“Unmistakable Signal is Flashing ‘Buy'” (David Gardner’s Motley Fool pick)

De-teasifying the latest pitch from the Motley Fool Stock Advisor

By Travis Johnson, Stock Gumshoe, August 15, 2012

“The ‘unmistakable signal’ that could lead YOU to profits of 246%, 631%, even 1,425%

“Only one in a thousand investors has even heard of it. But it’s delivered them an average return of 140% for more than ten years running.

“And the signal just started flashing AGAIN — pointing them to a surging stock that could be their biggest winner yet.”

That’s how the latest teaser ad for the Motley Fool’s Stock Advisor newsletter gets us started — this time the teaser letter is actually signed by a subscriber to the newsletter, a guy named Danny Vena, but the basic idea of the “unmistakable signal” is one they’ve used in ads several times over the years.

Basically, what they’re saying is that every time David or Tom Gardner re-recommends a stock, it does much better than the market… so that re-recommendation itself is the “signal” that a pick is extraordinary.

And there are plenty of examples they provide to back this up — both the Gardner brothers have re-recommended several stocks over the years, and many of them have been their best picks, stocks like Marvel (now owned by Disney, DIS), Quality Systems (QSII), Priceline.com (PCLN), Intuitive Surgical (ISRG) and Whole Foods Markets (WFMI). Of course, they’ve also occasionally re-pounded the table on stinkers, like Netflix when it was well over $200 a share (they also picked it cheap and got in very early, to be fair — they teased it at $17 a share in 2007, so folks who bought then are probably still happy if they hold the shares at $63 … it’s just that they kept saying it was a good buy at $200+ before the 70% collapse that started about a year ago), so the “signal” may not be entirely infallible.

Here’s how the ad puts it:

“Nearly all of Stock Advisor‘s biggest winners share one defining and extremely telling characteristic…

“They’re all stocks that David Gardner has re-recommended. Allow me to explain…

“Every month David recommends one stock to his Motley Fool Stock Advisor members.

“And, occasionally, when he thinks a stock he’s already recommended once makes for an incredibly compelling investment opportunity — either because of a temporary pullback in share price, or a new growth catalyst, or simply because he thinks it’s the very best company you can possibly buy at that given moment — he will actually double down and re-recommend it…

“That’s why I wasn’t surprised to see that David Gardner’s latest Stock Advisor re-recommendation is already up 20.8%… even though the S&P 500 has delivered just 2.4% in this same short period.

“If you’re worried this means you’ve missed your chance again… you shouldn’t be. Because what really fuels this stock’s growth (other than its 1,000 disruptive technology patents — both current and pending) is its ongoing defiance of Wall Street’s expectations.

“Here’s what I mean by defiance… on July 19, equity analysts at J.P. Morgan downgraded their rating of this company. But from that moment, it’s actually gone up… in just a few weeks, it’s clobbered the return of the S&P by a factor of more than 8 times.”

And he does actually insert a small note of caution, though it ain’t exactly in the bold type — he says that the “unmistakable signal… only generates a positive return about three quarters of the time.” So there’s your note of sobriety. But then he steps it up a notch because this is a rapid re-recommendation:

“Less than two months ago — for only the 6th time ever in his legendary investing career — David Gardner gave one of the picks on his Stock Advisor list an even STRONGER vote of confidence….

“Here’s the key statistic I want you to focus on: 6 months.

“As David will tell you, 6 months is usually too short of a period to evaluate a stock’s performance and potential. For starters, it includes only one quarterly reporting period.

“That’s why (until now) David has recommended a new stock — and then re-recommended it less than six months later — just 5 times in his entire career as an investor. A career that includes literally hundreds of stock picks.

“And those 5 recommendations have generated an average return of 440%.”

We’re told that this is a big vote of confidence because Dave Gardner re-recommended the stock very quickly, after just four months and 26 days … and that …

“… he isn’t issuing this ‘ultimate vote of confidence’ because the stock has seen a temporary pullback in price that represents a short-term misvaluation. Quite to the contrary, it’s already up 94% on his first recommendation. And now he’s signaling us again… that based on his analysis of the company’s outstanding fundamentals and its unique position in the marketplace, it’s poised to make an even BIGGER move.”

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Got it? So we want to know what stock he’s re-recommending, yes? Well then, on to the clues!

“… the companies he favors most are what he calls ‘Rule Breakers’ — businesses that completely reinvent their industry, or overturn it and create entirely new industries….

“… if you’ve been keeping an eye on the science world lately — like the recent “TED 2012” conference — you know that there’s only one technology right now that has this kind of disruptive potential.

“Researchers in Austri