| Author: Marc Mayor |
"Ars fit, ubi a teneris crimen condiscitur annis (Where crime is taught from early years, it becomes a part of nature)"Ovid
Many investors look for the winners. Not so many look for the losers ... especially serial loser stocks.
I am not afraid to say that, over the last seven years, I have literally studied thousands of companies, and on average, with good results.
Sometimes I come across a company that sounds familiar, until I realize it just changed its name for the second time in a couple of years. Such was the case with GlobeTel and my readers profited handsomely on this serial loser.
When I came across GlobeTel (Amex: GTE), two main things told me that something about that company just wasn't't right. The first element was that this firm seemed to suffer from logorrhea, or excessive wordiness. It seemed that every time some thought went through management's head, a statement was released to the press.
Reading those press releases more carefully, several things were apparent:
1. It was always good news for GTE (nobody ALWAYS has good news).
2. The disclaimers at the bottom of the page often mentioned a company called Investrend.
3. The news often referred to other small yet overvalued companies like Law Enforcement Associates (Amex: AID). Experience has taught me that, when Investrend starts to promote a given company, it's probably time to short it.
A QUICK SIDE NOTE: Our Inside ALPHA (IA) portfolios had a short position in Law Enforcement Associates as its share price hit an all-time high of 12.70 dollars. Two weeks ago the stock was worth 73 cents, a drop of 94% in less than eighteen months, and something tells me it's still heading lower.
So, I was suspicious and a closer look at GlobeTel revealed the company radically and frequently changed its core product focus. They were once active in the Colorado building industry. Later, the company decided to market syphilis detection kits. Then, the GTE management failed again so they decided to become active in the telecommunications sector.
Quite the radical moves!
So, as a player in the telecommunications sector, their concept was: forget about satellites, blimps are the future of communication.
But oddly enough, GlobeTel did't call them blimps; they called them "stratellites". I suppose they wanted to make it sound cooler. I think it just made the whole thing "stround" even "strillier."
See, I have been in Friedrichshafen, home of the original Zeppelin blimp. I have visited the museum and all. And I have seen pictures of so-called stratellites. Okay, so current blimps look much like the one that crashed in Lakehurst more than eighty years ago. On the other side, "stratellites" look like a blimp revamped by the designer of the iPod after many, many beers.
Despite the apparent silliness of it all, I'm perfectly happy to have blimps floating ten miles over my head if that means cheaper wireless Internet, Voice over IP or Wi-Max faster.
But instead of delivering, GTE has been able to lose forty million dollars since 2000. Their main customers at the time were some obscure Russian consortiumapparently willing to invest 600 million U.S. dollars in a network built by GlobeTel.
Needless to say, the thing never materialized, which was a good thing for the IA strategy. We made a quick 50 percent profit in less than three months, equivalent to an 870% annualized performance.
All this based on the "serial loser" concept:
- Investrend acting as a contrarian indicator, like in the case of Law Enforcement Associates or others, and
- GlobeTel failing again, as it always has
This has helped the IA strategy become a "serial winner", making low-risk, high-profit bets since its launch back in '99.
TAKE AWAY POINTS TO CONSIDER:
- Look for the serial losers. They're amazing companiesthey lose big, somehow woo new investors, lose big, somehow woo new investors, and lose again.
- Complete and frequent changes to a company's primary product focus are an indicator they're a serial loser.
- Serial losers are likely to employ desperate promotion companiesa red flag that they're not all that they're cracked up to be.
- Earn big by betting on the serial loser's downside. |
Author Bio:
Marc Mayor is the owner and chief advisor of Swiss-based Inside-Alpha. Mayor's Inside Alpha stock investment strategy has now verifiably beaten the S&P Index by at least 18% for six years running with 5 times less risk regardless of up, down, or sideways markets. www.inside-alpha.com/welcome |
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