Avoid This Stock

Editor's note: This article is a stock pitch made by a member on CAPS, The Motley Fool's free investing community. The pitch is published UNEDITED and is the opinion of the CAPS member whose pitch it is, in this case: TSIF.

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Star Scientific profile

Sources: S&P Capital IQ, Yahoo! Finance, and Motley Fool CAPS.

This Week's Pitch :

You can change your name, but you can't change your stripes. The last two days as Star Scientific Inc's ticker changed from CIGX to STSI the share price has climbed almost 20%. (Although the increase was "probably" mostly from recent peer review articles). The thought that Star Scientific may split off its tobacco products from its health products seems to have resonated with both the proponents. The problem is that neither bet at these price levels is investment grade. Of course both sets of proponents quickly attack any negativity toward their darling, so new investors, (which appear to jump in everyday) needs to filter through the noise.

Star's lawsuits against Reynolds American [(NYSE: RAI)] and other tobacco companies concerning the "curing" of tobacco have gone no where over the years. If the tobacco companies were that concerned they would simply swallow Star up. The aides to quit smoking sell at a low volume loss.

The newest play, that a component in cigarettes, anatabine, which Star Scientific sells in a compound called Anatabloc cures thyroid related autoimmune diseases, aides against inflammation in joints and possibly every ailment known to man, (including Alzheimer) has been the second leg of the out of bounds share price runaway the last year.

The bottom line is that even if both of these max out in a big way for Star they are still not worth nearly the market cap they have grown into. ($670 Million). They are constantly issuing shares to keep the lights on. ($40 Million worth the last year alone). There is nothing proprietary about what they have in the Anatabloc line. EDIT: Regarding my "nothing proprietary" about Anatabloc: I am aware that Star has Patents and a patent pending with the U.S. Patent and Trademark Office concerning extraction ofantabine from tobacco leaves and at least one concerning a combination use for obesity and weight loss. None of the patents are through the FDA. As was exhibited by the patents on curing tobacco leaves, there are multiple ways to "skin a cat". Other potential users of anatabine will either find their own methods of use or could easily license it from Star. All Star founders ultimately care about is their own future which can easily be meet without a $670 Million fictitious market cap in the stock. This was partially exhibited by the $2.3 Million in stock options issued this past quarter despite an $8 Million net quarterly loss.

IF studies support them AND IF some other company felt there was market opportunity they could grow it from scratch at a fraction of Star's bloated market cap.

Many of the current investors have conviction bias, so this pitch isn't for them. The issue isn't could they, should they will they hit a home run with their lawsuits or their supplement, the question is what that would be worth. The answer is a fraction of their current market cap. IF medical benefit is asserted by Anatabloc Star's share price will collapse even faster as a big player or two with an already established network jumps in. Star's feeble; over priced mail order business will collapse even faster.

I'll, (as well as any other CAPS players of influence who pitch their down thumb) be branded as a "Short". Playing CAPS has nothing to do with being short, it's about educating (yourself and others) and I would actually caution anyone against actual shorts. The premium is no doubt too high, the daily volume is low and 30 Million short shares may be right, but a short squeeze on any perceived good news could hurt. Anyone who things ZZlangerhans or poor TSIF could sway the market is a Fool with a huge capital F on their forehead.

You can cure tobacco, you can possibly cure thyroid/inflammation/or even Alzheimer's, but you can't cure investors/speculators from daydreaming about their Millions while continuously cycling in while others cycle out.

Foolish bottom line
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