MarketScanners is a newsletter featuring Market Scans and Trading Ideas based on many different types of fundamentals scans, market analytics and technical analysis. Coupled with fundamentals and news catalysts, some of the plays we highlight for investors tend to move quickly and make great candidates for momentum traders and others seeking quick picks based on solid analysis and research.
Some companies featured in our newsletter pay MarketScanners for research, analysis, articles and distribution. Our reports contain forward-looking statements relating to the developments of the featured company’s products, services, future operating results and the future of the market. Statements contained in writing or in interviews are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected.
Since we are often compensated in shares or cash for our services, investors should evaluate the information on the Site with that in mind and should always perform their own independent analysis.
Interested in world events, science, music, and medical breakthroughs. Professional musician, designer and builder. Combat wounded veteran of the Vietnam war. Very interested in alternative ways to combat serious illness such as cancer, and fighting to make sure these cutting edge treatments are available to those who need them. Hoping to raise interest and awareness in this area, and elimnating apathy concerning the plight of patients who are being denied treatments that should be made available without ludicrous exclusion criteria.
Steven Bulwa is an investment analyst with a focus on new developments in science, technology and medicine and the companies poised to benefit. He has contributed to TheStreet.com, Realmoney.com and SeekingAlpha.com, BusinessInsider.com, Mediaite.com and HuffingtonPost.com among others. Steven has actively followed developments in technology for over 20 years, working with a scientific advisory board to validate potential investments. Early in his career, as a musician and recording engineer, Steven recognized the importance of the shift from analog to digital recording. This inspired his first stock investment in a company providing hardware and software solutions to television news providers converting to a digital video environment. The success of this investment inspired Steven to continue to delve into yet-to-be recognized investment opportunities in technology. While writing for thestreet.com in 2006, Steven was one of the first analysts to identify the explosive investment opportunity of 3D Printing. At the time he wrote articles about Stratasys(SSYS) and 3D Systems(DDD). Steven's picks like Nuvasive(NUVA) were also featured on Jim Cramer's Mad Money on CNBC. He has also acted as a consultant to companies looking to acquire new technologies including nanotechnology.
A practical investor, Steven also called the demise of the housing and mortgage markets after listening to one of Ben Bernanke’s early testimonies while simultaneously learning of Bank of America’s efforts to proactively renegotiate troubled home loans. In our capitalist economy, companies only renegotiate out of desperation, trouble was obviously coming!
Technology now evolves so rapidly that there are always great new technology companies with tremendous growth potential to invest in. Big cap tech's strongest growth is past, Steve wants to help you invest in tomorrow’s Apple,Google, or Microsoft.
Andrew McDonald is a healthcare investment professional with expertise in identifying transformative medicines as well as in forecasting clinical trial, regulatory, and sales outcomes. Prior to co-founding LifeSci Advisors, Andrew most recently served as senior biotechnology analyst at Great Point Partners, a dedicated life science hedge fund. From 2004-2006, Andrew was Co-head of Healthcare Research and Biotechnology Analyst at ThinkEquity Partners, a boutique investment bank. Prior to entering the financial services industry, Andrew was a medicinal chemist at Cytokinetics from 2001-2004, where he discovered and developed a promising anti-cancer agent now in clinical trials. Andrew began his pharmaceutical career as a medicinal chemist at Pfizer from 2000-2001. Andrew received a Ph.D. in organic chemistry from UC Irvine and completed his B.S. in chemistry at UC Berkeley.
I hold BS degrees in Biology and Environmental Policy in addition to an M.Ed in Science Education. I have experience as a researcher in the biotech sector. Currently, I teach Biology courses as well as publish articles and research in the fields of science, education and public policy.
Bill Gunderson @billgunderson is the CEO and Chief Market Strategist of Gunderson Capital Managment in San Diego, CA.
He is also a professional money manager, former research analyst, author of Best Stocks Now, and developer of the Best Stocks Now smartphone app.
He offers four free weeks to his weekly Best Stocks Now to Seeking Alpha readers at gundersoncapital.com
He also hosts a daily stock market radio show that is syndicated nationwide on the Salem Broadcast Network.
Bill has appeared on the Fox Business Channel and on Bloomberg Radio numerous times .His articles have been published in Barron's, Forbes, TheStreet.com and numerous other publications.
He can be reached at firstname.lastname@example.org or by calling (855)611-BEST.
I am an attorney in Baltimore, Md., representing children with lead poisoning. I have been investing in biotech for over a decade.
I have an A.B. from Vassar College '76, Phi Beta Kappa; J.D. from Duke Law School '79; M.S. from Johns Hopkins University '08.
I provided stock and bond research and analysis to a small cap specialist investor, Lloyd Miller, from 2002 until his death in January 2018. For my own account I invest mainly in technology and biotechnology stocks. My technology and investment web site is openicon.com, where readers can view the notes I take to make decisions and to write articles for Seeking Alpha.
Editor and Publisher ... Henry enters his thirteen (13) year at RegMed Investors which aggregates, curates and creates bottom-line content of regenerative medicine - stem, gene and cell therapy news providing a "vetted" selection of relevant and high-impact synthesis. He was VP - Strategic Planning and Communication at Curis (2001-2002), HQCM focusing on healthcare investments (NYSE:HQH/HQL) from (1985-2001)and founded LifeScience Economics, a healthcare research and analytics firm with offices in Boston, MA and Palo Alto, CA. Past experiences include Thermo Scientific, SWEC following 5 years at the FBI. A former military officer, Henry has been an adjunct professor at Boston University and Golden Gate University where he taught courses in venture capital, corporate finance and strategic development in the universities' graduate business schools.
Brian Marckx, CFA is the Senior Medical Device / Diagnostics Analyst with Zacks Investment Research. I cover small and micro-cap medical device and diagnostic companies. Focus is development-stage companies with novel and emerging technologies as well as already established names still flying under the radar.
Prior to joining Zacks, Brian worked as a high-yield bond analyst on Wachovia Securities’ institutional trading desks where he specialized in the healthcare and industrials industries. Prior to that he was an analyst in corporate finance at First Union National Bank. Brian has covered the medical device, pharmaceutical and biotechnology industries since joining Zacks.
Brian has been quoted in numerous publications including The Wall Street Journal, Barron's, Bloomberg-Businessweek and Kiplinger. His work has also been cited in various market studies and working papers including those from Massachusetts Institute of Technology, Deloitte & Touche, and Pharmaceutical Manufacturing. Brian graduated with a B.S. in Finance from St. John Fisher College and received his MBA from Wake Forest University. Brian is also a Chartered Financial Analyst charterholder.
The founding members of Chimera Research Group have over 50 years of combined experience in the biotech and pharmaceutical sector. Their experience includes work at Investment Banks, Hedge Funds, Pharmaceutical Companies, top-tier Universities, and the U.S. Food and Drug Administration (FDA). Their published work includes freelance and editorial contributions both print and on-line, clinical and medical research, books and tutorials, as well as contributions to on-line social media. Through these and other activities they were able to collaborate and connect amongst themselves to establish this cadre of like-minded biotech/pharma trading and investing aficionados.
The Team includes:
Chief Scientific Analyst - Jason Chew
Chief Research Analyst - Patrick Crutcher
Chief Medical Analyst - Dr. Tro Kalayjian
CEO & Trading Analyst - Tony Pelz
Research Analyst - Dr. Andrew Goodwin
Research Analyst - Dr. Juan Pedro Rodríguez Serrate
Technical Analyst - Joe Gantoss
Research Analyst - Dr. Steven Murphy
I am a market enthusiast and part-time trader. I started writing for Seeking Alpha in 2011, and it has been a tremendous opportunity and learning experience. I have been interested in the markets since elementary school, and hope to pursue a career in the investment management industry. I have been active in the markets for several years, and am primarily focused on long/short equities. I hold a Bachelor of Science Degree from Lehigh University, where I double majored in Finance and Accounting, with a minor in History. My major track focused on Investments and Financial Analysis. While at Lehigh, I was the Head Portfolio Manager of the Investment Management Group, a student group that manages three portfolios, one long/short and two long only. I have had two internships, one a summer internship at a large bank, and another helping to manage the Lehigh University Endowment for nearly a year.
Disclaimer: Bill reminds investors to always due their own due diligence on any investment, and to consult their own financial adviser or representative when necessary. Any material provided is intended as general information only, and should not be considered or relied upon as a formal investment recommendation.
I am an American trader and a Vanderbilt University alumnus currently living in San Francisco. I'm mostly interested in income investing using dividends, preferred stocks and other debt instruments, and pair trading.
I fundamentally analyze every business from the top down.
In my personal life, I have a strong Jewish faith and enjoy playing Scrabble and entrepreneurship.
EP Vantage is a forward-looking comment and analysis service tailored to the needs of pharma and finance professionals, focusing on the events that will define the future of companies, products and therapy areas. Written by experienced journalists, EP Vantage provides timely financial analysis of regulatory and patent decisions, marketing approvals, licensing deals, and M&A, giving fresh angles and insight to both current and future industry triggers. EP Vantage is powered by EvaluatePharma, the industry leader in consensus forecasts.
Grant Zeng has over 10 years of professional experience in equity research and analysis. Grant joined Zacks Investment Research Inc. in March 2006, and currently is a senior equity analyst covering biotech/pharma industry. Before joining Zacks, Grant worked for TheStreet.com as a biotech analyst from 2005-2006. From Sept 2001 to December 2003, Grant worked for China Pacific Insurance Co. as an senior equity/fund analyst. Grant was a healthcare equity analyst with Young & Partners, LLC from Aug 2000 to September 2001. Grant had also teaching and researching experience in pharmaceutical science.
Grant Zeng obtained his MBA with a major in Finance in 2000 from McMaster University, Canada. He also holds a Master of Science in Biochemistry from the University of Western Ontario, Canada; Master of Pharmacology and Bachelor of Medicine from Second Military Medical University, China.
Grant Zeng is a Chartered Financial Analyst (CFA) charter holder.
Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases.
To contact Derek, email him directly: email@example.com (mailto:firstname.lastname@example.org)
GuruFundPicks.com offers top buy & sell picks based on the collective or Consensus Picks' of over 330 of our hand-picked top hedge & mutual fund managers, incl. 78 legendary or guru fund managers, 27 of the world's largest or mega funds, 165 sector-focused funds (in gold, biotech, tech, energy, consumer, finance & REITs), 59 billionaires, 54 new masters and 40 tiger, 52 shareholder activist and our Winners Circle Top 100 Performing Hedge Fund Managers (updated quarterly). We offer market-beating tools and services including Consensus Picks' DIY Tools, Top 20 Small-Cap and Top 30 All-Cap Long/Short Newsletters based on the Consensus Picks system, and Trade Alert Services for Self & Auto-Trading. All of our services have beaten market averages by wide margins. See our website GuruFundPicks.com for the latest performance numbers, or contact us at support@GuruFundPicks.com.
The two authors are co-managers of a family partnership long/short equity fund since 2001, that have a successful track record in trading primarily small-cap aggressive growth companies based on a fundamental valuation analysis of current news, including quarter reports, guidance, biotech clinical study results and other news. The junior partner is a self-taught private investor with a Business degree from the New York University's Leonard N. Stern School of Business and the senior partner has an MBA from the University of Virginia Darden School of Business, including prior MS & BS (Engg.) degrees, and with experience in business strategy consulting to large fortune 100 companies.
We are generally sector and market-cap agnostic, identifying opportunities using a 'stock picking' bottom-up, fundamentals-based, valuation-driven approach. However, we find most opportunities in the small-cap space, in technology & healthcare sectors, with some also found often in the consumer, energy & basic materials sectors.
Follow us on Seeking Alpha and Twitter (@GuruFundPicks), and connect with us on LinkedIn (http://www.linkedin.com/in/manishbabla)
Stephen Simpson, CFA, is a freelance financial writer and investor.
I have worked for both sell-side and buy-side firms (equities and fixed income), with the largest percentage of my working time spent in med-tech. At this point I am now effectively in a "working retirement".
I write because I find that the process helps me take better notes, be more disciplined about modeling, and come up with a more coherent investment view for my portfolio management needs. If I'm writing about a stock, it's generally because I'm interested in it as an investment prospect or I think there's an interesting story to tell.
I don't share my models, so please don't ask.
More of my writings can be found at my blog Kratisto Investing (kratistoinvesting.blogspot.com), or Twitter (@Kratisto_Invest).
I am a private investor with a broad portfolio diversified across sector and size. Most of my writing, and much of the speculative portion of my portfolio, focuses on small and mid-cap companies in the healthcare and biotechnology sector. This sector provides the opportunity for outsize rewards, though one must be willing to accept significant risk. My background has exposure to healthcare investing and involvement with operating companies, which I believe provides me with a unique perspective. Currently I am an Associate for Finance and Business development at a clinical stage oncology company called Oncoceutics. Previously I was an Analyst at Osage University Partners, a venture capital firm focused on investing in companies developing technologies licensed from universities across a broad spectrum of opportunities including life sciences, information technology, cleantech, hardware and advanced materials. Prior to that, I worked for a grant program directed at life science technology commercialization at the University City Science Center. I also have worked at BlackRock Asset Management in an operations role with the money market and municipal bond fund groups.
I have a B.S. in Finance and Entrepreneurship with a minor in Biological Sciences from Drexel University, and hold the Chartered Financial Analyst (CFA) designation.
Team StockMatusow.com research and writers are:
Scott Matusow; Team Leader, owner and founder of StockMatusow.com and Dan Cohen, partner, and independent investor/scientist/inventor/trader and lead contributor at stockmatusow.com.
Scott is an independent investor/writer/trader and team leader of StockMatusow.com.
He has have about 17 years of stock market experience which include trading, investing, and managing his family’s trust as well as his personal account.
Scott has had the most success in trading/investing in smaller cap growth companies. Because Scott is not 'officially trained' in the markets, he see things outside the box, using his experience to provide clarity and alpha. Scott uses his ability to read situations, emotion, charts, times and sales, historical data, and macroeconomic and other market forces to predict stock price movements, in both short and longer terms situations.. Using these acquired allowed for him to completely divest his own and family's money near the top of the market before the 2008 financial crisis.
Dan Cohen is a partner at stockmatusow and entrepreneur in the fields of nanotechnology, medical diagnostics, and energy storage. Additionally, Dan is a Scientist and inventor. He has 7 years of experience investing and trading biotechnology focused equities with a specialty in identifying under-appreciated value in small caps. Dan utilizes his experience reading and reviewing scientific literature to evaluate prospects for success. His work with diagnostics development give him a strong background in immunology which is leveraged in evaluating immunoncology focused approaches. As well Dan has 5 years trading futures, specializing in E-minis and Treasury products. He utilizes a combination of technical analysis, deep scientific research, and macro views to generate alpha for the team.
Places you can follow Scott are:
Places to follow Dan are:
Mike Havrilla is a former pharmacist, biotech stock trader, and writer with experience that includes full-time online trading since 2009, working as a full-time pharmacist from 2004-2009, and writing for investors since 2007. Mike merged his former publishing business with BioRunUp.com / Mark Messier in October 2010, creating a new online biotech stock research and trading service--please send me a direct message if you are interested in a discount promo code for 43% savings on a one-year subscription.
Follow @SmithOnStocks on Twitter for more updates (http://twitter.com/#SmithOnStocks
Please read this section carefully for some important disclosures.
Who Am I?
My name is Larry Smith. My career was spent on Wall Street as a biotechnology and pharmaceuticals analyst and also as Director of Research at Smith Barney and Hambrecht and Quist. On my website, SmithOnStocks, which can be addressed from this Seeking Alpha site, I publish articles on biotechnology and pharmaceutical companies. I attempt to be objective and present a balanced view of negatives and positives. Readers should not rely on Seeking Alpha for my latest views and articles on Seeking Alpha should be viewed as informational only. The reports section of my website reflects my most current view on a stock.
How Do I Get Paid?
My only source of revenues from my articles is from subscription revenues from my website. I do not receive any compensation from companies or investor relations firms to write articles. I do not receive any direct or indirect compensation from hedge funds, other investment managers or any entity to write articles. I consider direct compensation to be cash compensation that is directly or indirectly tied to my writing articles.
I also do not receive compensation in the form of content. I believe that it is not uncommon for some writers to receive content from hedge funds, other investment managers or any entity that are critical components of the articles that they write. I consider this as non-cash compensation. I do not receive advertising revenues from my website so there is no incentive to be sensational in order to create page hits. I only get paid if my subscribers believe that my articles are of value to them and they then decide to subscribe to my services.
You Should View Articles Published on Seeking Alpha as Informational Only
I want to make clear to readers that not all of the reports that I publish on my website are also published on Seeking Alpha. Also, I will sometimes make reports available on my website a significant period of time before publishing the same or a condensed version on Seeking Alpha. All of the articles that are published on Seeking Alpha and my website at the same time have consistent views and opinions. However, at a later data, it may be the case that my viewpoint and opinion may change and these changes in viewpoint and opinion may only be published in articles on my website.
For this reason, readers may want to check the reports section on my website for my current opinion on a stock and should not rely on the latest Seeking Alpha article as my viewpoint or opinion may have changed. The content on my website is intended only for subscribers, but non-subscribers can view the headlines in the reports section which in most cases but not all will announce a change in viewpoint or opinion. However, I emphasize that I undertake no obligation to update my articles on Seeking Alpha and the latest article on Seeking Alpha may not reflect my latest thinking. This is why I want to re-emphasize that any article published on Seeking Alpha should be viewed as information only.
What SmithOn Stocks is All About
SmithOnStocks is not registered as a securities broker-dealer or as an investment adviser with the U.S. Securities and Exchange Commission or with any state securities regulatory authority. SOS relies solely on publicly disclosed and available information. While SOS makes all reasonable efforts to confirm the accuracy of its statements and opinions, all comments should be considered only as opinion and should not be considered to be absolute fact. Investors should carefully read the Terms & Conditions and Disclosures sections of my website. Investors should carefully perform their own due diligence, seek other points of view and consult with their broker or financial advisor.
Investing in equities includes considerable risk, and investors should be prepared for the possibility of capital loss. This is particularly the case with biotechnology stocks in which hard to predict clinical and commercial outcomes can often disappoint investors and lead to unusually large declines in price. Potential investors in biotechnology stocks must often be prepared to risk the loss of substantially all of their investment. These stocks are only suitable for investors willing and able to accept unusually high financial risk. Users of my information acknowledge that SOS and its owner are not liable to any person or entity for the accuracy, thoroughness, reliability, or timeliness of the information provided. Users further acknowledge that SOS is also not responsible for any direct or indirect losses that may arise from the use of information provided to any person or entity.
Employees of SmithOnStocks or SOS do buy and sell healthcare stocks, some of which may be the subject of written articles appearing on Seeking Alpha. In the event that employees have a stock investment in a company, that ownership is fully disclosed in notes on Seeking Alpha. On any new recommendation, I have a 48 hour waiting period before initiating a position in a stock. I trade in line with my recommendations.
In 1999 I made an ethical breach that resulted in a suspension from being a registered representative in the securities industry for a period of time. I believe that this measure was harsh beyond any reasonable measure and totally unwarranted. I have gone to great lengths in this report to give my side of the story and I hope that you will read the in-depth account that I have provided. This took place over 16 years ago and has long since ended. There has been no restriction from the NYSE for many years on my working as a registered representative if I choose to go through the required registration procedures.
Still, this NYSE action is like a Scarlett letter that I carry. I would urge you to read the full account of the events that led to this NYSE action and if you do so I believe you will agree that this in no way reflects on my integrity and the way I have always conducted myself, then and now. I strongly believe that the action taken was excessive and I think that if you read my full account you will agree.
People make mistakes. Bill Clinton lied under oath, was impeached and disbarred as a lawyer in Arkansas in connection with the Monica Lewinsky affair. However, society has judged him on the body of work that he has done. Suspensions in the security industry can result from serious infractions in which investors are defrauded or swindled. In the events that led to my suspension no investors lost money and as I explain in this report investors who followed my advice made significant amounts of money. Before you rush to any conclusions, let me tell you my story.
I Am Proud in How I Have Conducted My Career
Before I go into the details of this ethical breach, I want to emphasize that I have had a distinguished career on Wall Street. My record from 1971 when I started on Wall Street until 1999 was unblemished. I came to New York from Indiana with no business connections and no money but through hard work I became a highly regarded Wall Street analyst and was selected to the Institutional Investor All Star team in pharmaceuticals for ten years in a row. Based on my record as being the top or one of the top analysts at Smith Barney, I was selected to be head of research from 1981 until 1989. I also served on the Board of Directors at Smith Barney.
Based on my strong reputation, Hambrecht and Quist approached me in 1989 to head their life sciences research effort and to run the annual H&Q (now JP Morgan) healthcare conference. I was a Managing Director and on the operating committee at H&Q. I left H&Q in the late 1990s because I disliked the bureaucracy that was such an integral part of being head of research. I had made enough money to be financially secure and I wanted to get back into doing what I loved, biotechnology research. I joined Tucker Anthony in 1997 as a biotechnology analyst.
Explaining the Events That Led to the NYSE Issue
Tucker Anthony had a sister firm called Sutro and a decision was made early in 1998 to move health care research from Tucker to Sutro. Tucker was an east coast based firm and Sutro was based in Los Angeles. Sutro leased a New York office to which I moved. It was here that an unfortunate train of events was set in motion that led to the NYSE action that put a stain on what I consider an outstanding career.
When I moved from Tucker to Sutro, I maintained my brokerage accounts at Tucker. I conducted normal trading in this account for some months. Then the research administrative research manager for Sutro contacted me and said that for regulatory purposes I would have to move my account from Tucker to Sutro. After some time spent in looking for a broker to handle my account at Sutro I became frustrated. At that time, I had over $5 million in my brokerage accounts. While I was sophisticated in health care investing which made up 10% of my portfolio, I needed help with other parts of the portfolio. I could find no retail broker at Sutro that I wanted to trust my portfolio to. I asked and received approval to look for a broker outside of Sutro and contacted Schwab about finding an investment advisor there to manage my account.
While this was in process, the research administrative manager at Sutro called again and said that Sutro was probably planning to shut down the New York office and I would have to move to Los Angeles or leave the firm. Moving to Los Angeles was not an option for me as my roots were deep in New York. I informed her that given this choice I would soon be leaving Sutro rather then moving to Los Angeles and began to think about what to do. I came to the preliminary conclusion that I would start a consulting firm dealing in biotechnology. I also concluded that I would have to carefully manage my investment portfolio.
It was here that I made a major mistake that I have regretted ever since. Frustrated that my money was tied up in Tucker and I was unable to trade in my account and unable to find a broker that I trusted, I decided to open an account at Schwab without a broker managing it. I indicated on the account transfer form that I was self-employed based on the assumption that I was going to be leaving Sutro imminently. This was my Bill Clinton moment and turned out to be a major mistake.
I continued to work at Sutro while I was waiting for the New York office to be closed which I thought would be in a matter of days or weeks and during this time, I began to execute trades in my account at Schwab. However, after some weeks the research administrative manager at Sutro called and informed me that based on the response they had gotten from clients and the work that I was doing that the firm had reversed itself and now wanted to keep the office in New York and they were also willing to hire two assistants to aid me. There was also the promise of a significant bonus in the upcoming review that based on my work could amount to several hundreds of thousands of dollars.
Not surprisingly, I decided to stay on at Sutro instead of leaving and starting my own firm. I then looked for and finally found a Sutro broker that I could trust to help manage my portfolio. The brokerage accounts at Schwab were opened in February of 1999 and transferred to Sutro in April 1999. When I moved my accounts to Sutro the compliance department at Sutro saw that there was this hiatus when I had an unauthorized account at another firm. This was reported to NYSE.
NYSE Reviewed My Case and Took No Action for Three Years
Management at Sutro looked very closely at what had occurred and decided that while it was certainly not something they could condone, it was a minor infraction and they thought that given my stellar and unblemished record that NYSE would not take any meaningful action other than a wrist slap. Sutro decided to be pre-emptive in administering the wrist slap and fined me and suspended me for one month. They thought that this would satisfy NYSE based on their interpretation of what had occurred. They wanted me to continue with the firm, paid the sizable bonus I was due and committed to picki up all legal fees.
I then had a deposition with a lawyer from NYSE in early 2000. During a one day interview, he went over all of the details of the accounts that were held at Schwab and all of the trades that occurred in detail. He also looked at all of the reports that I had issued as an analyst during this time to compare to the trading in my account to the issuance of research reports. I then heard nothing more from the NYSE for three years.
Sutro concluded as did I that this issue was behind us. Three years later in mid-2003, I heard from NYSE to my shock that they were re-opening the case. Why after three years was the case being re-opened? In talking to the lawyers at NYSE, I came to understand that this was the result of Elliott Spitzer’s attack on Wall Street research. Remember the famous case of Henry Blodgett who recommended stocks of investment banking clients to clients that he thought were actually sales.
NYSE enforcement was under pressure because this unethical practice had been brought to light by Spitzer and they had missed it. They were under pressure to show how tough they could be as enforcers. They reviewed their records and came up with my case which they decided to reopen it in order to show that they were aggressive enforcers.
They went over the same information that had been gathered in early 2000, but came up with an entirely different interpretation. They said that I effected stock transactions shortly before issuance of research reports which I had prepared and this was a violation of Exchange Rule 472.40(2) (iii). They also said that I failed to disclose that I held securities in stocks recommended in a research report. They said that I opened accounts at a member firm that concealed fact of my employment at another member firm; violated Exchange Rule 407(b). They recommended a censure and two and one-half year suspension.
Two Stock Trades at Question
The information on opening an account at another firm is something that I just discussed at length. This was not in dispute. However, NYSE focused on two stock trades that I made and explained the suspension largely on the basis of these two trades. I believe that they were clearly wrong in their conclusions. Let me discuss those trades in detail.
The first trade was in Stericycle, a medical waste disposal company. I had been following the company for some time with a neutral rating. In my reports, I noted that the Company wanted to buy the medical waste disposal business of Waste Management and if they were successful, I would immediately go to a strong buy.
This acquisition was announced on April 14, 2009 after the close at 4 PM EST. Because it was 1 PM in Los Angeles I held a conference call with Sutro’s traders and the salesforce and told them I was going to a strong buy on the stock. It was the practice of Sutro to initiate new ideas with a conference call in this manner. The traders and sales force would then go out to the clients with the idea. After this, the analyst would follow-up by publishing a note on First Call (an electronic distribution network) and this was done on April 15 This was then followed up by a written research report on April 16. On April 16, I bought 2500 shares of the stock at a price of $12. This was accepted practice at Sutro for research analysts buying stocks that they recommended. There was no requirement to wait for a period of time to buy the stock. The analyst was allowed to buy the stock at the same time as other Sutro employees and clients
The NYSE judged my conduct on standards that were different from those that were accepted practices at Sutro. By today’s standards, the Sutro practices seem very loose but they were common at the time. This is why Sutro did not view this trade as a breach of conduct and kept me as an analyst. The NYSE also said that I did not disclose that I owned Stericycle in my written report. However, none of the analysts at Sutro were required at the time to do so. This was also standard operating procedure.
Stericycle was a major success for investors. Adjusting for stock splits the stock traded at about $3.00 when I first recommended it. Fifteen years later, the stock is trading at about $119. This was one of my best recommendations ever. I held the Stericycle stock for many years and only sold it recently.
The NYSE did not accept that my actions were in line with the practices of Sutro even though I produced a letter to that effect from the research administrative officer. I also argued that a $30,000 investment in a portfolio that amounted to $5 million at the time was de minimus. I argued that the stock was bought and maintained as a long term investment. I argued that it was an excellent money making idea for investors. The NYSE dismissed all of these arguments and maintained that I traded ahead of my recommendation.
The second trade that the NYSE emphasized was a trade in Schering Plough. On April 18, the stock had traded down by 5%. I had an accumulate rating on the stock essentially telling investors to buy the stock for the long term, but connoting less emphasis than a buy. In the morning call to traders and salesmen, I alerted them to the price weakness, but told them there was no change in the fundamental outlook and there was no change in my price target. I was not intending to issue a report, but the research administrative manager told me that the price drop in Schering Plough based on my price target indicated 25% upside that was the accepted criteria for a buy recommendation. Hence, I needed to put out a report in which I upgraded my opinion from accumulate to buy.
I bought the stock on April 20 at the same time as the written report was issued. I previously owned 500 shares and this increased my position to 1000 shares for a total investment of about $35,000 which again was within a $5 million portfolio. The NYSE again accused me of the same things as in the Stericycle situation. They said that I traded ahead of my recommendation and did not disclose that I owned the stock. My responses were the same as for Stericycle and were once again rejected.
Was The NYSE Action Justified?
I think that the NYSE action was out of all proportion to what actually transpired. I think the enforcement officers applied new standards in overturning the prior decision to take no action on this case that had been in effect for three years. They were under pressure to make a big splash in the Elliot Spitzer era to show how tough they were. My recommendations were solid recommendations and indeed the Stericycle recommendation was outstanding.
I fully recognize that my decision to open the brokerage account at Schwab prior to resigning from Sutro was an ethical breach on my part even if I was planning to resign from Sutro. When I decided to stay with Sutro, I transferred my accounts immediately. I strongly and absolutely maintain that my trading in Schering-Plough and Stericycle was in accordance with policies in place at Sutro at the time. By today’s standards these seem loose, but this was common industry practice at the time.
The NYSE review was conducted by a mediator and it was he that determined the punishment. He had spent his entire career as an enforcement officer for the NYSE. He was also friends with the NYSE lawyers on my case and sent out to lunch with them during the hearing. He was the judge, jury and executioner of my fate. As I look back, I question his objectivity and motives. In writing his opinion, he did not acknowledge documents from Sutro that showed that my stock trading disclosures were in-line with their internal procedures. I had no opportunity to review or correct his opinion in the opinion he wrote. In a country in which, guilt or innocence is established by one’s peers, mine was determined by a hanging judge with no experience in the securities business and an apparent pre-determined view on my actions.
Leonard is an editor of BioTuesdays.com. Before joining the blog, Leonard amassed 36 years of experience as a financial journalist, editor and manager with The Wall Street Journal and Dow Jones News Service, and The Globe and Mail’s Report on Business, where he pioneered the development and launch of the newspaper’s Money & Markets section in the early 1990s. Most recently, he was Canada’s leading biotechnology and healthcare writer, as well as the author of a highly popular stock market blog on globeandmail.com.
I am a Portuguese independent trader, analyst and algorithmic trading expert, having worked for both sell side (brokerage) and buy side (fund management) institutions. I've been trading professionally for about 20 years.
I have a Marketplace service here on Seeking Alpha called Idea Generator that's focused on real-time actionable ideas based on valuation and catalysts. The Idea Generator portfolio has beat the S&P 500 by more than 48% in 28 months.
I also launched www.thinkfn.com in 2004. Thinkfn (Think Finance) carries thousands of educational articles on finance and markets (in Portuguese).
I trade futures, stocks from the long and short side, forex and options. I trade both discretionary and fully automated systems (Metatrader, Quantshare and others). I can be reached at paulo.santosATthinkfn.com or followed on Twitter at twitter.com/ThinkFinance999
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