You should follow Eddy Elfenbein on Twitter, he’s a funny and interesting guy. But you shouldn’t sign up for his newsletter just to learn a “secret” stock pick.
I’m not picking specifically on Elfenbein there, of course, just my regular public service announcement that sending money to someone to learn about a stock pick that you’re convinced will change your life is a recipe for disaster. It might work, of course, and odds are pretty good that any growth stock picked in the past five years worked out pretty well… but it really short-circuits your ability to analyze or even think clearly about a stock.
If you’re like most people, then you are strongly influenced, at least in your subconscious, by the first thing you learn about a company, that sets the basic foundation of your knowledge… and you are also likely to be biased in favor of anything you just paid for, because we like to justify our decisions and remind ourselves that we’re smart. That sets you up with a double-edged behavioral bias if you pay for a secret stock pick — you’re both more likely to believe the hype in the original ad, because it’s the basis of your understanding for this company (assuming it’s new to you), and you’re likely to follow the advice in the newsletter without doing much thinking on your own, because you paid for it and your brain will push you to reinforce that decision (I paid for it, so it must be good, and I’ll prove that by buying the stock!).
So that’s a big part of why we do what we do here at Stock Gumshoe — push back on that temptation to “buy” a stock pick by subscribing to some newsletter that you don’t know anything about otherwise. I’m hoping for two things: That you won’t commit to something you don’t need or want just to get a “stock tip,” and that if you learn the names of these stocks for free, courtesy of the Thinkolator, that this will give you a better chance of thinking clearly about both the upside and downside potential and buying something that fits with your needs and priorities and risk tolerance.
People often ask me if I hate newsletters, and, of course, I don’t. I don’t subscribe to them, because that wouldn’t be fair if I’m sniffing out their secrets based on their ads… but I have subscribed to some in the past (before my work here at Stock Gumshoe), and I’ve seen many sample issues and heard from many happy subscribers from a variety of newsletters. I know that some newsletters are educational, informative, entertaining, and sometimes even profitable for those who follow the advice, and that the editors are often more reasoned and careful than they sound in the hyped up ads their publishers use to hook new subscribers… but I also know that none of them can match up to the image you probably have from their hype-filled teaser ads about infallible 200% or 10,000% gains, so let’s get that part out of the way and let you think about both the stock and the newsletter with, one hopes, a clearer mind.
Sorry about that, sometimes I just get inspired to explain what we do here — I know we have lots of new readers every month, and sometimes it’s not clear.
But now I’ll move on to the task of the day — let’s check out Eddy Elfenbein’s latest ad for his Growth Stock Advisor, which is an entry-level growth stock picking letter ($49 for the first year, renews at $99, and unlike most expensive newsletters they do offer refunds if y