Does anyone subscribe to any of these? Their ads sound great, but I wonder what the comparison is to the sports services on here. Hype? Pump and dump? I asked awhile ago and can't remember if there were any responses. If nothing on the Motley Fool, any reco's for a novice, start-up investor?Thanks all!!
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Originally posted by rented muleI only subscribe to one. It's called Swingtradercentral. He gives out one pick a day. He does it all through technical analysis. He's very good, but streaky. But when he's going good, he's really good.
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Hidden Gems on the Motley Fool
I have subscribed to Hidden Gems since it started a couple of years ago. I like it a lot. I have a finance MBA, but don't have time to do the in depth research I would like on stocks so I decided to rely on Hidden Gems because they have a similar philosophy to when it comes to investing as a strong factor for selecting stocks is a companies free cash flow.
They recommend two small cap stocks each month. These are stocks that are generally not followed by analysts, are somewhat risky, but have a lot of upside. They also have a watch list and recommend 2 tiny gems each month, which have a very small market CAP.
I have bought some 25-30 positions with a return between 35%-40%. There have been some big gainers that have cancelled out the dogs.
2 of the best were the first two I bought, which were in the issue right before they started calling it Hidden Gems
Overstock.com (ostk) up 200%
Valero (VLO) up 370%
Others that have done well are
(Parl) up 290% (This is the company Paris Hilton sells her fragrances under)
Those are where the majority of the 35%-40% have come from.
The dogs have been
CDIC, Red Envelope (rede), (Deck)
(CRYP) Cryptologic Inc has stumbled lately but they are standing by this pick as they are a company that puts in the encryption to make online poker sites secure. They lost a customer which has caused a bit of an over reaction in the market.
They also provide good , informative articles each month. I have enjoyed it thus far.
Let me know if there are any questions
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one of last month's recommendations
Vol. 3, Iss. 8, August 2005The #1 Place for Small-Cap Investorswww.hiddengems.fool.com
Flamel Technologies
Hidden Gem by Tom Gardner
Risk-Level Rating: High
• New management has the trust of outside and institutional investors.
• It's the exciting technology leader in novel drug delivery methods.
• A strong balance sheet should improve with likely new partnerships.
Nasdaq: FLML
33 Avenue Du Dr. Georges Levy
Venissieux, France 69693
Ph: 33-4-7278-3434
www.flamel.com
(Except price, amounts in millions)
Recent share price:$19.02
Market Cap:$413.7
Cash/Debt:$105.3/$2.3
Owner Earnings Run Rate:$12.5
Buy-Around Price: $19.30In June 2004, I made my most speculative selection yet in Hidden Gems. I recommended Flamel Technologies (Nasdaq: FLML), a drug delivery company based in Lyon, France, that boasted a sterling balance sheet and a very promising use of nanoparticulate technology. The company was then valued at $500 million, with its stock trading around $25. An emerging partnership with Bristol-Myers Squibb (NYSE: BMY) held out promise for nearly $150 million in royalty payments over the next five years, as the two companies prepared to deliver Basulin, a long-acting human insulin for diabetics. I encouraged members to buy Flamel up to $27 per share and to plan on holding for many, many years.
When the Basulin partnership broke down, it was clear that I'd made a mistake. Management was relying on too few partners; its deal structures weren't creating long-term bonds; it was doing an increasingly poor job of running a transparent business for potential customers and shareholders; and operations could be expected to continue delivering losses for the foreseeable future. CEO Gerard Soula, who had cashed out nearly $10 million in stock at around $31 per share, received another large batch of stock options, priced for him below $2 per share (cough, cough). Soula had promised three new partnerships, but they weren't materializing. The valuable technology that he'd developed was being squandered. It seemed that Flamel might, in years to come, simply burn through the $100 million in its bank account. The stock had been sliced in half, to $13 per share, and I considered selling.
But I'm always slow to the trigger on selling stocks, so I scoured the marketplace for clues of a turnaround and found none. Then two institutional investors — OSS Capital and BVF — began to disclose substantial share purchases and their intent to challenge the CEO's proposed slate of directors. A feud erupted in the filings, with OSS Capital's Oscar Schafer connecting on one intellectual uppercut after another at founder Soula. We encouraged all members to vote with the rebel outside shareholders against the incumbent's board.
A week later, the results were tallied at Flamel's shareholder meeting. A full 88% of the company's shares were voted in favor of a new board. Soula resigned immediately, selling his more than 1 million shares. And Schafer's board of directors took control of the business. They quickly elevated Stephen Willard from his position as general counsel and CFO into a permanent role as CEO (veteran members of this service will recall that Transkaryotic Therapies (Nasdaq: TKTX) boosted its former general counsel to the CEO slot, and the stock rose nearly 10 times in value). Weeks later, Willard did something his predecessor had sidestepped for a year. He sat down for an interview with us in Hidden Gems (excerpt on page 10; full transcript on the website).
The Business
Flamel's business plan is the same as it was in 2004. The company helps major pharmaceutical companies and drug developers deliver their drugs into the human body more efficiently, effectively, and safely by means of nanoparticulate technology. In addition to licensing its technologies outright, Flamel conducts research and development for these drug makers.
Flamel has two delivery technologies. The first, Micropump, is a formulation of active ingredients that act as tiny time pills in the small intestines. A recent deal with TAP Pharmaceutical Products will enable patients with heartburn and acid reflux to take a Micropump formulation of Prevacid that is then distributed at intervals throughout the day. Flamel's second technology is the Medusa, used for the injection of proteins and peptides that mimics the natural release of proteins in the body. Medusa competes in a $50 billion market, expanding rapidly as researchers make headway on mapping the complex functions of proteins. The failed Basulin agreement with Bristol-Myers was structured around the Medusa technology, but it's a technology about which CEO Willard remains very optimistic.
The good news about Flamel's business approach is that major medical trends are working in its favor; the company has plenty of cash with which to steadily build a successful business; and Willard strikes me as a committed, methodical, and driven leader with something to prove to Flamel's patient owners.
The bad news? It still relies on too few partners. The company will not blossom into a multibillion-dollar business without a widening number of long-term partners. In his conference call 24 hours after assuming the top post, Willard said what I wanted to hear: "I need to spend more time with the team, but I'm confident that our goal will be to get a lot of good deals done as promptly as we can."
The Financials
In its most recent quarter, Flamel burned through $7.6 million from operations, coinciding with significant investments in research and development. The company received $5 million in Basulin break fees from Bristol-Myers, and ended the quarter with more than $100 million in net cash. Rarely can balance sheet capital be so simply labeled "shareholder money." The cash reserves come from the sale of stock to outside investors. Since coming public in 1996, Flamel has consistently generated operating losses. Obviously, the company — 15 years after its founding — now must demonstrate an ability to methodically generate cash.
The Valuation
Valuing a business that floats into and out of profitability without a functioning model for steadily recurring revenues is well-nigh impossible. Instead, a decision to invest in Flamel is a bet on three strengths of the business.
The first is the powerful technology. The second is the balance sheet loaded down with more than $100 million in cash. And the third is the new leadership group on the board and in the CEO seat. Of the three, I'd like to concentrate on the last in making my case for buying more shares.
Willard demonstrates everything I look for in a world-class leader. I finished my interview with him feeling the same enthusiasm for and confidence in leadership that I did after talking to Selim Bassoul at Middleby (Nasdaq: MIDD) and Michael Astrue at Transkaryotic. Willard is focused on the areas of greatest opportunity, committed to eliminating needless expenses, and, as far as I can tell, completely lacking the arrogance that leads to so much executive underperformance. In his first conference call, he repeatedly emphasized the importance of his team. Later, when an analyst compared him to Abe Lincoln, he graciously noted that he's shorter, has no beard, and never wants to get shot. Match that with great technology and a pristine balance sheet and I believe Flamel could more than triple in value over the next five years.
The Risks
The company has a new leadership team, has failed to sustain key partnerships, and, after more than a decade of operations, isn't yet steadily generating profit. For these reasons, I do not recommend overweighting in this stock. That said, each risk is surmountable by teamwork, technology, capital, and ambition.
Conclusion
It need not be a large position, but I believe Flamel Technologies under its new leadership team earns a position in the portfolio of every Hidden Gems member.
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