I just got a comment from “goldguru” at the Gold Stock Bull Blog. My first thought was that he was pushing a particular penny stock as part of a “Pump and Dump” scheme… Reading his post, that seems not to be the case, but caution is warranted. He says: As always, you should do your own due diligence, especially with bulletin board stocks that carry a higher risk profile.
That’s good advice. While he says he does not own any Nova, there are many others out there pushing stock they do own, and caution is always warranted.
It was recently shown that spammers are actually able to move the price of the penny stocks they push when they send out email about how this or that penny stock is about to “explode.” The strategy is generally to load up on some ignored penny stock, send out a bunch of spams, and then sell as all the suckers buy. This leaves the spammers with a tidy profit, and the suckers with stock that is more likely to implode.
Check out this chart of Petrosun Drilling. On Aug 18 I received 3 spams from people pushing this stock, saying it was about to “explode” that same day. If I had bought on that tip, I probably would have gotten in around $1.70. The stock is currently trading at $.91, and never got that high in the meantime. I think I also got a spam around Aug 30, where you see that secondary little peak, but I admit I wasn’t paying close attention.
This is why I seldom recommend stocks in my blog, and when I do it’s because I like the company, but currently think it’s overpriced (e.g. Wal-Mart.) What I’m saying is “This one’s worth watching, but don’t buy it at current prices.” I also try to stick to stocks with high liquidity, so whatever I say won’t have much of an effect on the stock price. If I find a stock I like in my research, I buy it for my clients and myself.
The goal of this blog is to give you the tools to invest profitably for yourselves. To do that well, you need to do your own research (if you’re going to use any active investing approach.) Passive indexers can get slightly-below-average returns for very little effort, and, as unappealing as “slightly below average” sounds, it’s a lot better than the typical retail investor does. For those of you who do not have the time or inclination to invest for yourselves, I hope to give you some insight into my methods and character, in case you or someone you know is looking for a professional to manage their money.
So don’t come here looking for stock tips, and be very wary of any stock tip you come across in a public forum. The more people who see a tip, the less it is worth. That’s why you’ll probably lose money following Jim Cramer’s picks, despite the fact that he seems to be (in my opinion) highly intelligent, if highly annoying. There are just too many people following his advice.
The only useful information in the stock market is private information: things that the market is not yet aware of, or is currently ignoring. Do your own research, pay someone who only sells his advice to a few people, or use passive index investing.