Today I’m looking into an insider trading pitch from a service I haven’t heard of before — the ad is staged as a “seminar presentation” by Ross Givens about how he follows insider buying signals to pick winning stocks, with the implication that he’ll be finding ideas that match some of the historically phenomenal insider buys he found through data mining.
And that’s dangerous, of course, because the 1,000% gain charts in the presentation that catch the eye of investors are not at all common.
They’re selling a subscription to their Insider Report service, which they say will have regular recommendations of stocks that have insider buying patterns, and Givens is starting out with three ideas in a special report that he thinks can double by the end of the year. The service is “on sale” as part of their hard sell offer at $1,997, but do note that they also advise you to take a “free trial” of a “War Room” service that renews at $97/month, and that the basic service will autorenew at $4,997 a year when your first year expires, with no refunds (as with so many other high-cost letters, if they fail to meet the “guarantee” that you’ll have the opportunity to make $100,000, the recourse is not that you’ll get your money back… but that if you complain, they’ll offer you a second year for free).
I don’t know Ross Givens, and am not aware of whether he has a good track record of picking good stocks or providing an interesting service, but do note that if you’re spending $5,000 a year (or $2,000 for that first year) for advice, then you should think of that similarly to how you think about the expenses that a mutual fund or ETF might charge. If you’re only thinking you’ll invest ten or twenty thousand dollars in this strategy, or even $100,000, then you’re spending a lot for that advice. I’d always hesitate to spend more than 1-2% of your portfolio to get actionable investment advice, research and education, and even that’s a lot when you can just match the market with global index funds at essentially no cost.
We don’t know what the stock picks are, of course, that only gets revealed to subscribers, but we do get some hints about one of them in the email that introduced the ad — so we’re going to look into that now. Ready?
These are the clues about that secret stock pick:
“Now, this particular pick is in the biomed sector, which has been red-hot in the wake of the coronavirus outbreak.
“Over the past nine months, this company’s shares have shot up 213%…
“And the number of institutional funds owning a piece of this stock has increased 112% as well.”
And then we get the insider buying signal that caught Givens’ attention:
“… a key board member dumped $348,750 of his personal money into the stock early last week…
“This particular board member happens to be the former CEO of Foundation Medicine, and he’s also served in numerous senior leadership positions at other leading biotech companies.
“This is the first investment he’s made into his current company…
“And at $350k, he’s definitely showing plenty of conviction.
“I immediately recommended my subscribers invest alongside our friend… “
So what’s this stock? This insider, sez the Thinkolator, is Troy Cox, and the stock he bought recently is Zymeworks (ZYME). Cox joined ZYME’s Board of Directors last summer, and then he bought 7,500 shares on January 27 as part of a secondary offering, at $46.50 per share (yes, that adds up to $348,750, in case you’re keeping track).
This is a development-stage biotech, so they don’t have a lot of revenue and they aren’t profitable — like any biotechs, I imagine they will trade based on clinical results, and while Troy Cox might have a good understanding of the company at this point he shouldn’t know anything about the results of their current clinical trials. The good news, I guess, is that the secondary offering did bring the shares down slightly from all-time highs, so you could buy the stock a little bit cheaper than he did if you’re interested.
Here’s how the company describes itself:
“Zymeworks is a clinical-stage biopharmaceutical company dedicated to the development of next-generation multifunctional biotherapeutics. Zymeworks’ suite of therapeutic platforms and its fully integrated drug development engine enable precise engineering of highly differentiated product candidates. Zymeworks’ lead clinical candidate, ZW25, is a novel Azymetric™ bispecific antibody currently in Phase 2 clinical development. Zymeworks’ second clinical candidate, ZW49, is a bispecific antibody-drug conjugate currently in Phase 1 clinical development and combines the unique design and antibody framework of ZW25 with Zymeworks’ proprietary ZymeLink™ cytotoxic payload. Zymeworks is also advancing a deep preclinical pipeline in oncology (including immuno-oncology agents) and other therapeutic areas. In addition, its therapeutic platforms are being leveraged through strategic partnerships with nine biopharmaceutical companies.”
And that’s about all I know about them. They did post a strategic update/2019 review press release a few weeks ago that includes their current plans, and they do have a couple clinical trials ongoing that could provide stock-moving news at some point this year, though they’re all listed as “enrolling” at the moment and I don’t know of anything imminent.
He also hints at three other picks that are buys right now and that are in his “special report”, the one that I could recognize without going back and recording part of the seminar is Safehold (SAFE), which is a REIT that owns ground leases (the land under the building, not the building itself) — Givens says he thinks the fact that the CEO has been buying and money flooding in means that it will rise by 150-200% this year.
I think that one’s absurdly overvalued at this point, it’s basically the safest part of the real estate ownership structure but also has extremely long-term and low-rent ground leases so the dividend doesn’t appear to have any chance to grow aggressively unless there’s something surprising in their future that I don’t see, and it yields less than 1.4%.