“The Next E-Commerce Superstar” Revealed (Motley Fool)

By Travis Johnson, Stock Gumshoe, August 17, 2010

The folks at the Motley Fool are right up there in the top ranks when it comes to over-the-top email marketing for their subscription newsletters, and the latest ad for their flagship Stock Advisor is no different — here’s how it opens:

“What if an ‘unmistakable signal’ could lead you to PROFITS of 832%, 935%, even 1,086%? (Yes, even in a market like this one!)

“Forget the ‘what ifs.’ This signal has already led investors like you to gains of 243%, 347%, 436%, 539%, 684%, 832%, 935%, and 1,086%.

“And it just started flashing again — meaning they could be on the verge of landing their biggest winner yet.”

I shouldn’t pick on the Fool specifically for this, since all the copywriters do it — but it is amazing that they can induce a Pavlovian drool response in us greedy investors even while using so many punctuation and disclaimer tricks, it’s worth noting that “unmistakable signal” is in quotes, that the first sentence is a question, and that the final question includes that key word “could,” favored by lawyers and compliance departments everywhere.

As I said, though, those same things can be found in every single promise-filled teaser ad for an investment newsletter, and I write about hundreds of these letters and their marketing hype pretty much every day … so why do it?

Because underneath it all, I know we’re all just looking for an interesting investment idea — and I hate to see folks get suckered into expensive subscriptions just to find out that the reality of their teased ideas is a fair sight less exciting than the copywriter’s conjured images of Xanadu. And while there’s always more to the story than you’ll get from the well-spun hype from the Motley Fool (or Stansberry, or Agora, or KCI Publishing, or Investorplace … the list goes on, they all use many of the same basic techniques), there are also some great-performing stock ideas that are justly touted by smart newsletter editors.

And of course, there are lots of good and informative investment newsletters that can expose you to new markets, teach you trading or investing techniques, and provide a good overall perspective — it’s just that none of them are as reliable at spinning straw into gold as their marketers would have you believe. In terms of monitored performance by Hulbert, the Gardner brothers with their Motley Fool Stock Advisor are in the top tier, beating the market in many years (we can’t compare most newsletters this way, since Hulbert only tracks about 200 letters out of thousands, but it’s at least a real and consistent measure), so let’s take a look and see what their latest breathless tease tells us to buy …

This latest pick is a Dave Gardner stock — which usually means it’s a growth stock, priced probably at a pretty high multiple and, as likely as not, in some sort of flash-bang hi-tech business. He has consistently favored rapid growers, to the extent that he even lists that as one of his key criteria for picking a stock: the rest of Wall Street has to have written it off as “too expensive.”

And the “unmistakable signal” that they are so careful to put into quotes? That’s when one of the Gardner brothers re-recommends a stock, the publisher tells us that this indicates an extra level of conviction and that it historically has led to even better performance than their other picks. Here’s how they describe this “indicator:”

“You see, every so often, David and Tom Gardner RE-recommend one of their past Stock Advisor picks. At first, I thought this was rather curious but insignificant.

“But now I know better!

“That’s because, as I told you earlier, I recently sat down and ran the numbers on every single stock David and Tom Gardner have RE-recommended. And as it turns out…

“David and Tom Gardner’s RE-recommendations absolutely CRUSH the market!

“In fact, if I had to invest my entire retirement nest egg in just one company, it would be a stock that David and Tom Gardner RE-recommended in Motley Fool Stock Advisor. Why?

“I’ve given this a lot of thought. And I’ve come to the inescapable conclusion that David and Tom RE-recommend the same company to their Motley Fool Stock Advisor members only when they are 100% CONVINCED it’s a surefire winner… and will become an even BIGGER WINNER going forward.

“Don’t forget, since April 2002, JUST 39 STOCKS have earned this distinction. And all told, these RE-recommendations…

* “Are OUTPERFORMING the S&P 500 by more than 100%
* “Boast a 116% AVERAGE return
* “And include stocks that would have made you NINE, TEN, and even ELEVEN TIMES RICHER”

So we know it’s a stock that has been in the Stock Advisor portfolio for at least a little while, not a brand new pick. What else are we told about this next “surefire winner?”

“…the revolutionary e-commerce company we’ve been talking about today was recently RE-recommended by David Gardner in Motley Fool Stock Advisor…

“Which is why Motley Fool Stock Advisor members are rushing to cash in — and why I want to give you the opportunity to join them.

“Of course, I could go on all day about how this mid-cap $14 billion company has stockpiled well over $1 billion in cash — giving it the option to fuel even greater growth through strategic acquisitions…

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“Or how it makes 75% of its income in overseas markets — which are MUCH larger and growing MUCH faster than the United States market is.”

So that sounds pretty good, right? How about some specifics about the company, the industry … or better yet, some numbers? They provide a few clues there as well. The letter tells us that this company follows in the footsteps of winners like Netflix and Amazon (Netflix, which I’ve been perennially wrong abo