This is the little ad snippet that sent me down a rabbit hole today:
“The $10 Company at the Center of a Revolution: It’s inked four deals with huge players in its sector, and it’s holding the keys to a potential global product. Click here to learn more…”
It led to an ad titled “The Secret of the World’s Greatest Stock Picker,” which is trying to sell us a subscription to Bill Patalon’s Private Briefing ($39 “on sale,” renews at $79) and a special report called “Cashing in on the ‘Smart Sensing’ Revolution.”
The “World’s Greatest Stock Picker” bit is obviously silly, but we should address it briefly… here’s how he sells himself:
“As of today, I am the world’s GREATEST stock picker.
“I don’t say this to brag – just to point out, based on every track record I’ve seen published today, nobody has come close to me.
“And when you see exactly HOW I’ve been able to help my followers get the chance at these windfalls, you’ll agree, I’m onto something that is very real, extremely profitable, and has NO end in sight.
“In all, as of writing this, I have 217 double- and triple-peak gain winners since I began keeping track in August 2011.”
No one else that I’m aware of publishes a list of their “double and triple peak gain” winners, of course, so it’s easy to have the best one… and his isn’t published either, so we don’t have any way to assess that list.
And, of course, “peak gain” is not a useful measure — that’s just claiming credit for the highest price a stock every saw after you recommended it. Most investors care about what their portfolio performance is like, and how they’re able to focus on strong investments and avoid bad ones… but if you’re just spitting out a few stocks a week and taking credit for the ones that went up, while not mentioning the ones that went down (some of them went down, of course, even in a bull market some stocks fail to rise), doesn’t tell us much of anything. There have only been 357 weeks since August 2011, did he present a thoroughly researched and interesting idea each week? Two ideas a week? How did they do on average compared to the (rising) market? We don’t know.
So yes, I’m sure Bill Patalon has picked a lot of winning stocks — in our history of tracking his teaser picks he has pitched a couple that have doubled, and a couple that have lost 100% (or nearly), which isn’t all that unusual in this universe (those are “hold until today” returns, of course, not “peak” returns for the magical beings who always sell at the top).
If he has recommended hundreds of stocks over the past seven years, it wouldn’t be at all shocking if 217 of them were up by double digits or triple digits (those are usually shorthand for the percentage gains — so double would mean it rose by somewhere between 10-99%, triple somewhere between 100-999%). After all, the S&P 500 has returned 140% to investors since August of 2011, and I imagine that if you had just said “Buy the S&P!” once a week for those 7+ years you’d probably have more than 100 triple-digit gains and about 200 double-digit gains (and, for the past year or so, some losses and tiny gains).
But anyway, we know those kinds of claims are silly… just wanted to point out a few numbers to help keep expectations in check. If you go in assuming he really is the “World’s Greatest Stock Picker,” well, then you’re probably not going to be as inclined as you should be to consider the idea carefully and skeptically.
So now we can move on — what’s this “$10 company at the center of a revolution?”
Let’s start with his “strategy” … here’s how he describes it:
“My method outfoxes Wall Street at its own game – and lets you capitalize on the ability to be nimble and fast-acting… running circles around the mega-investment banks, whose gargantuan size and massive holdings preclude them from making the same lightning-fast moves.
It works by first looking at thousands of pieces of economic research and data to identify what I call ‘Disruption Zones.’
“MY SECRET SYSTEM ENDLESSLY SEARCHES THESE ‘DISRUPTION ZONES’ FOR SMALL STOCKS READY TO EXPLODE
“Capital Disruptors: These are disruptors that affect the flow of money (cash, credit, digital, and others), how it is packaged and managed and how, where, and by whom, trades and transactions are intermediated.
“Paradigm Disruptors: These are disruptors that affect the fabric of humans’ daily lives and create transformational changes affecting the physical world, social constructs, and our individual existence.
“Systemic Disruptors: These are disruptors that influence the backbone of human society, and create transformational changes affecting how societies are governed, how states, businesses, and our lives are organized and managed and how the mechanics of existence and change operate.
“These are trends, technologies, movements, or sectors about to explode with profits as they dramatically change the status quo.”Are you getting our free Daily Update
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OK, so that’s what he’s looking for – “small cap disruptors.” Nothing shocking there.
He also says he looks for “impact triggers” — which means, to paraphrase, finding stocks that have something original or unique or a “first mover” advantage, some kind of big government or “big money” approval or backing, lots of insider buying or “knowledgeable outsider” buying, or “chatter” about a possible buyout.
Again, nothing terribly shocking — those are some of the criteria that lots of investors look for in identifying exciting “story stocks.” He also says he needs several triggers in place at the same time to recommend a stock.
And beyond that, he says he has a “seven-point data match” to further narrow down the choices, he says that his stock must score in the top 5% across several quantitative measures — including price to free cash flow below 10, 3+ executives buying, PEG ratio below 1, etc.
Which means the “disruption zones” could easily be a lot less significa