prancingbull.com

Every so often I will get something in the mail from “The Natural Contrarian.” I like to hang on to them for a while just to see how their picks really work out. It is a good way to try and test out the true track record of an investment company. I would think that in order to show how great at picking stocks they are, they would send a free recommendation for a surefire winner. This would convince people that they knew what they were doing and would entice them to do some investing with them.

Most recently (Oct 2007) it was a pamphlet touting their latest “hall of fame” pick. Inside this eight page color pamphlet was a lot of information on this up and coming company. The top line of the pamphlet proclaimed, “Expect +10,000% profits if you hold FXPE” (the ticker has recently changed to FXPT) “at least 6 months.” The reason that this large price run-up was expected was because Fox Petroleum was said to have access to “160 million barrels of oil along Alaska’s North Slope.”

Since I received this recommendation, FXPT has been in constant free fall. The flyer claimed that FXPT would reach $55/share, but in reality is has come nowhere even close. On April 21st, 2008, the stock did a 1 for 5 split in order to boost their price. On a split adjusted basis, the stock was trading at approximately $12/share, but it was actually at $2.40/share when the recommendation was made. It is currently trading at $1.52, or $.304 in October 2007 prices. This is a total decrease in price of 87.33%. So much for the massive gains they were expecting.

This example just goes to show that you shouldn’t blindly follow someone’s advice even if they claim that it is a surefire winner. One should always do their due diligence before investing.