PayDirt philosophy: C-
Just visited the PayDirt site to read the introductory report explaining their philosophy. And I must say here, I wasn't particularly impressed, mildly speaking. In fact, I was not impressed at all.
The report is centered around the "revolutionary" new approach of looking for value in the dustbin. It goes on and on to extol the great prospects of this investing style. The risks, according to the Fool, include the inherent high volatility of these stocks, and the chance to find that the stock is cheap for a good reason. There is less emphasis on LTBH, and more attention is paid to timing. Buf for all their warnings and admonitions, the basic message is rather unsophisticated: "we will be successful becuase these stocks are so cheap and because we'll be the first to touch them, if only with a 10 ft pole".
Excuse me Fools, but this is just not serious.
There are multiple venues one can take to make a killing on the stock market, we all know that. And no rational person will argue that that one can make a fortune buying even something as repulsive as worn socks provided the price is right. Ok, so that is the new investment style, I have no problem with that. But when the entire "philosophy" is reduced to a self-obvious statement, I say the report clearly falls short.
A really good report would have to provide detailed, candid answers to at least the following questions:
-Statistically, is this a better playing field than stocks of growing companies with steady earnings?
-Isn't it true, from our consumer experience, that cheap s..t is usually more overpriced than quality goods?
-If this is truly a superior investing style, then how come nobody has built a superior track record buying broken companies? The domain of expensive high-quality stocks has produced quite a few "Microsoft millionnairs", "Starbucks millionnairs", "Birkshire millionnairs", and so on, and so forth. Anybody heard of "Lucent millionnairs" or "Enron millionnairs"?
-Realistically, what is the chance of picking the next MIDD vs. the chance of picking a piece of garbage?
-What about the old truism, "I'm not reach enough to buy cheap things"?
-How about a candid discussion of the pop?
I would call this is an unauspicious start. The Fool hasn't actually made money so far; a less than inspiring 6-month performance - and for the vast majority of subscibers the trial subscription will remain just that - a trial subscription. The shortcoming in their philosophy that are easily overlooked during a rally will become very obvious to everyne and even appear exaggerated as soon as the market goes into the bearish mode. Given that the first picks that will define the customer experience are already reflecting the prices at the market peak, I think PayDirt is treading a very slippery ground.