Checking Up On Dr. Frost's Latest 13G Fund Filings

by: Greg Miller

Dr. Phillip Frost and his Opko Health (NYSEMKT:OPK) are attracting significant attention this year after his insider buying foreshadowed the company's 80% rally from last year's lows. Just this past week, his fund's investment in MusclePharm (OTCQB:MSLP) sparked significant attention and preceded a one-week rally from $4 to $7.80. He also received a prestigious endorsement on live television from Jim Cramer during CNBC's Mad Money.

Dr. Phillip Frost, you have delivered as you always have in the 25 years I've followed your career. -Jim Cramer, January 28, 2013

Dr. Frost originally made a name for himself when Teva (NYSE:TEVA) purchased his IVAX company for over $7 billion, yet he is now known on Wall Street for his relentless insider buying in Opko Health common stock. With Opko Health hitting 52-week highs yesterday and a recent Jim Cramer endorsement, investors are watching the actions of this self-made billionaire closely.

Because of the interest in Opko Health stock, it seems evident to me that Dr. Frost is "in-play" right now and, as such, I thought it would be prudent to check in on his latest round of 13G filings with the SEC. Although Opko Health is by far Dr. Frost's largest holding, he is nevertheless an active investor in a variety of other public companies.

Seeking Alpha contributor Rohit Thapliyal compiled one of the most concise lists of Dr. Frost's historical successes with small-cap companies, which I will borrow here for reference.

Here is a brief list of Dr. Frost's overlooked wins:

  • Continucare (invested $16.8M that became $170M) +900%

  • Dreams (invested $2M that became $15M) +650%

  • Whitman Education (invested $6M that became $175M) +2800%

  • Key Pharmaceuticals (invested $5M that became $180M) +3500%

  • Rolapitant (invested $29M that became $190M) +580%

  • Ivax (invested $100M incl. open market purchases that became $1.5B) +1400%

  • ChromaDex (combination of personal and corporate investments) all up at least +200%

  • North American Vaccine (invested $10M that became $140M) +1300%

I cite these numbers to illustrate Dr. Frost's history of small-cap investment performance, as there are only two companies listed on his fund's 13G filings for 2013, and both are small.

Dr. Frost's First 13G Filing for 2013: Continental Resources Group

According to the latest 13G filing of Dr. Frost's "Frost Gamma Investments Trust," the billionaire declared new ownership amounting to 8.3% or 7,879,752 shares of Continental Resources Group (OTC:CRGC). This 13G filing is unsurprising and does not represent a new trading idea for anyone who has been watching Dr. Frost's work over the past year.

Why? Continental Resources Group is a non-operational company that is finalizing a share exchange agreement with Pershing Gold (NASDAQ:PGLC). Continental Resources Group will ultimately wind-down its existence once the SEC approves share registrations and Pershing Gold distributes previously-issued shares to Continental Resources Group.

Dr. Frost has been a long-term shareholder in Pershing Gold, so his 13G filing today in Continental Resources Group is unsurprising and simply reflects his continued confidence in the "parent" company, Pershing Gold.

Of note, stock prices at both companies (and Dr. Frost's respective holdings in each) have already doubled over last year's lows in anticipation of the reinstatement of mining operations on Pershing Gold's property in Nevada. Pershing Gold is a late-stage gold exploration company with plans to enter production by early 2014.

Dr. Frost's Second 13G Filing for 2013: IZEA Inc.

In an interesting move, Dr. Frost declared increased ownership in IZEA Inc. (IZEA) amounting to 9.1% or 465,125 shares. In contrast to his 13G in Continental Resources Group, this filing represents a new trading idea, as Dr. Frost has not made any adjustments to his holdings in IZEA since the middle of last year.

Dr. Frost's total ownership in IZEA represents only $74,885 as of Monday's closing price for IZEA, yet the billionaire's interest sparked a flurry of trading activity in 10,000- and 20,000-share blocks after the filing was released yesterday on the SEC's website. (With Opko Health at $7 from last year's $4, and MusclePharm at $7.80 from last week's $4, Dr. Frost's trades appear "in-play" indeed.)

IZEA is a social media company that allows advertisers to pay celebrities to tweet or blog. It generated revenues of $3,908,221 with a 52.8% increase in gross profit for the first three quarters of 2012. I easily understood this company's service after I visited its intuitive storefront.

As with Continental Resources Group (and its parent company Pershing Gold), I have no opinion as to the suitability of IZEA as an investment. Both companies have debt, and I am currently looking at some debt-free companies for my personal portfolio. Regardless, small-cap investing is exciting yet perilous, and both of Dr. Frost's 13G investments carry risks typical of any small business: marketplace pressures, low credit-worthiness, regulatory hurdles and high share price volatility.

Focus Remains at Opko Health

In this brief review of Dr. Frost's 13G filings for 2013, it is clear that his focus remains at Opko Health. With the imminent launch of Opko Health's 4KScore in the U.S., its new vitamin D formulation from Cytochromas and the roll-out of Claros, Dr. Frost has most of his attention directed toward internal affairs. He also continues to invest the vast majority of his excess funds in Opko Health shares.

For the billionaire, though, it seems as though paying less than $3 million for some speculative multi-bagger potentials in 2013 like Continental Resources Group or IZEA is worth the risk for the opportunity to build a larger estate that will ultimately be donated to charity through Bill and Melinda Gates' Giving Pledge.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.