Tobin Smith’s “99% Sure Thing to Double Your Money”

By Travis Johnson, Stock Gumshoe, January 28, 2008

OK, so leaving aside the fact that if you ever see a subject line like that in your email, you’re probably better off just deleting it, let’s take a little Gumshoe gander at the latest campaign from Toby Smith’s ChangeWave MicroCap newsletter.

For those who don’t know him — and how you could avoid his presence, I don’t know — Toby is a frenetic, glad-handing, bombastic, and very friendly guy (I mean all of this in the most loving way possible, he’s just larger than life compared to many of the quieter, bookish newsletter guys). He fronts a few newsletters and manages his “ChangeWave Alliance” research group that polls users to plumb their experiences for stock ideas in exchange for a free subscription to one of his newsletters. I’ve heard from a fair number of readers who like his relatively low cost ChangeWave newsletter, but no one yet who’s a great lover of the MicroCap version. He’s also one of the talking heads on Fox News’ Bull and Bear financial show, though I’ve never watched it.

As you can imagine, microcaps have been a tough place to be during the recent “flight to quality”, which I suppose is why he is offering such a strident guarantee of your success with the names he has in mind. Just to be clear, this is his exact wording:

“… these stocks are a 99% sure-thing to quickly double your money when the current mess is over and the market, as a whole, comes back. (Yes, I’m holding back 1% of doubt – you and I both know there’s no true sure thing in this world outside of death and taxes. But in investing this is as close as it gets.)”

He teases three different microcap stocks in this teaser ad, and notes that we could pick up 100 shares of each with our “risk capital” (as if any of it is not “risked”) for about $500. For all three, not for each one.

His basic argument is that these stocks used to be higher, their businesses and prospects haven’t changed, and if the market recovers they should go back to their old highs. Maybe a compelling argument for some, arguing not for a reversion to the mean but a reversion to a high, but it reads a little thin for me.

Let’s look at them one at a time.

The first one: “Completely changing the networking game (Was $2.30. Now on sale for 80 cents)”

I happen to know that one without any more clues, since we’ve done it before, but just to keep you in suspense …

“This company has perfected and commercialized a new ‘switch technology’ that blows away the competition, including Cisco Systems.”

“Its breakthrough technology delivers up to 1,000 times the speed for about one-fourth the price of older technologies.”

“[how?] By using a series of small high-performance switches, connected by fiber-optic links. They behave like a single, direct switch – even though they’re separated by distances up to 25 miles! … Goodbye, hub and spoke. Hello HUGE PROFITS!”

This one is probably the Toby Smith microcap I’ve looked at more closely than any other, because it was teased so heavily that I wanted to watch how his recommendations and his ads might be moving the stock price. That writeup from August is here if you want to check it out