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PDFJames DiGeorgia, editor of the Gold and Energy Advisor newsletter, this week suddenly reversed his “strong buy” recommendation on BGBR and started urging his followers to sell the stock instead. His abrupt about-face came just one day after The Street Sweeper raised serious questions about BGBR’s true value and the paid promoters – including DiGeorgia himself – who have been touting the heavily traded stock.
“Based on new information I received in the last 24 hours that I was not presented with when I initially reviewed and recommended the stock, I believe it would be in the best interest of any investors holding shares in this company to sell them,” DiGeorgia stated in an official press release on Tuesday. “It doesn’t matter if you’ve made money or lost money holding BGBR.OB. Everyone who has based their purchase of shares on my recommendation should sell their shares.”
Last week, DiGeorgia took the exact opposite stand. He told investors to purchase BGBR quickly in order to capitalize on a likely 400% jump in the company’s share price over the course of just 60 short days. Back then, at least, he insisted that BGBR was the “best way to play the 2010 gold craze” and the “most exciting opportunity” in the entire stock market.
“I’m betting big on this belief,” DiGeorgia stated. “I’m sending out 1.5 million letters just like this one -- to investors all over the United States – which means if this letter has sat around for more than 14 days, the stock may already trade at $4-plus per share and you may be too late.”
Those who waited around, however, may have escaped big losses instead. BGBR’s stock had already hit an all-time high by the time that DiGeorgia made his bullish call, peaking at $1.75 a share on April 9, and has been steadily losing steam ever since. It closed at $1.05 on Tuesday, down 40% from its recent high.
Meanwhile, with BGBR under pressure on disturbing media reports, DiGeorgia began to have second thoughts. Before issuing his recommendation, DiGeorgia explained in an email to The Street Sweeper, he requested backup information from the company that he failed to secure in advance. Since then, DiGeorgia has fretted over “the omission of some key facts” and the company’s failure to even respond to his escalating concerns.
“My decision to change my recommendation comes from the discipline ‘where there is smoke, there is fire,’” DiGeorgia told The Street Sweeper. “I’ve learned a long time ago, when in doubt, get out.
“If BGBR.OB does run up in price,” he added, “I will still have made the right decision to change my recommendation.”
Still, DiGeorgia could have spared investors some pain by doing more homework before mailing out his newsletter. According to his email, DiGeorgia first discovered BGBR roughly three weeks before issuing his bullish call on the stock. He relied heavily on BGBR press releases to back up his favorable views, while The Street Sweeper uncovered multiple risks – in less than a week – by combing through the company’s regulatory filings and other publicly available, if less obvious, documents instead.
Meanwhile, DiGeorgia followers may not even realize that the stock picker has changed his mind. Although he reportedly mailed his newsletter to 1.5 million investors, he has relied on an Internet chat room – often frequented by only the most active stock traders – to announce his bearish, new BGBR call. (DiGeorgia says he did try to issue his announcement over the newswires, but his press release has yet to show up under headlines for the company.)
Chat-room visitors who saw DiGeorgia’s announcement have started attacking him in the meantime. One of them even claims that he fielded a bullish email from DiGeoria – urging him to “buy shares of BGBR now (and) buy the Ferrari tomorrow – on the same day that the gold analyst later reversed his call.
For his part, DiGeorgia has suggested that others may be using his name to promote the stock instead. He says that he has since contacted those responsible for distributing his buy recommendation and asked them to halt that activity. Meanwhile, however, he finds himself scrambling to defend his actions and his reputation alike.
“The sign of an honest analyst, rating agency or brokerage firm is their willingness to recognize an error in judgment and swiftly going public with the error,” DiGeorgia insisted in his recent email to The Street Sweeper. “I’ve had so many winners over the years that looking stupid over one recommendation doesn’t bother me.
“What would bother me,” he added, “is to allow any amount of money get in the way of recognizing a possible error.”
According to a fine-print disclaimer, an outside party paid $900,000 to cover costs associated with creating and distributing DiGeorgia’s bullish letter on BGBR’s stock. But DiGeorgia himself says that he personally pocketed far less.
“I was paid $15,000 for the paid advertisement,” he told The Street Sweeper. “I had absolutely no control over the $900,000 budget quoted – absolutely no control.”
Regardless, that $900,000 investment has so far failed to deliver any desirable returns. At $1.11, BGBR currently fetches about half the price cited in DiGeorgia’s original report. As a result, the stock must now soar by almost 1,000% -- rather than 400% -- in order to reach the $11 target DiGeorgia set when first recommending the shares.
BGBR skeptics, quick to attack DiGeorgia’s coverage of the stock from the start, seriously doubt that will happen.
“Look at the last financial statements,” one chat-room visitor urged. “They have nothing. They are nothing. (And it) looks like they will stay nothing.”
* To contact Melissa Davis, the author of this story, please send an email to editor@thestreetsweeper.org.
