Casey Research – Under New Management

by JDH on June 13, 2015

Over the last decade or so I have subscribed to two investment advisory publications: The Dines Letter, and various publications from Casey Research.  The most popular post I ever wrote was my review of The Dines Letter 2010 Annual Forecast Issue.  Number 4 on the most popular list was Doug Casey, and Casey Research: A Comparison to The Dines Letter, and #5 on the list is Casey Takes a Shot at Dines Over Rare Earth Elements.

You see a theme here?  If I mention one of the big newsletter writers, it gets action.

I don’t write this blog for “action”; I write it for my own amusement (and to force me to think through my investment decisions on a regular basis).  With that background, my thoughts on Dines and Casey.

You can search for my previous ramblings on the topic, or follow the links I cited above.  My general thoughts are that newsletter writers perform a service, but you can’t rely on them.  Just because Casey or Dines says “buy this stock” doesn’t mean you should.  You should do your own research, and make your own buy and sell decisions.

In my humble opinion, the big value of these newsletters is that they are a source of ideas.  They force me to consider alternate viewpoints.  I don’t act on most of what I read, but they are food for thought.

Here’s an example: Casey is an advocate of doing private placements in companies that have good management, and are growing.  He admits that they are high risk plays, but could also have high rewards.  His general approach is to buy units in a company that include both a share and a warrant. The goal is to get warrants with long expirations that are not too far out of the money.  It’s a good strategy, because it allows you to get more upside if it works.

Understanding this concept has helped me in “real life”.  This week my broker sold all of my shares in a company (not a Casey recommendation) that I bought through him in a private placement 12 months ago.  The shares cost 15 cents, and we sold them this week for 45 cents.  Perfect.  Even better, the shares came with warrants, also at 15 cents, so we exercised and sold some of them, at a big profit, and kept the rest.  I know own a bunch of warrants that still have a year to run on them, so if the stock price continues to increase, I can make even more money.  If the stock tanks, oh well, I’ll be disappointed, but I’ve already made a big profit, so no worries.

It’s what Casey calls a “free ride”; the cost basis of the warrants is essentially nothing, so I have nothing to lose, but I keep the upside.

That’s a valuable lesson I’ve learned from Casey, which I have applied to other companies not related to what he was recommending.

I find with both Dines and Casey they are decent at deciding when to buy, but not great at determining when to sell, so in most cases it’s best to make your own sell decisions.  I prefer to sell early, even if it means leaving money on the table, but that’s just me.

Change in Management at Casey

So, on to the news. Here’s the email subscribers received on Friday, from Porter Stansberry:

In early May, my company (Stansberry Research) purchased a controlling interest in Casey Research from David Galland and Olivier Garret. This was a friendly deal, with all partners in full agreement. We bought a great and profitable business with an extraordinarily valuable brand and dozens of very talented employees. David and Olivier, after spending more than a decade building this business nearly from scratch, were able to monetize the value they worked hard to create. We paid a fair price based on the company’s current earnings. Both sides are very pleased with the deal.

This email contains two interesting bits of information:

First, Doug Casey doesn’t own or control Casey Research, and hasn’t for many years.

Second, David and Olivier, who did control it, have sold to the new guy, Porter Stansberry, who has his own investment newsletter business, and has been in the business for many years.

As a result of this transaction some employees have departed, and one or two new analysts have been hired.  How will this impact their new recommendations?  No one knows.

As I stated above, I use these publications as a source of ideas; I don’t buy everything, or even most stocks, they recommend.  So, we’ll see what the new guys can do.

My final thought is that, as a consumer of information, you never really know who is supplying that information.  You would think that Doug Casey is behind Casey Research, but that has not been the case for many years.  Does it matter?  Maybe.  Maybe not.

James Dines started writing his letter, in a different form, in the 1950’s.  It is now 2015, so he’s been in this business for over 55 years.  Assuming he started when he was 20, he is clearly not a young man, and presumably won’t be doing this for another 55 years.

Does he even write his letters?  Any of it?  All of it?  Or is he just the editor?  If he stops writing, would the letter change?

I have no idea, but that’s why as a reader you don’t want to put all of your eggs in one basket.  You never know when a letter will be sold and a new guy will take over, so ultimately you want to learn to think for yourself.

That’s the message for today:  listen to all opinions, but ultimately you must do the research and think for yourself.

Thanks for reading, and thinking for yourself.  See you next week.