Doctored Track Record?
In the fall of 2000, Asensio found himself in hot water with securities regulators. According to the NASD, his website had been using a variety of deceptive tactics to inflate his track record. Asensio accepted a censure and fine of $75,000 to settle these and other charges. Alas, the experience does not seem to have deterred him from spinning a few more yarns about his investing prowess.
His website recently added a chart entitled Activist Shorts. According to his description, it shows:
publicly traded companies that Asensio & Company researched and about which it then published its research opinions [emphasis added]. The list includes the date on which Asensio issued its opinion and the stock price on that date.
The chart says that Asensio recommended PolyMedica (PLMD) for short-sale in July 2001, at a price of $39.90. However, his list of published reports shows otherwise. Asensio did not issue a formal opinion on the company until October, 2001, when it traded at less than $17.
PLMD has more than doubled since then--and declared a dividend.
Obviously, these are not numbers that make Asensio look good. Which perhaps
has something to do with his failure to use them.
How to Cook Numbers
Other stocks have also posted gains after being attacked by Asensio.
But you would never know it from his chart. Although he claims that the
chart provides the "subsequent stock price after varying periods" for his picks,
there is a catch. Subsequent price has been surreptitiously
redefined to exclude increases in selling price. Which all but insures
that Asensio will appear infallible.
As used by Asensio, the "subsequent price" is actually the lowest price
recorded at any time after he issued an opinion--even if many years later.
Excerpted below are the values shown in his chart for some of his best-known
picks.
| Stock | Recommended | Initial Price | Subsequent (Lowest) Price |
Decline |
| Hemispherx | 09/22/98 | 8.00 | 0.74 | 91% |
| Parkervision | 09/28/99 | 26.38 | 5.65 | 79% |
| PolyMedica | 07/26/01 | 39.90 | 9.50 | 76% |
| *Biovail (per Asensio) | 09/13/96 | 31.38 | 16.19 | 48%* |
| *Biovail (corrected) | 09/13/96 | 7.84 | 5.81 | 26% |
| General Nutrition | 01/19/96 | 20.00 | 13.25 | 34% |
*
Biovail has split several times since 1996. Asensio appears to have used a pre-split value for the initial
price and an inaccurate post-split value for the subsequent price. This
creates the appearance of a far larger decline than actually occurred. Corrected
values compiled by this site take all splits into account.
The Missing Ingredients
Absent from Asensio's
chart is the highest price attained after he attacked, and the increase that it
represents over his initial price. Had such numbers been included,
visitors to his site would see that gains posted by these five picks
exceeded the declines that Asensio touts.
| Stock | Recommended | Initial Price |
Subsequent Highest Price |
Increase |
| Hemispherx | 09/22/98 | 8.00 | 19.00 | 138% |
| Parkervision | 09/28/99 | 26.38 | 56.44 | 114% |
| PolyMedica*** | 10/25/01 | 16.61 | 43.40 | 161% |
| Biovail (split-adjusted) | 09/13/96 | 7.84 | 57.18 | 629% |
| General Nutrition | 01/19/96 | 20.00 | 41.25 | 106% |
***
initial price adjusted to reflect date when first research report was actually issued
Covering up this part of the story saves Asensio
from having to concede that a nimble
trader could have done very well with long positions in these stocks. And
that long positions in Biovail probably outperformed short ones.
Asensio's ruse also conceals the risk
taken by those who shorted these stocks. If unable to accommodate margin demands
created by rising prices, they may have incurred considerable losses.
In fact, within months of Asensio's attack on Hemispherx, the stock surged in
price, causing one Asensio client with a large short
position to lose about $3 million in a single month.
Thinking About
Performance
For evaluating performance, the "subsequent price" approach is misleading even if highest prices are included. The primary reason is obvious: Asensio (or anyone) may have covered long before the most extreme price was reached. It's the price paid to cover that really matters when calculating return on a short pick. Asensio does not provide it.
Another problem with this approach is that it fails to consider the time
factor. How long it took to achieve a particular change in price greatly
affects return.
Asensio's targets also tend to be heavily
shorted. Borrowing such stocks often means paying a surcharge based
on a percentage of current price. (Brokers may not incur these charges, but retail
investors do). But the approach here makes no allowance for such costs. Nor
does it adjust for the long positions that Asensio and his clients often take in stocks
they short. As
described on the page called long-short strategy, such
positions are often sold at a loss.
Obviously, Asensio selectively presents facts (and sometimes fabrications) designed to put him in the best light. No doubt this allows him to impress those who do not see through such tactics.
But
how
much more impressive it would be if he would tell us the
whole story of his short picks--and career. Warts and all.
Page Created 5/03/03