“Hidden Government 100-F Documents Easily Predict Gains or Losses”

By Travis Johnson, Stock Gumshoe, August 7, 2008

Today we have the pleasure of yet another ad that includes a made-up name that sounds official …

This time, it’s the “100-F Document” — something that is filed in Washington, D.C. that will give you inside information into a company’s troubles, and let you bet against the company before it makes headlines.

And it’s all part of an ad from Dan Amoss for his Strategic Short Report newsletter — we’ve looked at these before, when we dug into what he called the “Paddle Strategy” for profiting in a bear market. To tell the truth, this ad is actually quite similar to that previous one, though I’ve not heard a lot from Dan Amoss in the interim (that Paddle Strategy campaign was back in January).

So what are we looking for?

Here’s the lead-in to the ad:

“Hidden Government ‘100-F Documents’ That Let You Predict Which Stocks Will Go up or Down

“Discover how one small group of Americans uses government-mandated “100-F Documents” to easily predict gains or losses for any household-name stock in America…

“On at least 58 different dates, each year…

“And how you can now use these same “secret” documents to post returns as high as 400–600% over the weeks ahead”

What the heck could that be? You know that we loooooove secret government documents here at StockGumshoe.com … even if you put the “secret” in quotes.

But unfortunately, this secret is just a little silly, and not all that secret. You see, 100 F Street NE is the street address for the Securities and Exchange Commission right here in my home town of Washington, DC.

So yes, 100-F documents are just SEC filings. You know, the same stuff you see almost every day if you’re an active investor — 8K reports, 10-K annual reports, Form 4 insider trading filings, etc.

It’s valuable stuff, but it ain’t secret. And despite what Dan tells us in the ad, the SEC filings of this magnitude do in fact have a big impact on stocks, regardless of whether or not the news makes the front page of the paper — the active and institutional investors who most influence prices are obviously watching SEC filings of all types.

And these are not particularly secret kinds of filings, either — for the most part, he’s just talking about the SEC-filed versions of the quarterly reports that we all hear about four times a year for virtually every US public company.

Here are a couple examples he gives of how one could have potentially profited from these “100-F” document filings:

“On Sept. 5, 2007, shares of Krispy Kreme would have set you back $6.26. Sounds like a bargain for a doughnut maker that once traded near $50 — but on Sept. 6, 2007, a “100-F document” filed in D.C. revealed it could go lower. And it did, sliding to $3.24 just four days later.”

“For nearly 14 years straight, Starbucks shares looked like portfolio caffeine…soaring to $41 per share. But a deeper look at the company’s “100-F documents” revealed a slip in store traffic…and the steam was off the mug. By November 2007, shares hit $24…when “100-F documents” filed on Nov. 15 and Nov. 29 exposed more bad news. By April this year, shares hit a low of $15.66.”

We’ll take them in turn, shall we?

That Krispy Kreme filing on September 6, 2007? That was their normal quarterly earnings report, their 10-Q. And it was awful. It was filed after the market close, and any KKD investor would have doubtless noticed it. The shares collapsed the next morning, closing the following day at $3.91 (they had been over $6 before the earnings release). They did dip further after that, and were at $3.24 a few days later — but you would have been hard pressed, as an investor, to decide whether the shares would dip further from $3.91 in the next few days, or whether they might recover a little bit, and there was nothing secret about the contents of the 10-Q.

Dan Amoss is implying that the information in the SEC filing would have enabled you to profit by betting against the stock when it fell by buying put options (which is certainly less risky than shorting stocks). That’s true, to some extent, but those put options would not have been cheap when the shares had already fallen 30% or so in a day, and he does not promise to have a time machine that could take you back to the prior trading day to bet against the shares at $6.

Essentially, this is an assertion that stocks that get clobbered by very bad earnings reports or similar data releases will keep going down after they get the initial clobbering. That’s certainly frequently the case, as investors who held through the first few hours of cataclysm lose faith in the following days and the herd of analysts d