1 Hot Stock to Avoid

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Each week, Motley Fool editors cull a top stock idea from the pitches made on CAPS, the Motley Fool's 180,000-member free investing community. Want your idea considered for this series? Make a compelling pitch on CAPS with a minimum length of 400 words. Want to follow our weekly picks? Subscribe to our RSS feed or follow us on Twitter.

CompanyStar Scientific (NAS: CIGX)
Submitted ByTSIF
Member Rating99.93
Submitted On8/27/2011
Stock Price At Recommendation$2.13

Star Scientific profile

Star Rating*
HeadquartersGlen Allen, Va.
IndustryCigarettes
Market Cap$300 million
Industry Peers

Altria (NYS: MO)

Phillip Morris International (NYS: PM)

Lorillard (NYS: LO)

Sources: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and Motley Fool CAPS.

This Week's Pitch:
Star Scientific has made multiple run-ups over the years, and subsequent run downs. They have minimal income and rely on share issue when the price gets upward. The price has gone upward over their substitute cigarettes, but no sales developed to cover expenses. The next round was sueing various tobacco houses, namely RJ Reynolds for patent infringement. On top of the court trials rumors that they had isolated chemical called Anatabine as a regulator of NF-kB's which can potentially affect Asthma, Crohns, Alzheimers, Parkinsons, Irritable Bowl Disease, Cancers, arthritis, thyroid disease etc. The focus has been on Alzheimers.

Friday the share price spiked 20% and then dropped in half as the interpretation from their patent royalty claims against Reynolds American [ (NYS: RAI) ] were squelched. I had a limit down set to kick-in above $3.50, but apparently the knee jerk was too short lived and I had to settle for kicking it in much lower. 

I'm still confused that if investors think Star Scientific's patented cure for Alzheimers is worth Tens of Billions why they let a little thing like a patent infringement suit rattle them. Maybe the price will go back up again as bargain hunters root for the cure. More likely this round is over and the historical sub $1 norm is in range. Hard to tell when speculators are driving.

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At the time this article was published The Motley Fool is investors writing for investors.Dan Dzombakowns shares of Altria and Philip Morris International. Pitches must be compelling and made in the past 30 days. 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 Motley Fool has a disclosure policy.

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