It's every investor's dream. And this one came true...
For lucky shareholders in this formerly tiny maker of automated
medicine dispenser machines, last November's election changed
No, not that election. And, no, not just any medicine.
I'm referring to the state ballot in Massachusetts... along with
a medical treatment that's still illegal in most parts of the
You see, the "medicine" that's distributed from this company's
dispensers is marijuana. And after the Bay State's citizens voted
to make Massachusetts the 19th U.S. state to allow the use of
cannabis for medicinal purposes, the mainstream media tooknote .
(Adding to the storyline was the fact residents of Washington and
Colorado on the same day voted to make recreational use of
One week after the elections,
TheWall Street Journal's
Marketwatch.com published an article entitled "
How to invest in legalized marijuana.
Topping Marketwatch's short list of stocks "for regular
investors looking to get in on the action... without having to
actually grow or sell drugs" was Hollywood, Calif.-based
Medbox Inc. (
, whose patented machines use biometrics to verify patients and
doses. Also, as the company's founder told Marketwatch, the
machines could potentially be used in ordinary drugstores too.
Two days later, the $4 stock was trading at $200 a share, and
the $45 million company was worth billions. Now that's a Hollywood
feel-good story if there ever was one.
Welcome to the world of game-changing stocks.
In the case of Medbox, share prices quickly fell just as
fast, but not as far. On Friday, Dec. 28, MDBX closed at $63, down
from the high, but still up a whopping 2,400% from the company's
debut on the over-the-counter (OTC) market.
StreetAuthority's guide toinvesting in aggressive growth stocks
is Andy Obermueller, ChiefInvestment Strategist for
In hisissue , Andy pointed out that the Medbox example
is extreme but hardly isolated. Every year -- regardless of the
market environment -- companies emerge seemingly out of nowhere to
deliver eye-popping returns to early shareholders.
Andy admitted he didn't see this one coming (for more on
Andy's Medbox "confession," see the interview below).
But the fact that the sudden burst in Medbox was
triggered by a news article suggests that neither did anyone
With or without Medbox, however, there wasmoney to be made
in the game-changing universe in 2012.
Last February, for instance, Andy recommended
Human Genome Sciences (Nasdaq: HGSI)
, which had developed the first new drug in 50 years to treat
Lupus, a chronic inflammatory disease that can affect various
systems of the body, especially the skin, joints, blood and
kidneys. At the time, HGS was trading at $9.16 a share;
less than five months later, British pharmaceutical giant
bought the company for $14.25 a share -- a 55.6% gain.
In July 2011 Andy named
Celsion (Nasdaq: CLSN)
his top cancer-treatment pick on the strength of a promising liver
drug. At the time, the oncology drug developer was a $50 million
company trading at $3.13 a share. Earlier this month, the $272
million company posted a52-week high of $8.86 a share. That's a
gain of $183% against a meager 6.8% increase in the
S&P 500 during the same period.
equity that invest in promising businesses. His top pick on
June 20 from 27 such stock:
Main Street Capital (Nasdaq: MAIN)
, which has since appreciated 26.5%.
For more on Andy's quest for game changers, read on...
What's your analysis of Medbox? At what price would you be a
Medbox is an important story for investors to be aware
of. I hope that the huge returns catch people's attention. But let
me be clear: I would not be a buyer of Medbox at anything
near its current valuation. The stock flew too high, too fast. It
is unlikely to be able to produce results thatwill justify its
But there is nevertheless alot to learn from the phenomenon, a
lot to take away from the idea that a stock can skyrocket because
of an externalcatalyst .
First, a confession. I didn't conceive of the marijuana
initiatives as an investment opportunity. So that has to be the
first lesson: Never let a failure of imagination limit your
investment choices. Do not confine your cerebral activity to the
interior of an enclosed rectangular space. Or, toput it another
way, "Think outside the box." I didn't on this one. I wish I
But having said that, let's look at Medbox. It's not
actually in the marijuana business. It doesn't even make money from
the sale of medicine. It simply provides machines that verify
documentation and identity and then dispense. Now, as I
mentioned in the newsletter, there's a lot of detail work in that
-- tons ofred tape to wade through. Medbox came up with a
nifty tool to do just that. But CareFusion -- a stock I have
recommended in the past -- has the same sort of dispensary, and
with a much stronger brand and vastly superior market position.
The Medbox technology is good, but it's not the only
competitor in its field, nor is it the best. That's lesson two,
then: Always invest in stocks with the best technology coupled with
the best industry position.
Finally, and maybe more importantly, heed the words of country
music legend Kenny Rogers, who tells us to "know when to walk away,
and know when to run." Investors have to be clear-eyed as to
whether a trend has played out. This one has. It played out on
Election Day. MedBox was long on ink and light on squid.
There is perspective to be gained, but that's the extent to which I
would seek toprofit from theseshares at this point.
Some of the stocks I mentioned above, including Medbox,
achieved game-changing status relatively quickly. But that's not
always the case, is it?
Let me bring your attention to Obermueller's rule number two when
it comes to investing in potential game changers: The aggressive
growth investor must be patient. Or, to put it another way, "A nut
has to stand his ground for a long time to become an oak."
If you look at companies that built and kept strong businesses,
the stock chart is revealing. Typically, not all the years were
good ones, and most success stories took years to make the journey
from nano cap tomega cap .
In the most recent issue of
, I cite the example of
Apple (Nasdaq: AAPL)
. The iPod, the device that began Apple's transformative march, was
released in November 2001. The share price was around twenty bucks
at that time, and the stock was functionally dead money for two
years. Thereafter, the shares rallied, though the company also saw
periods where the stock turned negative.
That's why I frame my advice about patience in terms of its
cousin, confidence. When you really understand why a stock is a
real game changer, then you have confidence. Confidence must be
present for patience to triumph.
What are some of your other rules for investing in
The first rule is: Be realistic to the point of hyper rationality.
There's a lot to know before investing, and that reality -- those
realties -- have to be acknowledged and accepted for what they are.
Being realistic means collecting and assimilating a lot of
information. I know that might sound obvious, even silly, but I see
people skip this every day. I get 100 emails a month from otherwise
intelligent people who fail to heed the most basic information
about theirinvestments .
My third rule is aportfolio manager 's most important job:
allocation, allocation, allocation. Investors have to find a mix of
securities that meets their needs and fits their risk profile.
Aggressive growth should never make up more than 20% of a
portfolio, and that might be high for some investors.
What are you looking at these days?
Health care, energy and some pure science - the next "big thing"
stuff. I'm also interested in taking a global view of growth this
year and investigating where the next boom will hit (my initial
guess is Mongolia, though two other countries also intrigue me) I
also see a whole lot of tech companies with a whole lot ofcash on
hand, and I'm interested to see what the early acquisitions in 2013
will foretell. So I'm all over the map. Basically, I hit the reset
button every year and begin a new search. It might sound a bit
chaotic, but I see a lot of areas to be really hopeful and excited
about. I looked at the performance of the first year of second
terms, and the average market gain since 1965 (Nixon 1973, Reagan
1985, Clinton 1997 and Bush 2005) was 13.8%, versus a historical
average total S&P return of 10.9%. What's more, in
two of those four years, the total return exceeded 30%. Given the
relatively lowearnings multiple of the market, 2013 might well be
another breakout year.
As Andy is fond of saying, "
all it takes is one solid game changer to move the needle
on an entire portfolio.
" And Andy's had a number of them recently, including a
pharmaceutical company that surged 55% in the five months following
his recommendation... a biotech stock that is already up 183%...
and a business development company that has gained 27% since he
brought it to his subscribers' attention a few months ago.
To get Andy's latest pick, or to learn more about
you can follow this link here.
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