Why Star Scientific Is Poised to Keep Plunging

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, smokeless tobacco products specialist Star Scientific (NASDAQ: RCPI  ) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at Star Scientific and see what CAPS investors are saying about the stock right now.

Star Scientific facts

Headquarters (founded)

Glen Allen, Va. (2000)

Market Cap

$300.0 million

Industry

Personal products

Trailing-12-Month Revenue

$5.4 million

Management

Chairman/President/COO Paul Perito
CEO Jonnie Williams

Trailing-12-Month Return on Equity

(136.3%)

Cash/Debt

$9.5 million / $12.0 thousand

Competitors

GlaxoSmithKline
Pfizer
Vector Group

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 45% of the 322 members who have rated Star Scientific believe the stock will underperform the S&P 500 going forward.

Just last week, one of those Fools, All-Star zzlangerhans, kindly updated our community on the opportunity:

So where does Star stand now? The patent infringement suit against big tobacco is gone for a paltry [$5M] settlement. I have to admit that one scared me a little. These are companies that have tens of billions in discretionary funds at their disposal to make irritants like Star go away forever. [$500M]? Chicken feed. So the fact that Star was only able to chisel out [$5M] is flat out pathetic.

The low-nitrosamine tobacco products are gone as well. So now Star only has unregulated cosmetics and nutraceuticals featuring snake oil anti-inflammatory compound anatabine. ... Star can't make anywhere near enough money off anatabine as a nutraceutical to justify its valuation, and the trials they are running to supposedly garner FDA approval as a drug are fraught with misrepresentation and will likewise fail.

Just a note: Virtually every one of my Star [underperform calls] has been followed shortly afterwards by a startling gap up in share price. Of course, I closed all those red thumbs for a solid positive score. So you might want to buy up some Star shares now but keep your finger on the trigger to sell on the spike.

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Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.


Read/Post Comments (7) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 13, 2013, at 10:24 AM, hansmith wrote:

    Peer reviewed studies on this "snake oil" — please read and decide for yourself:

    1) “Anatabine lowers Alzheimer's Aβ production in vitro and in vivo” published in the European Journal of Pharmacology – 11/30/11

    http://www.ncbi.nlm.nih.gov/pubmed/21958873

    2) “Anatabine Ameliorates Experimental Autoimmune Thyroiditis” published in Endocrinology – Online 7/17/12, Print 9/1/12

    http://www.ncbi.nlm.nih.gov/pubmed/22807490

    3) “Anti-inflammatory activity of anatabine via inhibition of STAT3 phosphorylation” published in the European Journal of Pharmacology – 1/5/13

    http://www.ncbi.nlm.nih.gov/pubmed/23178521

    4) “Amelioration of Experimental Autoimmune Encephalomyelitis by Anatabine” published in PLOS ONE – 1/30/13

    http://www.plosone.org/article/info:doi/10.1371/journal.pone...

  • Report this Comment On March 13, 2013, at 10:47 AM, BostonBlackJack wrote:

    "snake oil" ?

    Really, Brian?

    "snake oil" ?

    wow - you should strive for a little more "motley" and a little less "fool"

    good luck to you and your friends covering all those shorts.

  • Report this Comment On March 13, 2013, at 10:48 AM, mbusser56 wrote:

    Due to the lack of any supporting information to support you claim regarding STSI, I would assume you are just another short attempting to better your position. How do you explain all of the testimonials on amazon.com, STSI website, GNC website concerning anatabloc or what you term ""snake oil." How do you explain GNC's new product of the year for anatabloc? How do you explain the significant growth in orders? The key is you don't. You rave about the small tobacco product which was obviously a disappointment; however, you do not look realistically at anatabloc. So I assume you are short and hope you get burned!

  • Report this Comment On March 13, 2013, at 11:42 AM, Pipilongstocking wrote:

    Well this snake oil sure is clearing up my life long psoriasis- it is a slow process- I have been taking 6-8 since November- it is hard for me to believe it but I am proof to me- anyone w/an autoimmune issue should give this a try- all natural and well worth trying it- but you have to be patient and consistent w/it.

  • Report this Comment On March 13, 2013, at 11:49 AM, thefamilyman wrote:

    You say "snake oil", I say bull malarky. You say "misrepresentation", I say look in the mirror. The fact is that Anatabloc works! And Star has not misrepresented anything.

    Every peer reviewed study to date has verified that anatabine works to address inflammation at the cellular level. Now we have the human thyroid study which has already been reported to be a tremendous success. And I have no doubt but that the peer review will confirm that report.

    20 million people in this country alone are afflicted with thyroiditis. What will the only known treatment that ameliorates thyroiditis be worth?

    Anecdotal evidence, some of which has been confirmed by prominent dermatologists, is mounting that Anatabloc Cream is more effective than the current standard of care for treating rosacea and several other skin disorders. A rosacea study is currently underway.

    Sales continue to increase at a rapid rate and the CEO has announced that he will forego his ~$83,000 per month salary until the company is profitable. Something tells me that he does not expect to be without his paycheck for very long. But you guys keep on shorting. I'll just keep buying, the product and the stock.

  • Report this Comment On March 14, 2013, at 5:56 AM, adi101 wrote:

    How motley. Unfortunately, seems like your research is off. the Antabine product has great promise. buttom line, sales growth will tell the true story. pay very very very close attention to sales in the coming quarterly reports...

    I forcast sales will grow exponentially, and I expect the company to break even this or next year, and from there, I see a market of 5 billion (anti inflamatory, think lipidor, think nutracutial, think no (known) side effect. think the scientific studies on antabine.

    So, now we are in transition from a cash burning comapny without real product into a company that has patents on a product I expect many - many people to grow aware of.

    We may (will) see the stock go down from here - for the short term. Ill be accumulating.

    I would not bet against this company for the long term and that is why I have sinthetic long on the company.

    lets talk in 2 years time...

    I think you will have to eat crow on this article, but at least the Fool paid you for it.

    (in fact, I exepect it to come up in RB or HG within 2 years time when sales growth scares the shorts away and when the expenses from discontinued activities melt away from the P&L), and PE is 100 or more (fitting the criteria for RB).

    I will be on the board then, linking to this relpy, pointing to how a X begger was missed, and how shallow the research you have done is...

    Until that victorious time.

    Fool On.

  • Report this Comment On March 19, 2013, at 11:16 AM, steveh800 wrote:

    Regardless of the Fool's inability to get the facts stated correctly on the "snake oil" type comments, the stock right now is not a place to put your money unless you don't need it long term. It's a high risk, speculative investment with strong potential for profitable revenue from it's product line. That is not next quarter, nor the next quarter after that, and maybe not in 2013. Manage your risk accordingly............company's with great products go under everyday from lack of operating capital. Expect a share dilution if this does not turn around from higher product sales. That said, If you want to own it....now is a good time to buy-in, wait longer and I think another low will come along.

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