Who Can You Trust?
Tesla Motors is Still Strong
One High Potential Travel Stock
Last week, Fox News fired “news pundit” and “business analyst” Tobin Smith after learning that he’d accepted $50,000 to promote the stock of Petrosonic (PSON) in his “Next Big Thing” newsletter.
What Fox did was entirely reasonable and in keeping with its corporate policy, which states "no contributor to FBN [Fox Business Network], nor his/her firm, and/or family members are allowed to accept financial consideration of any kind whatsoever to issue research, advertisements, or to otherwise promote individual stocks or securities."
Smith defended himself saying, "For the record, my last contributor agreement with Fox News did NOT include any exclusion from me or my company sponsored research. But that is water under the bridge." Also mentioned was the fact that Smith did not tout the stock on the air, but in his newsletter. Still, the fame derived from his on-air personality was part of what Petrosonic was paying for.
And they weren’t the only ones!
Smith has received compensation for promoting many other small, thinly traded stocks in his newsletter as well, all of whom were eager to see their shares driven higher by Smith’s efforts.
In the case of PSON, the stock climbed from a price of $0.96 to $1.38 in the two weeks prior to Smith’s dismissal, and there’s little question that his efforts were the primary reason for the advance.
But in the days after he was fired, PSON fell as low as $0.65. Now it’s back in the neighborhood where it traded before Smith entered the picture.
And here’s the kicker. Smith’s newsletter is FREE.
In other words, it’s not research, it’s paid advertising!
To me, this is not surprising. After all, when I first met Smith some 20 years ago, he was head of marketing at one of our competitors.
After leaving that firm, he went on to found ChangeWave Research, and now he heads NBT (Next Big Thing).
But NBT is no more a reputable investment research firm than Kim Kardashian is an economist. And anyone reading the firm’s “company sponsored research” should consider the adage, “You get what you pay for.” Or, as Jonathan Zittrain, professor of Internet law wrote, “If what you are getting online is for free, you are not the customer, you are the product.”
Now, technically, what you are reading here is free as well.
But my goal is not to have you buy the stock I recommend below and drive it up. (That company’s not paying us a dime.) My goal is to help you see how valuable our advice can be on a regular basis, so that you become a subscriber to one or more of our (moderately-priced) investment advisories, which have high-quality investment advice by experts.
As far as I can see, Smith would tout anyone’s stock, if they paid him enough.
For the record, in our 42 years of publishing expert investment advice, we’ve never accepted a penny from any firm. And we have no plans to change.
Turning to the market, we’re now in correction mode, which is perfectly normal. If you’re substantially invested, you’ve probably lost some profits in recent weeks; that’s normal too.
But the good thing about corrections like these is that they give you an opportunity to find the most resilient stocks. They’re the ones most likely to break out to new highs once the market gets moving again.
One of these is Tesla Motors (TSLA), which I’ve mentioned here several times and which is still acting very well, building a base around 100. But I’m not going to write about Tesla today.
Another stock acting very well, which I do want to talk about, is HomeAway (AWAY), which is making great strides in the vacation business, just like Expedia and Priceline did in their day.
Here’s what Mike Cintolo wrote in Cabot Top Ten Trader on March 20, when the stock was trading at 31.
Travelers who want to avoid hotels and resorts can go to HomeAway’s website and find more than 720,000 vacation homes in 168 countries that are available for rental. This young company (founded in 2004) connects the properties’ owners or managers with the tourists looking for interesting accommodations and makes most of its money via listing fees. Revenue grew by 22% in 2012 and earnings popped up 100% in Q4. AWAY traded at 46 a couple of months after its June 2011 IPO, but dipped to 20 three times in 15 months before catching a real updraft on February 21 when a great earnings report gapped the stock up on big volume. AWAY is thinly traded, but a buy here could pay off as the company refines its pay-per-rental model and looks to offer related services.”
Since then, the stock has climbed as high as 34 and dipped as low as 28, but the overall trend is sideways, and with those strong fundamentals, the odds are very good that this sideways action can’t last much longer.
So, you could simply buy the stock right here and hold on hoping for a breakout above 34—but then you’d be on your own. What I recommend instead is that you take a risk-free subscription to Cabot Top Ten Trader, to get Mike’s latest insight on the stock, and many more like it.
Yours in pursuit of wisdom and wealth,
Editor of Cabot Stock of the Month