Interesting article about the man behind Invest4Profit in The Australian website in Feb 2007:
"Caught in the net: Online tipster gives the blue-chips a shock"
AT 2.02pm yesterday, 2000 mobile phones around the country bleeped: "Sell BNB now. See your email for important info. Invest4Profit."
In the next couple of minutes a rash of private client sellers hit the market, smacking Babcock & Brown shares down from $26.22 to $25.72, wiping $200 million from the company's market value. Babcock closed at $25.87, down 49c.
There are few people whose recommendation can shove a share price about like that, especially in an $8 billion company. Perhaps the only one in the market right now is Paul Nojin, a cocky 41-year-old former trader from the halcyon days of Bankers Trust. Nojin, who runs the online tipsheet Invest4Profit from Coffs Harbour on the NSW Mid-North Coast, has a devoted bunch of subscribers. Targeting undervalued growth situations - especially in internet and resources - Nojin has made them good money over the past two years, albeit in a raging bull market: 46.5 per cent last year for a 46.4 per cent return since inception in May 2004. The Australian verified these numbers with an external auditor hired by Nojin to ratify his results.
A self-confessed rebel who "doesn't like air-conditioned spaces" Nojin grew up in Sydney's southern middle-class suburb of Kogarah and joined the BT graduate program after university. Three years later he was out on his own, trading everything from wool futures to interest rates. Nojin says he doesn't trade shares any more because of the potential conflict and, while he owns some property at Coffs, most of his wealth is tied up in online property.
He's been copping flack from his critics of late. In the internet chatrooms - hotbeds of anonymous market manipulation - they charge him with ramping stocks, putting a squeeze on small company shares in particular and wielding too much power at the micro-cap end of the market.
And, for this article, ETrade chairman Kerry Roxborough responded to criticisms of the online broker, saying Nojin was out to seek notoriety to get more subscribers to his newsletter.
Nojin agreed to put The Australian on his subscriber list to check out the operation, as long as we did not reveal his current recommendations, save Babcock & Brown. Sure enough, his subscribers had put a rocket under the stock mid-last month. Not since the days of Rene Rivkin's late-night TV ads, had a stock-tipper pushed the market around to this point. And the Rivkin Report, at its peak six years ago, had 50,000 subscribers.
Since then, thanks to the bull market, the explosion of day traders and new technology - chiefly the proliferation of broadband and online broking - the online newsletter business has flourished.
Nojin might be riding high as the stock market's guru of the moment, but he's not happy - not happy, that is, with the state of his own industry. The online tipsheets, he reckons, are beset by conflicts of interest, lack of accountability, and myriad transparency and disclosure issues. They variously deliver poor advice, calculate their performance with selective data, use aggressive sales tactics and may flout the Australian Securities & Investments Commission's guidelines in their advertising.
Mind you, these are the "blue chip" players Nojin is talking about, not the scoundrels who tout surefire triple-digit returns from a month of program-trading options and so forth.
"It's truly remarkable," says Nojin. "Consumers are really treated badly by those in my industry. It's disgusting.
"I firmly believe the likes of Fat Prophets and Huntleys are entrepreneurs, not advisers ... mediocrity is what you get. It's ridiculous to even think they would beat the market in the first place".
Fat Prophets founder Angus Geddes is irritated by Nojin's claims over mediocre performance and potential conflicts of interest. "We are about trying to maximise performance. We are stock pickers, not traders, and I think our record bears that out," Geddes says.
Of Nojin, Geddes says he's only been around with Invest4Profit for a couple of years and "he pushes the edge".
>"It's only until recently that he's come out and said his numbers have been independently verified. Anyone who knows anything about the stock market knows it's very hard to get returns of more than 20 per cent (for an extended time). We all know you're going to get them wrong." Nojin agrees. His returns, indeed everyone's returns, would be lower come the bear market, or even in a less bullish trading climate. But he still believes he will outperform his rivals.
While most of the big names in this burgeoning online advisory sector provide decent, if not spectacular research, his claims merit attention.
ASIC itself concedes there's a problem and has been stepping up its monitoring, according to executive director of compliance Jennifer O'Donnell. "It's been an area of increasing concern to us. The two big ones have been past performance and promised returns. We've been taking a fair bit of action behind the scenes but I'd suggest that now would be a good time for people to revisit the guidelines because our tolerance is starting to diminish," she says, citing aggressive advertising.
Even a cursory perusal of tipsheet advertising shows most of the top players sail close to the wind on the ASIC guidelines on Using Past Performance in Promotional Material.
"3.7 Million Reasons to take my FREE Offer," boasts the banner headline in a recent Huntleys' newspaper ad. "Our income portfolio made 190 per cent in just over five years," blares another. These headlines, from the most established player in the business, would appear to invite scrutiny. The ASIC guidelines, which warn against large-font headlines of selective past performance figures.
Aspect Huntley managing director Andrew Bird counters that the appropriate information is provided: "We are confident we are doing the right thing".
Then there's performance methodology; an area where there is plenty of wriggle room for the tipsheets to put a shine on their results for marketing purposes. ASIC discourages the industry from annualising results for trades of less than a year (10 per cent profit in a month becomes 120 per cent when annualised), and for not annualising trades of more than a year.
While Intelligent Investor eschews the practice, other mainstream players such as Fat Prophets do annualise. As expected, Nojin is in a piping-hot rage about this: "I'm really pissed off. It states clearly in the rules you are not supposed to annualise. My results would be over 80 per cent!"
Like Nojin, the Rivkin Report's chief stock-picker Nigel Littlewood recommends fewer stocks to his clients and does not annualise results of less than a year. The advice is designed for investors to follow every recommendation. They get in and get out when they are told, rather than use the analysis to select their preferred investment.......
