Promoted Stocks: Losses All Around; There’s No Tiger in the Tank

Okay, time to roll the promoted stocks scoreboard:

Ticker Date of Article Price @ Article Price @ 12/30/13 Decline Annualized Splits
GTXO

5/27/2008

2.45

0.009

-99.6%

-63.2%

BONZ

10/22/2009

0.35

0.001

-99.7%

-74.2%

BONU

10/22/2009

0.89

0.001

-99.8%

-78.6%

UTOG

3/30/2011

1.55

0.002

-99.9%

-91.1%

OBJE

4/29/2011

116.00

0.230

-99.8%

-90.3%

1:40

LSTG

10/5/2011

1.12

0.012

-98.9%

-86.9%

AERN

10/5/2011

0.0770

0.0001

-99.9%

-94.9%

IRYS

3/15/2012

0.261

0.000

-100.0%

-100.0%

Dead
RCGP

3/22/2012

1.47

0.140

-90.5%

-73.4%

STVF

3/28/2012

3.24

0.430

-86.7%

-68.3%

CRCL

5/1/2012

2.22

0.024

-98.9%

-93.5%

ORYN

5/30/2012

0.93

0.030

-96.8%

-88.5%

BRFH

5/30/2012

1.16

0.610

-47.4%

-33.3%

LUXR

6/12/2012

1.59

0.012

-99.2%

-95.7%

IMSC

7/9/2012

1.5

0.850

-43.3%

-31.9%

DIDG

7/18/2012

0.65

0.053

-91.8%

-82.2%

GRPH

11/30/2012

0.8715

0.024

-97.3%

-96.4%

IMNG

12/4/2012

0.76

0.050

-93.4%

-92.1%

ECAU

1/24/2013

1.42

0.248

-82.5%

-84.7%

DPHS

6/3/2013

0.59

0.006

-99.0%

-100.0%

POLR

6/10/2013

5.75

0.050

-99.1%

-100.0%

NORX

6/11/2013

0.91

0.096

-89.5%

-98.3%

ARTH

7/11/2013

1.24

0.290

-76.6%

-95.4%

NAMG

7/25/2013

0.85

0.290

-65.9%

-91.7%

MDDD

12/9/2013

0.79

0.480

-39.2%

-100.0%

12/30/2013

Median

-97.3%

-91.1%

Before I talk about tonight’s loser-in-waiting, let me tell you what happened to Makism3D, the last company I reviewed.  Four days after I reviewed it, the SEC suspended trading, and it reopened on 12/30, falling 49% on the day.  Dig the price graph:

promoted stocks

The SEC is getting more aggressive about suspending trading in companies that are being promoted.  Some suggest that publishing pieces like this, or others at Seeking Alpha, is encouraging the SEC to be more bold.  If true, that is good.

Now for our loser-in-waiting — Tiger Oil & Gas [TGRO].  I ran into TGRO via an ad on Bloomberg.com.  It led me to this spammy article, which led me to this even more spammy article.  If I were invests.com, I would be more protective of my reputation.  I get all sorts of requests to publish low quality articles at Aleph Blog, maybe 50 per month.  You can make money doing that in the short run, but I never want to treat my readers in such a bad way.

And if I were Bloomberg.com, I would not let them advertise.  Because I write these articles, sadly, I get ads for them, but if I see those ads, I tell my ad network to stop running them.

TGRO is another company that has no revenues, negative income, and negative net worth.  Sound familiar?  Maybe Congress should ban “development stage companies.”  I’ve never seen one that was worth anything.

Here is the beginning of the disclaimer:

This report is for informational purposes only, and does not represent a solicitation to buy or sell the profiled company’s securities, which trade under the symbol TGRO, nor any other securities. StockTips.com is operated by Amerada Corp. (AC). Neither AC nor its employees are certified financial analysts or licensed in the securities industry in any manner. The information in this marketing piece and any accompanying information is subjective opinion and may not be complete, accurate or current and was paid for directly or indirectly by shareholders of the profiled company who may or will profit as a result of the preparation, publication and distribution of this marketing piece and accompanying information. AC expects to receive $2,500,000.00 (TWO MILLION FIVE HUNDRED THOUSAND DOLLARS) as a marketing budget for production and distribution of TGRO marketing material from an unaffiliated 3rd party, Laluna Services, Inc.

And that is what paid Bloomberg.com to give them the top link on a box to the side.  The amount paid is 5% of the present market cap, but 30% of the market cap prior to the promotion.  Look at the price graph:

I should add that this was a operating chemicals company 2007-2010, and another development stage company prior to that.  Such behavior where a company is in the development stage indicates that there is little if any underlying business, and that it is merely a machine to suck money out of the pockets of naive investors, and into the pockets of promoters and insiders.

As I often say, “Don’t buy what someone wants to sell you.  Buy what you have researched and think is valuable.”  Particularly with intangible items like stocks, those who are directly paid to promote stocks are almost always scammers.

Avoid promoted stocks.

By David Merkel, CFA of Aleph Blog



About the Author

David Merkel
David J. Merkel, CFA, FSA — 2010-present, I am working on setting up my own equity asset management shop, tentatively called Aleph Investments. It is possible that I might do a joint venture with someone else if we can do more together than separately. From 2008-2010, I was the Chief Economist and Director of Research of Finacorp Securities. I did a many things for Finacorp, mainly research and analysis on a wide variety of fixed income and equity securities, and trading strategies. Until 2007, I was a senior investment analyst at Hovde Capital, responsible for analysis and valuation of investment opportunities for the FIP funds, particularly of companies in the insurance industry. I also managed the internal profit sharing and charitable endowment monies of the firm. From 2003-2007, I was a leading commentator at the investment website RealMoney.com. Back in 2003, after several years of correspondence, James Cramer invited me to write for the site, and I wrote for RealMoney on equity and bond portfolio management, macroeconomics, derivatives, quantitative strategies, insurance issues, corporate governance, etc. My specialty is looking at the interlinkages in the markets in order to understand individual markets better. I no longer contribute to RealMoney; I scaled it back because my work duties have gotten larger, and I began this blog to develop a distinct voice with a wider distribution. After three-plus year of operation, I believe I have achieved that. Prior to joining Hovde in 2003, I managed corporate bonds for Dwight Asset Management. In 1998, I joined the Mount Washington Investment Group as the Mortgage Bond and Asset Liability manager after working with Provident Mutual, AIG and Pacific Standard Life. My background as a life actuary has given me a different perspective on investing. How do you earn money without taking undue risk? How do you convey ideas about investing while showing a proper level of uncertainty on the likelihood of success? How do the various markets fit together, telling us us a broader story than any single piece? These are the themes that I will deal with in this blog. I hold bachelor’s and master’s degrees from Johns Hopkins University. In my spare time, I take care of our eight children with my wonderful wife Ruth.