Zeal’s Lucky Streak Ended?

[powayseller]

Both stocks I bought from Zeal’s recommended list have gone down. Unfortunately, I didn’t set the stop loss, like they told me to do, but nonetheless, their stock picks the last few months are horrible.

Ivernia Lead went from $1.50 to $ .90, and Conoco Phillips went from $63 to $58. Those were their two biggie favorites this summer.

My opinion is that they rode the commodity bull, and that is their gig. As commodities go down, so does Zeal.

I’ve cancelled my subscription to Yamamoto Forecast; he’s so lame. Each month, he says get 100% cash, check bankrate.com for the best rate. They won’t let me cancel, so for the next 8 months, I’ll keep getting that lame newsletter telling me to be 100% cash. Why can’t he tell me something I don’t already know?

So for Zeal, does anyone else have other explanations?

[sdappraiser]

Why didn’t you set the stop loss limits like they told you to? You want investment advice, you pay for it but you don’t follow it. You think you are smarter than everyone else – that’s the explanation.

Why are you buying thinly traded Canadian stocks anyways? Stick with what you know.

[rseiser]

I have a question to both of the stocks: Regarding COP, I agree with most of you that it has pretty good value as well as the other oil-companies, provided there is a commodity bull market. I was skeptical on oil will all the hype, but on the other hand nothing has changed yet. People drive more than ever, and there are hardly alternatives. So after some pull-back, whenever that ends, there will probably at least one more leg up at some point. And the Oil companies pay good dividends in the meantime.
My real question is more on the charts. It is so curious to see COP near a support line while all the other oil companies are above. If COP breaks it, what does that mean for the others? Or what if COP holds and the others go towards their support line? How have such things played out in the past?

Regarding Ivernia, how can you find out more about them. If they are for real, it might be a good opportunity. Jim Rogers always talks abot lead, and I have no clue how to buy it, and nobody talks about it either. With the poisoned in China, it shows what an awful business that is. Probably no competition for a long time.
Regarding if they are for real, this is quite tough, because I think most penny-stocks aren’t. You must really know something detailed about the people running it, and I wonder if Zeal even know that much detail. Usually there is hardly any positive proof (except earnings and a dividend), but much more contrary proof. Contrary proof would be all kinds of things to make me stay away. Like if you ask them questions, and you don’t get a precise answer. If you ask about an obvious business strategy, and they pretend that they don’t understand your question. Or they show you only apples to oranges comparisons. In all these cases, either they are lying or they are so dumm that they don’t deserve your money. Next, if their compensation is outrageous or simply flawed in respect to motivate them. Handing out stock options left and right sounds like one example.
I think readers on this board have some more examples too.
Anyways, do you have more information on them from Zeal?

[lewman]

Zeal launched their service pretty much at the start of the current commodity bull. Before I subscribed, I went back to look at a lot of their weekly essays and as far as I could tell, so far they’ve launched 4 campaigns 1) precious metals 2) oil 3) base metals 4) general stock market.

The general stock market campaign was launched in mid-2002 as the stock market bottomed. Too bad it was a “short” campaign and they screwed up big time.

The other 3 (or you can say one as they’re all commodities) have been generally profitable and they continue to recycle capital between profit taking and stop losses.

I would agree with the claim that so far they’ve only proven themselves to be capable of riding the commodity run and nothing else. It’s interesting to see how well they’d fare when the commodity bull ends / takes a breather.

With newsletters in general, I prefer writers that write in a way that I understand and can learn from, instead of just getting their picks. With Zeal in particular, I learned how to use what Zeal calls relativity (basically an asset’s price vs its own moving average) to help determine whether an asset’s price is resonable. I also enjoyed Zeal’s discussion of long valuation wave (basically stock market oscillates between extremes in terms of valuation like a sine wave) and I look forward to a period in the future when the S&P500 trades at 9x PEs and the headline “Sell All Your Stocks Now” appears on the likes of Businessweek. And that’s when I’ll sell my last underwear to plunge into the market.

I don’t think there’s anything wrong with not following 100% of the advice even you choose to pay for it. Newsletter advice is meant to be one size fits all. Obviously we’re all different. However, if all you care about is performance to judge a newsletter writer’s capabilities, it’s better to look at the performance of the whole portfolio, and over a longer period of time, rather than focusing on a few picks over just a few months. Warren Buffet unwound his FX shorts last year probably at the worst possible time. I haven’t heard anybody say he’s a lousy investor because of that.

[LookoutBelow]

Casino Wall Street Royale…….Good luck

[Anonymous]

Chris Johnston

As a newsletter writer in this field I think I am qualified to respond on this topic. First, I have never read Zeal so I do not know how it is written. However, looking at COP PW we discussed you buying this before you did and I told you that based on the ratios I thought it was ok to buy. The stock was trading in the 50’s when we discussed this.

This stock went to $70.75 a very nice gain. There is absolutely no way that any professional stock trader would still be in that trade. You need to take partial profits on gains, and trail a stop at breakeven on the balance. Here is an example, lets say you bought it at $58 and carried a $10 stop loss at $48 on the initial position. Once you get a gain equal to your stop which would have been at $68, you sell half your shares, and place a stop at $58 your entry price, on the remaining shares. Now you would have the ability to participate in unlimited profits upward, yet have an exit point that is breakeven on the balance.

After you do this you then move up your stop underneath support points as prices move up. $67.02 became the most obvious support point so that is where most pros would have been out of this. Maybe your initial stop could be less than $10, but whatever it is the logic still applies.

As for Penny stocks, nobody should ever bother with those. That is a suckers game. There is a reason why stocks under $10 have very little institutional participation. One person selling shares can move a chump stock like that down. I got a call on Monday from a client that claimed a stock trading at $1 was really worth $54 dollars. I looked it up and they had revenue of $143,000 for the last quarter and lost $700,000. How could a company losing that kind of money be worth even a dollar? They had only 1.3 million shares outstanding, and no information on how much of that the insiders owned. This had scam written all over it, pump and dump. Yet this client was going to put 100k into this! YIKES!

I get calls almost daily from clients asking about a particular penny stock and “they have inside information…” etc.. Forget about all that nonsense. This may have not been that scenario, but stocks that are that cheap are priced at that level for a reason.

As far as writing newsletters, it is a tough thing to do. You know a couple of things, first there will be some people that will just wait until you are wrong about one thing then pummel you over that mistake.

Second, often people will not fully follow what you tell them, and blame the result on you when if they followed exactly what you said they would have made a profit.

Third, eveyone goes through sub par periods. I had one a couple of months ago in the S&P. That period has been followed by 11 consecutive wins which some people missed who tuned out. They followed the consecutive 3 losses I had, and did not take the 11 consecutive wins that followed. I am sure they have said to someone, well that blah blah blah sure led me astray etc.. In the meantime I am getting very nice calls thanking me for profits that have been made on the 11 win streak from those who stayed with it. I also had someone who was doing a free trial with me on my bond trading service ask to cancel after the service had 3 consecutive wins during their trial. What more could you ask for, yet they were not satisfied for some reason.

All you can do as a writer of a newsletter is make the best effort to produce the best product you can. You have no way of knowing if your clients follow your advice. A sample size of 2 is way too small to be the basis of a conclusion about whether Zeal is a good product or not. Zeal over a large sample size probably does pretty well based on the following they have.

Just the energy call alone if followed could have made someone rich. Now the uptrend in OIL is broken, whether it resumes its upward path is in question.

[lewman]

Chris, you said “After you do this you then move up your stop underneath support points as prices move up. $67.02 became the most obvious support point so that is where most pros would have been out of this”.

I followed you up to this point. How did you arrive at $67.02 ? thanks.

[technovelist]

Yes, I have an explanation. There is an almost 100% accurate rule when dealing with advisory services: If an advisory service has a wonderful track record up until you start using them, as soon as you start following their advice they will lose their golden touch.

This is due to “survivor bias”; that is, even if every advisory service used random numbers to make their predictions, if there are enough services, one or more of them will have an excellent track record, viewed retrospectively. Unfortunately, that doesn’t mean that their track record will continue in the future, for obvious reasons.

[powayseller]

Zeal recommended COP in April 06, when it was $63.15/share, as a long-term investment. In June, they recommended COP Nov 60 calls. I went long in August, at around the price they recommended COP, and it was still in their long-term portfolio. So I followed the COP instruction.

Zeal recommended Ivernia in their May 06 newsletter, as a long-term investment. IVW.TO. Since I did not have a Canadian account, I had to buy it as a pink sheet stock, but the worst mistake I made, is not setting a stop. So now I just have to hope that its lead sales will pick up, and its stock will recover. The reason I did not set a stop loss, is because I did not want to get stopped out just because of some commodity stock volatility. I don’t mind the volatility in a stock I’m holding for the long-term, but I’m also concerned that it dropped so much. Fortunately, I only have a couple grand into it, so not a big loss if it doesn’t recover.

Paraphrased/copied from Zeal’s May 06 newsletter:
Their new operation in Western Australia is going to be one of the top five lead producing mines on the planet. Its lead concentrate is shipped to Asia, the fasted growing area for lead demand. It is the only pure-lead-play publicly traded company n the world,. It looks esceellent in fundamental and technical terms. It is trading at under 5x forward PEs. At today’s lead prices of $.55/pound, Ivernia operating profits would run a massive $59mil.

So both of those stocks they recommended are way down. I did not follow their other stocks, but we could do so. Here are some of their other picks as listed in the May06 newsletter, along with the price at the time of recommendation.

LNG, 12/05, $35.83
TGA, 12/05, $5.17
POMGF, 3/06, $2.11
SYNM, 3/06, $8.82
URRE, 3/06, $4.92
EGY, 3/06, $6.55
EZM, 4/06, $1.75
FRO, 4/06, $33.49
SFY, 4/06, $37.46
IVW(Toronto Exchange), 5/06, $2.01

[anxvariety]

PS, you said you were buying COP at $60 for a long term investment.. it’s only been a few months, I would wait a few years before evaluating.. unless you’re considering getting out. Zeal wrote an excellent speculator newsletter just the other day reaffirming their opinion on oil prices.

This stock went to $70.75 a very nice gain. There is absolutely no way that any professional stock trader would still be in that trade.

Chris, excuse me.. but Buffet is holding this stock, and he increased his position between $58 and $64 and he is still holding.. I consider him a professional trader, do you? If you said it was a good buy at $50.. why didn’t you stop by and tell everyone to sell above $70? You should know better than posting in hindsight… If you said buy at $50 sell around $70, then fine.. but it’s in the past now – pretty easy to be right in commentary, but taking credit for it is kinda far out…

Warren Buffet bought in to COP between 58 and 64.. do you think he is evaluating the invesment yet? I doubt it.. I don’t even know how anyone could be evaluating an investment on COP this soon into it.. if you’re doing that, then it’s not a true ‘long’ investment by most definitions.

COP – ConocoPhillips
2006-03-31 Buy 2.48% $58.99 – $64.68
($61.8) $ 58.14 -6% Warren Buffett 17938100 sh. 17,938,100
http://www.gurufocus.com/StockBuy.php?symbol=COP

BTW, Zeal has their track record posted for the last 4 years..

[davelj]

Buffett’s not a trader, he’s an investor. Big difference. (Actually, he does a little trading in currencies and commodities, but for the most part his positions are long-term in nature.) One thing to keep in mind: Most great long-term investors underperform a large percentage of the time. John Templeton underperformed the S&P in 40% of the years he managed money, but in the end came out WAY ahead. Bottom line: It’s hard to be a trader (focused on the short-term) and an investor (focused on the long-term) at the same time. Generally, you have to pick one or the other. And if you choose to be an investor you’re going to underperform in the short-term a certain percentage of the time no matter how well you do in the long-term.

[anxvariety]

http://www.zealllc.com/perf/2001.htm

http://www.zealllc.com/perf/2002.htm

http://www.zealllc.com/perf/2003.htm

http://www.zealllc.com/perf/2004.htm

http://www.zealllc.com/perf/2005.htm

http://www.zealllc.com/perf/2006.htm

Chris J, are you for real? Do you have a 5 year trading performance with line by line traded purchases and dates?

Also didn’t you say 90%+ of options expire worthless? How would that happen as a zero sum game? Every dollar gained is a dollar lost, right? does money disappear, or is it actually 50%?

PS,
Zeal’s 2003 was pretty brutal!! I still think they’re good.. it’s partially up to you as the subscriber too, why would you subscribe if you complete disagreed with their view? As a subscriber I would think you are taking a stake in their opinion and research.. they certainly aren’t perfect nor do they have crystal ball.

[Daniel]

“Also didn’t you say 90%+ of options expire worthless? How would that happen as a zero sum game? Every dollar gained is a dollar lost, right? does money disappear, or is it actually 50%?”

It is a zero-sum game, even if most options expire worthless. The catch is that the 10% of options that make money usually make A LOT of money, to compensate for the 90% that lose. Think of it like a slot machine that 9 times out of 10 eats your dollar, and one time out of ten gives you $10 back.

[lewman]

Powayseller, I suggest you take this as a lesson to make yourself a better investor.

There will be stocks that you believe very strongly that it’s the next Microsoft giving you a 10x or even 100x return over the next decade. But the only way to get that 10x return is you put it away and sit tight through all the volatilities. Then there are those that you “trade” and you remember to set stop losses and employ tactics like those Chris described and if they get stopped out you walk away.

Re: Ivernia. You said you don’t mind the volatility but yet you’re concerned it dropped so much. Well unfortunately short term volatility is part of long term investment. What you have to ask yourself now is whether Ivernia is a long term investment.

Re: COP. It went from $63 to $58 and you consider that “way down”. Sounds like your risk tolerance level, even at the individual stock level is pretty low. As such, should you invest in stocks at all ?

In my case, I didn’t invest in Ivernia for reasons that some other people have said on this thread but did follow Zeal’s advice and launched an oil and natural gas stock campaign between apr & jul. Collectively these stocks are down and some of them have been stopped out. If they rebound from here, great; if not, the stops will do what they’re supposed to do and I walk away and try to make money elsewhere.

Good luck to both of us here.

[Daniel]

To continue my previous post, the beauty with options is that you can play either side. You can be the gambler at the slot machine (buying options), or you can be the casino (selling options). But you have to be careful because, unlike casinos that make good money on slot machines, option sellers have no “house” advantage in the long run over option buyers. It is tempting to start playing the casino and collect option premiums. However, sooner or later, an option you write will blow up in your face and wipe out all your profits.

[Author]

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