Since the Stock Gumshoe’s vacation hiatus is just about to begin this morning, I thought I’d share a quick bonus for those of you who are not yet members of the Stock Gumshoe Irregulars — this article first appeared in the Irregulars Friday File on July 10, and it has not been updated. Daily articles will resume in this space the week of August 17 — have a great couple weeks, everyone!
This latest ad from the Motley Fool Stock Advisor that I thought I’d look at today briefly mentions one of Tom Gardner’s favorite picks, Dolby Labs (DLB), but I uncovered that pick for you way back in October of 2007, when they had just begun to use in their promos. When they find a favorite, they really stick to it.
Which is why it’s slightly surprising that when they picked a genetic assay company, they didn’t go with the old Rule Breakers pick Affymetrix — but not a big surprise, I suppose, since my memory of Affymetrix being a Rule Breakers favorite is several years old, and it doesn’t appear (based on their disclosures) to be in the portfolio anymore. No, they’ve gone with a larger competitor.
The ad is actually written from the perspective of a subscriber to the Stock Advisor, Dr. Christopher Tilmann, a “lab rat” who says he is not being compensated for his endorsement, he’s just touting the Gardner brothers because he wants to spread the wisdom that helped him back when the Gardners were in their tech-bubble heyday, with David picking out winners like Amazon and AOL and holding firm for big profits (yes, and big losses from the peak when they held many of them through the pop, though many were still profitable picks). If so, I hope Tilmann is being otherwise rewarded for his volunteer hucksterism — they’re certainly going to make some money off of him.
This latest ad is about the human genome, which means we quickly get into areas that I don’t understand at all … we can all read a balance sheet, of course, but reading a genetic map is another thing entirely. The argument is that we’re on the verge of the next real breakthrough in technology and medicine, with the cost of mapping an individual’s DNA drops from the $13 billion that the Human Genome Project swallowed to now about $50,000, and that the real revolution will come when it hits $1,000 and becomes a regular part of every doctor’s work. Tilmann says that “experts predict the $1,000 genome could be announced by 2011,” and I’ll take his word for that — of course, you can get an expert to say anything you like, but we are at least on that path.
He goes on to say that the single secret of great wealth creation is the reduction of consumer prices — in his words, “the best investments cause massive reductions in consumer prices.”
That includes bringing computers to the masses when Apple started to popularize the personal computer … streamlining assembly so Henry Ford could build cars that his factory workers could afford to buy, etc. etc.
So what does that have to do with us? Reducing the cost of mapping an individuals DNA will mean the market explodes in size, bringing riches to those who make the materials and testing equipment. At least, that’s the theory here.
Here’s a longer excerpt from the ad letter, it includes most of the clues we’ll look at …
“So if you’re interested in learning more, and being a pitbull on the pant leg of this rare $1,000 genome opportunity. I congratulate you. Because your timing couldn’t be better…
“‘June 8, 2009 — Rival scientific teams, including three in the Bay Area, are racing to devise next-generation sequencing technologies that can accurately decode an entire human genome in less than 30 minutes for $1,000.’ — San Jose Mercury News
“The company David and Tom Gardner are recommending has a position INSIDE THE VORTEX OF THIS HISTORIC WINDFALL! It’s a top seller of genetic diagnostic tools to research labs and universities all over the world… at the same time it’s rolling out announcement after announcement about genome sequencing in record-breaking times, at lower and lower costs.
“The stock has returned an astounding 1,105% over the last 5 years — a period when the S&P 500 has lost 19%. More recently, over the last 12 months… during one of the most difficult years in history for most companies… revenue at this company grew a jaw-dropping 48%.
“How is this company, and its investors, raking it in when the biggest, most powerful companies in the world are in a fight for their lives? The answer is straight ahead. But first, I should tell you why I’m so excited about a stock that’s already up this much…
“This company’s stock isn’t soaring on the promise of some pie-in-the-sky technology. Its business is already massively profitable, with revenue easily topping $500 million in 2008. You see, long before the $1,000 genome was on the horizon, this company pion