Scams Can Come in Snail Mail Too

Every few minutes, I receive an email telling me how I’m about to miss out on the latest stock market darling if I don’t act fast enough. I think that many of us do. But I also get something really similar in the mail every couple of weeks. One of these that I received earlier this year was Scott S. Fraser’s Elite Stock Market Advisory. Dated “3rd Week – January 2007”, I figured I’d hang onto it, and see just how well old Scott did with his picks. I mean if he did well, maybe I ought to pay a little more attention not only to him, but to those email messages as well.

So now it’s a little more than six months after I received this letter, and I figured that it’s worth checking back in to see how things have fared over time. Sure, it’s possible that a short-term ride would have done well, but I’m more of a buy-and-hold investor anyway, as I never have time to check in every few minutes. While it’s definitely possible that we may need to check back in after an even longer waiting period, as six months may not be a good measuring stick, it’s a decent estimate, just to see what’s happening. Ready? Here we go!

In this “advisory” (and I use that term loosely), there were a total of six symbols – Lusora (LHCS), True North Energy (TNEN), Liberty Star (LBTS), Homeland Precious Metals (HPMEF), Klondike Star Mineral (KDSM) and International Gold (IGRU). The first sign of trouble is that none of those symbols are actually listed on an exchange any longer (if they even were before). The first five are all now bulletin board stocks, while the last – International Gold – is traded on the “pink sheets”. Not a good start, Scott! Still, perhaps it was for some other reason that each and every choice listed under “current coverage” is no longer listed. Lets start at the bottom and work our way up. Since Lusora was the pick of the advisory, we’ll save the best for last.

International Gold. International Gold Resources, Inc. engages in the acquisition, exploration, and development of resource properties in Brazil and in the Yukon Territories in Canada. (Courtesy Yahoo! Finance) Though the stock price is currently at $0.52, and was at $0.65 in late January, it’s not as bad as it could be – shares traded as low as $0.21 in March. So a comeback is underway. Perhaps I should have waited longer than six months. Still, a 20% loss kind of stinks. Let’s see what else we have before making a decision.

Klondike Star Mineral. According to their own website, they are also involved in gold in the Yukon Territories. I’m sensing a trend. Unfortunately, after being priced at $1.65 in January, the stock currently trades at $1.05, for a 36% loss. It’s getting uglier, and making that 20% look pretty decent.

Homeland Precious Metals. Again, I had to visit the company’s website, and again, they are looking for precious metals. Finishing the latest trading day at $0.26, when the stock was at $0.82 in January gives them a loss of 62%. This isn’t just ugly. It’s a bloodbath. Maybe I should have put all my money into IGRU. I’m also still holding out hope for Lusora.

Liberty Star. Scott seems to have a thing for metal. Liberty Star is actually short for Liberty Star Uranium, and once again, I had to visit the company’s website to find any data. Frankly, you can probably get the idea just from the company’s name, so let’s go straight to the numbers, shall we? I’m just wondering if we can break the trend. While we didn’t actually see a gain in our theoretical portfolio, we did reverse direction, and in fact saw our least loss so far – the last close was at $0.49, while January had a price of $0.61. That’s a loss of just under 20%! Way to go Scott!

True North Energy. I’m guessing from the name that this isn’t metals. I was also surprised to see that I could garner some information on the company from Yahoo! Finance: True North Energy Corporation engages in the exploration, development, production, and acquisition of natural gas and oil properties in the United States. What about the stock price? Unfortunately, LBTS was just a blip on the radar, as a recent stock price of $0.62 compares to a January stock price of $2.50, which translates to a monstrous decline of more than 75%. Wow.

So now it’s time for the feature. According to Scott, “This is as close to a Guaranteed Profit-Formula as you’ll find in any market sector”. Or perhaps “Buy LHCS now up to $3 and then read this time-sensitive report”. Maybe even “Your AGING MOTHER Demands that you buy Lusora (LHCS)”. Finally “DO NOT just turn to page 6 right now. First, buy LHCS below $3, read the rest of this report, and then call your mother to tell her the good news.” Without further ado…

Lusora. Once again, I had to visit their website, but it is nice looking (and it’s not a metals company), and here’s what I found:

Lusora is at the forefront of developing and deploying wireless smart sensors for security, monitoring and home healthcare applications.

A pioneer in the emerging market for tiny (“mote” technology) wireless sensors, Lusora and its founders have invested substantial sums developing world-class research and development, patent filing and protection, and product development and marketing.

It’s like those old commercials where an elderly person falls and can’t get up and says “help, I’ve fallen and can’t get up”, and presses a device around their neck and they are saved – only updated for the connected world we live in, and it seems to send signals to everyone, instead of just some monitoring company. Sounds interesting, to be fair, and according to Scott, everyone from GE to Tyco is interested, meaning billion-dollar deals are in the works, so you better get in now (in January, that is) so you can enjoy “above $30 prices” later.

Well? What happened? Was this “time-sensitive” material? Let’s see. According to what I could find, the price of the stock when I received this was… $1.21. Interestingly enough, the stock went public on January 8, just two weeks before I received this mailing. That should tell you something. But I digress. The price recently? $0.43, for another loss, this time of 64%. Not the largest of the group, to be sure, but definitely not the smallest.

So should you listen to Scott? Probably not. If you were to take $10,000 and invest it into each of the stocks here, you would have spent $60,000 (six stocks, $10,000 each equals $60,000) and you would currently have about $32,300 left. Perhaps something slightly different than that for rounding purposes, but somewhere in that neighborhood. If you instead took that and bought $60,000 of SPDRs, to just track the S&P 500, you would now have about a 7.1% gain. I’m thinking that listening to Scott is a remarkably bad idea.

September 3: Another two months later, and Scott is now down 55.18%, a bit over $33 thousand dollars (I set up a portfolio, it makes tracking things easier). Those of you who purchased SPDRs at the same time would now be up just 3.7%, instead of the 7.1% from earlier this summer – but it’s still a whole lot better than a 55.18% loss. Make your own call on this one. I’ll check back in a couple of months.

November 25: I checked in a bit early, because I received another newsletter from Scott. Imagine my surprise when I found out that Lusora had changed their name on September 7 – just days after my last check – to Western Standard Energy, in order to “better reflect the focus of the company”. Looking about a bit, it seems that the revolutionary healthcare applications are gone, and now they are looking for oil. The stock ticker changed, too. It’s now WSEG.

The return? My hypothetical portfolio is down a tad over 46%, and I have just under $28,000 left. Lusora/Western Standard sits at fifty cents. I have no idea when they will hit $3. However, International Gold is doing well, up 55% to $0.94, nearly a double in the last two months. You’ll remember I bought for $0.65 in January. So that one’s not bad. The S&P may have only turned in 1%, but it’s a lot better than a 46% loss!

January 30, 2010: I hadn’t checked in on my portfolio for quite a while – over two years. So long that I actually had to update three of the tickers because they were no longer valid. The results? Not promising.

The original $60,000 investment is now worth an incredible $3,389.64. You read that right. In just about two-and-a-half years, I’ve lost about 95% of my investment. To be completely fair, it’s been a rough time for everyone. But 95% is just insane. And the original predictions of glory? Not even close.

The best performance in the bunch is actually Homeland Precious Metals, down a mere 82% (to $0.15 per share). Compared to the almost total loss of Liberty Star Uranium, down 99.7% (at about a quarter of a penny each), it’s a relative bargain. In case you’re wondering, the other four stocks in the bunch are all showing losses above 90%.

At this point, I might as well hang on and hope for a nice bounce because there really isn’t much left…