Trade-In: Wade Cook Posts $1.7 Million in Trading Losses

Before you plunk down $2,500 for Wade Cook's November Hula Moola stock-trading seminar in Hawaii or $4,900 for his Wall Street Workshop, there's one thing you should know.

The folks at Wade Cook Financial (WADE) aren't very good traders.

According to a 10-K filed Monday with the Securities and Exchange Commission, Seattle-based Wade Cook Financial lost $1.7 million trading securities during the quarter ended June 30, reversing $700,000 in trading revenue in the year-earlier period.

Cook rose to popularity in the mid-1990s writing books, producing tapes and hosting seminars on investing. Since then, he has made a living recommending trading practices to individuals. Among his favorites are buying stocks just after split announcements, using covered call-option trading (simultaneously buying stock and selling call options, using the call premium to offset the cost of the stock purchase), and setting what he calls rolling stock positions, in which investors try to time highs and lows.

Spoiling the Broth Wade Cook's downtrend

Source: BigCharts

His popularity, however, has waned during the past year. That can be seen from the price of Wade Cook Financial shares, which have plunged from an all-time high of 5 3/16 in December 1997 to 3/16 Tuesday. It's also evident from the company's revenue, which fell to $34.9 million for the six months ended June 30 from $52 million during the same period in 1999.

A company spokesman says the trading results in the SEC filing are a "jumble between a lot of different positions," some with realized gains and losses on closed positions and some without on positions that are still active. He adds that the company's ability to instruct inexperienced traders is reflected less by its trading losses in the quarter than by the hundreds and thousands of testimonials from program participants.

Cook has managed to keep the seminar and book business bustling, plowing through reams of criticism, castigation by the Wall Street establishment, and at least three state regulators' investigations, including a 1999 lawsuit filed by the California attorney general's office. In seeking $18 million in refunds for people who had taken Cook seminars, the attorney general alleges the firm made misleading promises and ignored the state's three-day refund law.

A spokesman for the company didn't return a call requesting comment on the investigations.

Cook's business also included offering examples of winning trades he made and told of routine triple-digit returns, practices now under investigation by securities regulators in several states, according to one source familiar with the regulators' activities.

The cost of his seminars and tape series typically run into the thousands of dollars, and the low-cost seminars hosted by the company's staffers typically include recruiting speeches for the other programs. (TSC attended one in 1998.)

More recently, his books have worked on setting up Nevada corporations, limited partnerships and other entities that would reduce tax exposure for individual investors.

Trading is still at the core of Cook's business, but the most recent numbers show that while lipstick serves many purposes, it offers little help to a pig.