“Double Your Money in 2012”

Squeezing in one last promise from the Cabot folks for the Friday File

By Travis Johnson, Stock Gumshoe, December 23, 2011

I thought we might be done for the year … but before we turn out the lights here at Gumshoe HQ for our Christmas week vacation, I couldn’t resist sharing one last teaser tidbit for you — after all, if you’re thinking about what to do with your money next year, what could be better than a promise to “double your money in 2012?”

That’s the pitch given by the Cabot Stock of the Month folks in their latest teaser ad … but I have to start you off with a bit of a caveat.

That’s because we’ve sniffed out similarly pitched teaser stocks before from Cabot — which look similar, promise the same kind of “double your money, guaranteed” action, and compare their hot new stock pick to their very successful selection of First Solar (presumably this means they recommended First Solar in 2007 — it’s been a trainwreck for most of the time since, and particularly for this year … enough so that I wonder whether their marketers realize what a bad taste FSLR leaves in investors’ mouths).

And of those previous Cabot Stock of the Month “guaranteed double” picks, can you estimate how many of them have actually doubled? Need a pencil? It’s OK, I’ll wait.

Yep, it’s “zero.”

There have been four stocks that were heavily teased with this “guaranteed double or your money back” pitch this year (or at least, four that caught our attention enough to feature them here in the pages of Stock Gumshoe): MercadoLibre (MELI), Seaspan (SSW), LDK Solar (LDK), and Sky-Mobi (MOBI). Only one of those has had a positive return, MELI’s 7% or so gain since June, the others are down pretty harshly for an average loss across the four of about 40%.

So the Chicago Cubs fans out there will have only one answer: they’re due. And I must admit, being a Detroit Lions fan myself, that I’ve got a certain sympathy for that sentiment.

Cabot’s Stock of the Month picks are pretty unlikely to be huge gainers in a weak market — most of the Cabot newsletters rely heavily on their own momentum screening that tends to pick out stocks that are market darlings and growing fast, not too different from folks like Louis Navellier, and when things get hinky in the market sometimes those stocks don’t exactly shoot out the lights. Sometimes they work very, very well, of course — and even in a weak market, genuinely outstanding growth will always be rewarded, so let’s give them another chance and see what pick they’re teasing as we close out the year.

Clues, please?

“Just Look at the December Stock of the Month and You’ll See Why I Can Make You this Money Doubling Guarantee

“Like First Solar, this company is also riding the wave of profit growth—but it’s in the biotech industry.

“You need only look at this company’s breakthrough cures for multiple sclerosis, non-Hodgkin’s lymphoma and rheumatoid arthritis to understand why our December Stock of the Month could be the biggest profit maker of all.

“That’s because this company’s profits are virtually protected from competition under the little-known Orphan Drug Act of 1983, which not only gives drug companies tax incentives for developing drugs for small market diseases but also enhances patent protection and marketing rights.”

A few more details? Naturally …

“… the company’s orphan drugs have as much as a 40% market share in the U.S. and a 30% market share in Europe.