GorillaTrades spent over $5 million on ads last year alone and is well known to most investors who watch cable television. The $600 annual service offers stock picks via its use of certain technical indicators. Subscribers love the service, but is the service really worth your money?
BusinessWeek found through its research that the service performed well below the overall market.
How the service runs: Every evening the Gorilla stockpicker sends out an e-mail recommending stocks to buy or sell short, along with a commentary on that day's stock market. Recent picks like Fiserv (FISV) and Trident Microsystems (TRID) have both returned double digit losses this year. On the positive side though First Data and McDermott Internation (MDR) both have realized nice gains.
How easy is it though? Can you just open your email box, write down a ticker, buy it the next morning, then watch the stock soar? Data available from the site is hard to assess, and like any service promoting their own work they are going to make sure they look good, not bad. If the stock picking ape can't beat out the S&P500, I say you are better off buying exchange traded funds (ETFs) that track the overall market, SPY and QQQQ for example.
Technical analysis is the basis of the service, and fundamentals are not taken into consideration at all. There are 14 different indicators put to use, 12 of which are known to everyone, 2 remain undisclosed to only Gorilla.
One way the service works is you buy based on a "trigger" price which is released in the newsletter. So say a stock is at $14.00 a share, the trigger price may be $14.50. Once a stock hits its trigger price it is then added to the Gorilla portfolio and monitored performance wise there on out. From the article, "A BusinessWeek analysis of this data is revealing: If you invested $1,000 in all 311 gorilla picks that triggered in 2006, you would have lost $1,051.25. That's a 0.3% loss in a year the market benchmark S&P 500 rose 12.8%. In 2005 the same portfolio would have returned 1.55%, while the S&P 500 was up 3.01%. The portfolio has returned 2.13% so far in 2007, while the S&P 500 is up more than 7%."
So can we trust the Gorilla?
The article went on to illustrate how most customers are happy with the service overall. Amateur traders especially are more easily excited about gains then they are losses, which may help them stick around even though they lose the majority of times. Some facts about the service taken from founder Ken Berman:
- 70% of subscribers renew each year
- Ken recommends those with less than $25,000 shouldn't utilize the service
- A big argument is Ken asks, "how much is education worth?"
The service's daily market recaps are apparently pretty popular too as one customer in the article stated the recaps are his favorite part.
So how much is education really worth? I say it is priceless, and I think Ken has a valid argument here though it can go either way. When I lost over $70,000 by holding a biotech that didn't receive FDA approval I was torn, but it was a $70,000 lesson that still sticks with me today. I have become a better trader because of it, and it is only a matter of time before it pays itself off. The question should really be, "is $600 a year going to pay itself off for you?"
Thoughts to Consider about the Service
When you compare the Gorilla to someone like Dan Zanger, it is a night and day difference. Dan has a world record, an insane track record, and his service has proven itself time and time again unlike GorillaTrades. What Gorilla has is a phenomenal marketing campaign and service that really makes trading light hearted and fun, and as a result they have a huge following.
The service itself costs $600 a year, and the big bottom line question is a personal one, how much value does it have for you? Ken argues education and has a good point. You may be an amateur and to have access to tons of data and ideas could help you substantially over the course of a year versus say a $600 one week seminar on the basics of trading. Some subscribers I am sure found great success because they can sort through the picks themselves; they don't buy every recommendation.
Does it matter that GorillaTrades can't beat the overall market? It all depends on what angle you are coming from. The get rich quick investor is going to be in that 30% unsubscribing at the end of this year, whereas the "I am here to learn" investor may very well be back for more.
One thing is for sure, whether you love or hate the Gorilla, he is here to stay. Is the Gorilla in you?