GorillaTrades, Serious Stock Picks or Lack There Of?

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?

The Service

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.

GorillaTrades Site Logo

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?

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  1. says

    It certainly matters to me that the Gorilla cannot beat the overall market. If you are going to charge that much for a service you have to be able to beat the market, regardless of how nice the site is or how good the marketing campaign is.

  2. says

    I have a family member who used to the service and they loved it. When the gorilla sends out their picks they have a trigger price like you mentioned but they also have confirmation volume number which lot of people ignore. In order for a stock to “confirm” it has trade above the trigger price and have more volume then what is listed in the newsletter. I bet if you only bought stocks that triggered with confirmition you would easily beat the major indexes. Any experieced trader knows that price alone is not a reason to enter a trade. They also do a very clear job of explaining this point that the safest way to trade their picks is to wait for confirmation not just trigger price. Basically this means buying stocks near the end of the day even if its a point higher then the trigger. The reason my uncle stopped the service was for this reason. He doesn’t have time to watch the volume and price so he was just buying stocks that triggered.

  3. says

    From the article, “Berman provided raw data from 2007 to BusinessWeek, however. After calculations, it showed a portfolio of confirmed picks up just 1.6% so far this year. That does not include new confirmed picks that haven’t been sold off yet.”

    The question is where are the stocks that haven’t been sold off yet? :twisted:

  4. Mikel says

    Seeking alpha, found a hairy gorilla… thanks but if i wanted index, i’d buy the qqq’s….

  5. says

    Any service that doesn’t publish it’s results clearly is probably not worth the money. I’ve been a subscriber to a couple of Motley Fool newsletters, and overall I’ve been very impressed… they publish there results clearly, they provide very good investor education, and they have strong results.

    I’ve also found that many investors really don’t keep track of how well they’re doing. Sure they can tell you how much they’ve made, but they don’t compare against the markets. It’s one of the reasons that, as you’ve said, people get more excited about the gains than the losses.

  6. says

    Nice artice Blain. I’ve personally never tried Gorilla Trades, or any service that I have to pay for in exchange for stock picks. I’ve always seen those types of services as a hinderance to my overall education. How can I possibly learn to invest/trade if all I’m ever doing is relying on others to do the work for me?

    Also wow on your 70k loss. That’s massive.

  7. says

    The way the service works is they have a first target and a second target. The second target is very far away. Basically they want you to hold 25% of your shares for the very long term, in fact they keep raising the second target so you could be in a stock for months. I can imagine a big chunk of their gains are locked in here that are unaccounted for. I remember seeing unrealized gains of 60% on some of these stocks.

  8. says

    Not to be hypocritical, because I have stock picks on my site as well, but it comes down to owning your own research. I’m sure gorilla trades has some good picks, but like Bubs said, they also have volume requirements.

    It’s really hard to trade someone else’s methods blindly. To be successful, IMO, you need to have a method and find trades that fit that method.

    I’m sure Gorilla trades has some nice ideas. I think the fault is with the trader.

  9. says

    Your 100% correct Jonathan it all comes down to the trader. Even if someone gives you a perfect system you still have to execute it properly.

  10. Bill says

    I found that the CONFIRMED picks did well for me. I bought a just out of the money call option on one of there picks and it returned over 800%in less than two Months.
    So I agree, its the patient trader going with confirmed picks that will get the job done.

  11. Warren K says

    In a nutshell; a total waste of money. After 3 months of use it became clear that these folks are in the business of selling memberships and not providing very good information. Their return on investment spreadsheet is deceptive and, in many cases, they are suggesting you buy stocks at the highs. In one week they send buy and short suggestions on the same stock!!!! I asked for my money back and requested they return the balance of my unused membership. They refused. Any organization that does business in the manner not only does not stand behind their product but is only after your money.