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1-Star Stocks Poised to Plunge: Star Scientific?

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: CIGX  ) has received the dreaded one-star ranking.

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

Star Scientific facts

Headquarters (Founded) Glen Allen, Va. (2000)
Market Cap $426.8 million
Industry Tobacco
Trailing-12-Month Revenue $960,000
Management CEO Jonnie Williams Sr. (since 1999)
CFO Park Dodd (since 2007)
Return on Capital (Average, Past 3 Years) (106.3%)
Cash/Debt $10.4 million / $5.7 million
Competitors Altria
Reynolds American

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

On CAPS, 48% of the 282 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, summed up the bear case for our community:

As always, the real story governing the value of Star is their ongoing nuisance lawsuit against RJ Reynolds. In August 2011 the share price dropped after the US Court of Appeals refused to order a new trial despite upholding the validity of Star's patents. ... Now the share price has ripped north of 3 again on word that the federal court has referred the patent infringement case to a magistrate judge for possible settlement.

I'm not a legal expert, so I'm out on a limb here. What is most notable here is that RJ Reynolds hasn't offered any kind of settlement, and this seems more like a move by the federal court to clear an irritating and trivial case from their docket. ... This won't be a multibillion dollar payout for a lung cancer class action suit. With a market cap of 440M, minimal cash, laughable product sales, and dismal long-term prospects outside of the lawsuit, Star's share price is pricing in an unlikely outcome.

What do you think about Star Scientific, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!

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

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Altria. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Read/Post Comments (10) | Recommend This Article (8)

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 February 06, 2012, at 9:50 AM, osu78 wrote:

    The fool is still a fool. Always looking everyway but at the Anatabloc issue. Why don't you do some real research just once?

  • Report this Comment On February 06, 2012, at 10:57 AM, thefamilyman wrote:

    Maybe those "48% of the 282 members who have rated Star Scientific believe the stock will underperform the S&P 500" feel that way because you still refuse to give this stock balanced coverage. The lawsuit against RJR is not a "nuisance lawsuit". The Appeals Court and the Patent Office have both ruled against RJR. Both have now confirmed that Star's patents are VALID. The WRITTEN opinion from RJR's own attorney is that if Star's patents are VALID, then RJR HAS INFRINGED. Star's patented curing method is now the ONLY way to produce low TSNA tobacco. (TSNAs or Tobacco Specific Nitrosimes, are the major cancer causing substances in tobacco.)

    And of course your author's still refuse to cover the Anatabloc story. A recently released study showed that Anatabloc reduced C-Reactive Protein (CRP) levels by 30%. The study group consisted of smokers, 80% of whom were obese. More studies are underway with results expected to be released soon. I wonder what negative acticle your writers will concoct then to protect your short position.

  • Report this Comment On February 06, 2012, at 12:53 PM, SJC1111 wrote:

    The Motley Fool is nothing more than a tool for cheerleading and bashing for their friends and brokers. These uninformed morons that pass themselves off as analysts, research and investigative reporters are simply providing fodder to assist their goons with bogus articles to move a stock price. By this idiot's own admission, he's not a legal expert but seems like a move to get rid of a trivial case. Excuse me there, old Brian, but just how much legal background do you have? You follow Canadian financial penny stocks and a pulp recycler. You have 17 followers on TMF yet you feel qualified to render legal opinions. TMF never ceases to amaze me. Utter nonsense.

  • Report this Comment On February 06, 2012, at 10:45 PM, c0git0 wrote:

    How, pray tell, would you know that RJR hasn't made a settlement offer? Are you on RJR's legal team, or on Star's? I have never seen a settlement offer that wasn't strictly confidential.

    Indeed, the whole idea of a public settlement offer would short circuit the very delicate process of settlement.

  • Report this Comment On February 07, 2012, at 6:59 AM, AAJetMan wrote:

    Be careful, Fools, you don't slip up and mention Anatabloc as you did in your last article. Could cause people to do some research into Star and then compromise your short position.

  • Report this Comment On February 07, 2012, at 3:00 PM, jigolf wrote:

    Followed this stock for years- profitably with the predictable cycles -and The Fools constant bashing- totally agree with thefamilyman! Hope the Fools prove to Foolish for the guiys that are long at this point. Tradewind Master Fund BVI LTD must be reading your reports incorrectly.

  • Report this Comment On February 07, 2012, at 3:05 PM, Tosetitstraight wrote:

    I completely agree with thefamilyman. There is so much more to Star Scientific than the smoking related products.

    You know, I have always respected you guys, but for the first time you have ventured into an area that I happen to know something about. I just wonder what type of due diligence you guys do.

    Anatabloc is an anti-inflammatory product which is now been used by some NFL athletes and there is a large double blind study in progress.

    I use Anatabloc and it works, but that is not evidence to go on, however.

    The "shorts" have been attacking this company for sometime, and we all know what that is all about, MONEY. Thanks for your kind attention.

  • Report this Comment On February 13, 2012, at 2:34 PM, Bearsinbulls23 wrote:

    CIGX is up 18% since this article was posted, lol keep up the good work

  • Report this Comment On February 21, 2012, at 10:41 PM, Passingass wrote:

    Please keep bashing a stock that you haven't fully read about. Freddie Couples is now a spokes person for Anatabloc.

    Star's patent on curing came in one year earlier than R.J.. I will continue to buy on dips.

    Thank you

  • Report this Comment On February 29, 2012, at 10:26 AM, mirwin52 wrote:

    Star may have stumbled upon one of the greatest medical discoveries of quite some time when it found that anatabine (the active ingredient in Anatabloc) is a potent and specific inhibitor of the JK/STAT cell-signlaling pathway that contributes to out-of-whack inflammatory processes. Do a little DD on some of the disease conditions that relate to inlammation-gone-haywire. It would be just a "story stock"... BUT Anatabloc is not a drug and doesn't have to jump through any FDA hoops... it's on the market now and the people who use it are reporting amazing results. It's still very early in the game, if the shorts feel like waking up and smelling the money.

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CIGX.DL $0.00 Down +0.00 +0.00%
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