Today we’ve got a teaser that has already been solved, and it’s for a teensy weensy stock that has already experienced a dramatic surge in its fortunes over the past week or so just because a large publisher teased the stock… so you can probably predict that my sentiment is likely to be something along the lines of “don’t get too crazy with unprofitable microcaps” … but so many readers are asking and posting comments about this one that we should at least take a quick look.
The ad is from Jason Stutman’s Cutting Edge newsletter, which is one of the pricy ($799/year) “back end” newsletters at Angel. I’ve only covered one teaser pick from this service, and it turned out to be a terrible one back in the Summer of 2015, but I don’t know what the overall record might be for their picks — if they’re consistently choosing these $100-300 million market cap pre-profitability tech stocks they’re likely to have a lot of losers, so my guess would be that they rely on occasional 1,000% winners to offset the several near-100% losers.
(What does “back end” mean? Most publishers have “front end” or “entry level” newsletters that get you in the door at $49 or $79 and make a little money, but rely more on the “back end” newsletters that they sell to those folks as $500 or $5,000 “upgrades” to generate much of their profits, with these letters often positioned as trading in less liquid or more specialized investments like microcap stocks or options, and sometimes specifically limited in terms of readership size.)
Volatility and wildly uneven results for a portfolio are not that unusual for “growth” focused newsletters, or those that focus on tiny companies (whether biotech or junior miners or tech stocks), but it means you should probably take any individual teased stock with an especially large grain of salt — when it comes to an advertisement for a newsletter, the ability to “sell” the exciting story of a stock to readers is probably more important (to the publisher and the copywriter, at least) than the judgement about which stock in that newsletter’s portfolio is judged to be the one with the highest potential… and if the newsletter editor knew in advance which of his stocks would be the losers, and which would “win” enough to make up for the losers in his portfolio, well, he wouldn’t recommend the losers.
Sorry, that’s just my usual “buyer beware” note — I often feel extra compelled to add those kinds of cautionary statements when looking into the tiniest stocks, because even a cautious mention here in lil’ ol’ Stock Gumshoe is enough to move a stock sometimes. Particularly a stock with a $50 million market cap that only trades $50-100,000 worth of shares in a given day.
So given all that, what’s the stock?
The headline is what clearly grabbed the attention of our readers:
“Forget About Tesla and Solar City:
“This Company’s ‘Tiny Dots’ Promise to Turn the ENTIRE Renewable Energy Industry on its Head
“(And Its 15-Cent Stock Could Make You a Fortune!)”
And then the heart of the pitch, which is about how Elon Musk’s Tesla is about to become obsolete:
“Elon Musk’s supposed stranglehold over clean energy may be so overblown, in fact, that my team of researchers has recently uncovered a single set of documents that threatens Tesla as a company altogether.
“As a matter of fact, these documents threaten to disrupt not just Tesla, but the entire renewable industry as a whole…
“I’m going to show you how it will be possible to profit from these documents for many years to come. I’m talking returns up to 4,600% if you take action today.
“You see, these documents I’m about to reveal grant exclusive rights to incredibly powerful technology — a groundbreaking material — that stands to make Tesla, and companies like it, virtually obsolete.”
So what’s the 15-cent com