key to a lifetime of profits for his company, and for you.
“This man’s a shrewd businessman too. I estimate his intellectual property today to hold conservative value of over $200 million. In truth, it could be worth many, many times that amount.
“How much did he pay to get it? A measly $1.2 million.
“And he walked away with exclusive rights to his own research. He did it. He owns it. He controls it. It’s his. The eventual profit explosions are going to go through him.
“Because his new company could some day very soon turn even a small block of shares into a wealth legacy like that of the Vanderbilts or the Fords …
“This researcher is giving a speech to a respected and heavily followed scientific organization on the grounds of a famous university on Nov. 19. I believe the media story about his work could pick up immediately afterward — meaning the press won’t be able to miss it.
“The speech this CEO is giving will be in front of all the biggest movers and shakers in the industry. Scientists. Researchers. Public relations folks — hundreds will hear his remarks.
“Starting on the morning of the 20th, the ground floor for his company might be nothing but a distant memory.”
Well, the man who’s giving this speech is Michael West, CEO of BioTime (BTIM, trades over the counter). And as far as I know, the speech itself is just an anniversary celebration about the last decade of stem cell research, with probably some projections about future developments. I’ve seen no indication that any company specific news or breakthroughs will be released, though I suppose it’s always possible.
The stock is already up quite a bit over the past couple days, and I would wager that all of that advance is a result of this big newsletter ad campaign — they’re convincing folks that BioTime will be a huge growth story, and people apparently believe the speculation that Smith’s keynote address at the “Decade of Celebrating Stem Cells” conference at the University of Wisconsin will really be some sort of catalyst.
Personally, though I hate to be a humbug, I’d guess that BioTime will be giving back its recent gains fairly soon unless there really is something dramatic and new out of Dr. Smith’s mouth at this conference. I see companies move like this quite frequently — a newsletter picks an urgent date and promises that you need to be in before that date to maximize your returns … when the date passes with relatively little news, as is true most of the time, the excited traders who piled on after subscribing to the newsletter sell the stock and it goes back to it’s “natural” level where it traded before the extra attention came down from the skies. My guess would be that the announcement from BioTime last month, that they had some new agreements in place, was bigger for the long term prospects of this specific company … and that the September announcement that they had inked the licensing deals for stem cell technologies was larger still. That acquisition of the stem cell licenses appears to be what really moved BioTime’s stock price — it was trading around 50 cents a share in the Summer, then shot up over $1.50 in September and, in the past couple days, up another 40-50% or so on the enthusiasm of Breakthrough Technology Alert subscribers.
And if we’re placing bets, I’d wager not only that we’ll eventually give back this 40% advance if tomorrow’s speech is uneventful, but that they won’t waste a great advertising letter like this for just one week of swamping email inboxes. I predict that they will repurpose the ad sometime in the next few months, choose a new date in the future (could be an earnings release date for one of the companies, or a date when a company’s study or medical trial should move forward, or another speech, whatever), and try sell the newsletter again.
So that’s what’s happening with the share price this week, in my opinion. What is BioTime?
BioTime is indeed in the stem cell biz — this company aims to supply the tools to reproduce stem cells, which Smith likes to call “progenitor cells.” They do have access to a lot of cell lines, and technology to reproduce them … whether they have a lot of competitors in that technology, or they have an advantage, I have no idea.
The announcement of BioTime’s licensing of the patents from Advanced Cell Technologies, Dr. Smith’s previous company, is here, if you’re interested — it was indeed a deal for $1.25 million, though it was really for $250,000 plus a maximum of one million in royalties if this pans out. They call the technology ACTCellerate, so you may find that name mentioned as you’re doing your research.
It looks like, for at least one of the other stocks involved in this teaser which is working on delivery systems for these miracle therapies, that a possible candidate is CytRx Corporation (CYTR), which just last month licensed technology for oral delivery of RNAi therapeutics … but I’m not as sure about that one yet (even though it’s also up big at the moment, a 20% gain so far this morning), I’ll try to get to it in the near future if it looks promising.
So sorry to leave you hanging for the moment … I don’t know whether BTIM or CYTR is worth your money or has a bright future, both are far from profitable but certainly interesting, so I hope this just gets you a small start on your research.
And remember, you didn’t have to be perfect and catch the right price to get wealthy from the railroads, or personal computers, or any other revolutionary technology that developed over years and decades, there was plenty of time to get on board during the climb, including plenty of times when those investments probably seemed terrible to their investors.
But in many cases, you did have to pick the right companies.
Rarely has being patient enough to watch leaders emerge, or at least to understand industries, companies, and competition, not paid dividends … and patience seems particularly valuable these days. Good luck to you, and happy investing.
By the way, there has been some discussion of this one over at the forum, too, including some folks who speculated about the same companies I mentioned above and some other possible candidates, including old standbys like StemCells (STEM) and Geron (GERN), before I got around to writing today (good work, folks!) — feel free to share your thoughts either here or there.
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