Market Authority
04-16-2011, 11:04 PM
Wealth Insider Alliance
The Dirty Little Secrets of the Penny Stock Industry
This is a complete transcription of Timothy Sykes video Penny Stock Scammers EXPOSED (http://wealthinsideralliance.com/timsykes/stockscamalert/?aff_id=664).
You can view the video here (http://wealthinsideralliance.com/timsykes/stockscamalert/?aff_id=664) or read the contents below.
[Video Begins]
Hey there. My name is Tim Sykes, and anyone who knows me will be stunned to hear I’m not making the case against penny stocks. It’s a little like hearing Mick Jagger announce that he’s forsaking rock and roll. After all, I’ve made millions of dollar over the last 12 years trading penny stocks, and during that time, I’ve developed a reputation as a loud mouth penny stock fanatic.
I’ve also been ranked the number one trader out of 50,000-plus traders on www.Covestor.com for the past three years in a row by trading penny stocks exclusively. And I ran my own penny stock hedge fund from 2003 to 2006, and I was Barclay’s number one ranked short bias hedge fund all three years. I was also named to Trader Monthly’s top 30 traders under the age of 30 in 2006.
More recently, over the last three years, subscribers to my penny stock trading service have been reaping windfall profits with returns of 197% in 2008, 141% in 2009, and 55% in 2010. That’s good enough to turn $25,000 into over $277,000. Not too shabby for a period of time when most investors were losing their shirts. And get this, unlike the phony track records, most investment advisors boast about those returns include not just my winners but every one of my losers as well. Yes, I do have losing trades from time to time, every trader does. But according to CXO Advisory, an online service that ranks investment advisors, over the last two years, my trades have been profitable 76% of the time, and on average, my losers lost the paltry 5%.
My biggest claim to fame, however, and the thing I’m probably most famous for, is having taken $12,415 in Bar Mitzvah money at age 17, investing it all in penny stocks and turning it into $1.65 million in four short years. How did I do that? I can sum it up in one word: research. You see, I’m something of a nerd who gets off on reading long, dull and boring SEC filings. I love digging into balance sheets and income statements, and I relish reading technical charts until my eyeballs feel like they’re about to fall out.
I’m going to tell you more about that on the next video in this series, but suffice to say for now that my obsessive-compulsive research is the real reason for my success. Now, I know it’s hard to believe that someone so young could have had all this success with penny stocks, and I don’t expect you to believe a word of it. After all, I could be the world’s biggest liar, making this stuff up as I go along, as do a surprising number of investment advisors and newsletter editors. But I’m not asking you to believe anything just yet. All I ask is that you refrain from disbelieving until I show you my proof.
So at the end of this video, I’m going to give you a website you can go to, to verify my track record. This website has a track record of every trade I’ve ever made, and it also includes scans of my brokerage statements, audits and my tax returns for the last 12 years. I did this because I want you to be absolutely convinced that I’m the real deal, that I know what I’m talking about, and that I’m worth listening to. You can be that transparent when you have nothing to hide, and your track record is 100% real.
My track record has gone being featured on dozens of TV shows including being featured for seven minutes on 20/20. I’ve also been on Fox’s Neil Cavuto, and I was once a regular on CNBC until I got kicked off for using some bikini-clad female models that carried my charts during one of my segments. It’s on YouTube. Watch it; it’s good. I was also selected to be on the hit TV show Wall Street Warriors.
But before I go on, let me tell you something about getting on TV. It proves nothing about my abilities as a trader. And if you were to study the track records of TV’s financial talking heads, you’d be appalled at how terrible they are. And you wouldn’t believe some of the outright penny stock scams a few of these scumbags have been involved in. I say this because in the end, there is only one reason to listen to me, the track record I laid out a moment ago and the proof you’ll find on the website I’ll list at the end of this video.
So after all the success I’ve had with penny stocks, what’s the deal? Am I really turning my back on the investment vehicle that has made me and many of my subscribers wealthy? Actually, no. I still believe penny stocks are the best investment for the little guy who’s looking to make a killing without the risks associated with trading options and commodities.
The fact is every investor, even the most conservative, needs to have at least a few penny stocks in their portfolio. But I have to tell you, for many investors, penny stocks have become a black hole for their money. Every year, hundreds of thousands of investors are taken advantage of – robbed actually – by penny stock executive, hucksters and gurus who pitch worthless penny stocks as if they’re the greatest thing since sliced bread.
They send out slick direct mail packages, many of them cleverly designed to look like magazines or special reports, and millions of Emails that tell expertly crafted stories revealing all the wonderful things a particular penny stock supposedly has going for it. Maybe it’s a breakthrough new product or technology that’s going to change the world. An oil and gas discovery overlooked by the major oil companies, a new drug that’s going to cure cancer, or a massive gold find on a forgotten piece of land in Nevada, Canada or South America. Whatever it is, the story is usually crafted so beautifully and so compellingly that many investors find themselves chomping at the bit to get a piece of the action.
Especially, since the story is always accompanied by outlandish profit promises, outright lies actually, of turning $5,000 into $50,000 or even $100,000 practically overnight. In other words, these stocks sound really good, and they’re always promoted by a respectable figure; the editor of an investment newsletter, a talking head from your favorite TV financial channel, or even in one case professional basketball star Shaquille O’Neal who, as you’ll hear in a moment, threatened to sue me for exposing the crummy company he was promoting.
These expert endorsers, almost all of them are unethical, liars and destined for the underworld, put your mind at ease. After all, they’ve done the research. They like the stock. They think it has a chance. Who are you to argue? So you throw a few thousand dollars at it and, sure enough, the stock starts to rise. Over the next few weeks, it goes from $0.50 to $1to $2, maybe even $3. You can hardly believe your good fortune. Pop the bubbly, you’ve got a 500% winner on your hands. Your only regret is that you didn’t put $20,000 or $30,000 into it. But then, just like that, things suddenly turn bad. You notice the stock falls back to $2.50. No worries, you’ve still got a good game, and markets after all do fluctuate. There’s no getting around that. But then, before you can even blink, the stock crashes back to $2, to $1, and it blows right past $0.50 and keeps falling until it’s worth a measly $0.25 a share, and your nifty 500% gain is now a painful 50% loss. So you pour out the champagne and berate yourself for not getting out when the stock was $3. Maybe you curse the guru for recommending such a volatile stock. You may even vow to never invest in a penny stock again.
I don’t know if something like this has happened to you but I do know that it happens to hundreds of thousands of investors all over the U.S. every year, and a very few of them know the real reason why they lost their money. Yes, it was a crummy stock; yes, the guru made a lousy recommendation; and yes, they have been better off selling at $3. But what you may not know is that the only reason the stock rose to $3 in the first place is because all the promotions, the direct mail and the Emails I mentioned a moment ago, plus Twitter messages, Facebook postings, text messages and press releases, sent so many investors scurrying to buy the stock, that the price had to go up.
Then, once the stock got up to the $3 level, thieving insiders at the company, people who controlled millions and perhaps even billions of shares, shares that were given to them or that were purchased for just pennies a share, dumped their stock on to the market, raking in millions of dollars in profits and driving the stock price into the ground at the same time.
Think about how lucrative this is. Say, you bought a million shares at $0.05 a share. That’s an investment of $50,000. When a stock gets pumped to $3, just like that, and you’ve made a cool $2.95 million. Not bad. And in most cases, multiple insiders have these big paydays. You, on the other end, got screwed by a bunch of crooks who are now living the high life, taking fancy vacations and drinking expensive champagne at your expense. Bottom line, the soaring stock price had absolutely nothing to do with the quality of the company or its products and everything to do with the thousands of investors piling into the stock at the same time, thanks to a successful promotion.
In the industry, this is known as a pump and dump, or as I like to call it a hype and wipe. These scummy insiders do whatever it takes, including telling outright lies, to pump up the price of the stock. And then when the share price rises, they dump the stock and rake in the profits. The company itself is actually beside the point. It’s just a means to an end. In almost every case I’ve seen, the company behind the stock is a joke, regardless of how great it sounds on paper.
But the only ones laughing at the joke are the scumbags who just got rich by screwing small investors like you. What makes these companies a joke? Simple, in almost every case, the promised technology either doesn’t exist or is completely inconsequential. The massive oil-and-gas discovery exists only in the minds of the company’s scum executives. The breakthrough cure for cancer is a ridiculous flop that couldn’t cure a hangnail. And that overlooked gold property in Nevada is nothing more than a worthless, weed-filled vacant lot that was picked clean of any gold it may have held more than a century ago.
Now, wait a minute, you might be thinking, why on earth would my favorite investment guru, or any investment guru for that matter, recommend such a stock? Don’t they know any better? Of course, they do. They know very well that the stock in question is a stinking pile of you know what, and they simply don’t care because promoting these stocks is actually quite lucrative for them. And these scumbags care a lot more about fattening their own wallet than they do about helping investors like you.
You see, what these fakers want to keep under wraps is the fact that they are paid, or should I say bribed, to promote worthless companies. How do I know? Because every single one of these pump and dumps, scam and slam promos has a legally required disclaimer that keeps them out of trouble with the SEC by spelling out exactly who was paid what.
Check out this disclaimer, it tells you everything you need to know about these supposedly hot stocks and the thieving scumbags who promote them. Let me read it to you: This publicly distributed report of stock prospector is a sponsored advertisement. This paid advertising issue of stock prospector does not purport to provide an analysis of any company’s financial position and is not in any way to be construed as an offer or solicitation to buy or sell any security. Stock prospector is a paid advertiser. Amarok Resources, Inc. is the featured company.
Did you catch that? This Email is a sponsored advertisement, a paid advertising issue. It doesn’t provide an analysis of the company’s financial position, and the newsletter is a paid advertiser. That’s not me saying it, it’s them.
But here is the real tip-off of the rip-off. The distribution cost of this report to new subscribers, $80,000, were funded by Benchmark Media Ltd. in an effort to create investor awareness of Amarok Resources. Benchmark Media Ltd. is neither a broker dealer not investment advisor, but is a shareholder in Amarok Resources, holding 1.5 million shares of Amarok Resources stock which can be publicly traded (sold) at any time by Benchmark Media. In other words, the $80,000 cost of creating and distributing this mailer was funded by a company that holds 1.5 million shares of Amarok, shares that can be sold at any time.
Does that sound a little suspicious to you? I don’t know this for sure, but it’s my guess that Benchmark was given those shares by Amarok as their compensation for, number one, putting this deal together with the guru recommending the stock; and number two, writing and sending the Email pitching the stock.
Now, just imagine the profit Benchmark Media can make selling its 1.5 million shares, especially if it were given the shares in the first place. If they can get the share price up to just a couple of bucks, they’ll clear a cool $3 million. That’s just what the promoters make. Insiders at the company control many more shares and typically make many millions more. Not bad for creating a worthless company with worthless products, and they’re not the only ones making out. The guru promoting the stock does pretty well too. Take a look.
It is anticipated that this report will generate new subscriptions for stock prospector and expect to receive an unknown amount of revenue from new subscriptions from the subscription offer contained herein. Eric Dany, the reviewer/analyst, has been paid $10,000 in compensation for research preparing and publishing this report and other publishing venues.
So for starters, this so-called investment advisor doesn’t have to spend a dime advertising his newsletter, which is always the most expensive cost in a newsletter publisher’s budget. He gets to keep any subscription revenue that is generated, and he was paid $10,000 on top of that.
Do one or two of these paid promos every month and combine it with your regular newsletter revenue, and you’ve got a pretty lucrative business going. Now, let’s finish off the disclaimer.
Neither stock prospector nor Eric Dany is a broker dealer. This report, including the opinions expressed and the statements made within is for informational and advertising purposes only and should not be construed as investment advice and does not constitute an offer to sell any securities, and is not soliciting an offer to buy any securities in any state or other jurisdictions where the offer is not permitted.
That last sentence is one of the longest in recorded history, which makes it even harder to read and comprehend which is their intention in the first place. But the key line is that the report is for informational and advertising purposes only and should not be construed as investment advice.
What the heck? This guy just spent nearly 12 pages telling me what a great stock Amarok is and how it could hand me a whopping 500% gain, but he’s not giving investment advice? Then what exactly is he doing? I’ll tell you what he’s doing. He has simply whored himself out to pump up the price of the stock so that insiders can sell it and leave you holding the bag when the price comes crashing to earth. It’s as simple as that.
And the fact is, these so-called gurus, who love to boast about all the research they do, never do anything resembling true research. They just take what the company’s executives and their press releases tell them and regurgitate it to millions of investors. In my world, that’s not research. It’s BS.
Now, let’s take a look at the final paragraph of the disclaimer.
The information used to prepare this report is believed to be from reliable sources but no representation is made as to the accuracy or completeness of such information. Investment in securities carries a high degree of risk and involves risks and uncertainties which may results in investors losing all of their invested capital.
I think that paragraph speaks for itself, and it’s all the reason you need to simply ignore these promotions when they hit your mailbox. In just a second, I’m going to give you a few examples of some of the more egregious pump and dumps I’ve come across over the years. But first, I want to make it clear that on occasion, one of these pumped up stocks does make it to the big time.
Probably, the best known example is True Religion Jeans, a Vancouver pump that actually turned into a viable company, and it’s now a major company in the fashion world. Investors who bought its stock and stuck with it made some serious profits. So it does happen, and this leads many investors to adopt a sort of lotto mentality about buying penny stocks. The idea is to buy 10 or 20 penny stocks in the hopes that one of them will hit the jackpot and erase your losses on the remaining stocks.
This is an actual penny stock investment strategy taught by some penny stock gurus. And while it may sound great in theory, it simply doesn’t work in the real world, and that’s because chances are all 20 of the randomly selected stocks are completely worthless. Not always, of course, but that’s the way it works for most investors who wind up losing everything.
Believe me, you’re most likely better off putting your money on double zero in Vegas. And think about it for a moment. Suppose you did buy 10 penny stocks and one of them went to the moon. That’s fantastic, and it’s worth celebrating. But what do you do next, buy another 10 stocks and hope for another winner? What are the chances that lightning will strike twice?
My point is this that even though this might work for the occasional investor, it’s not a sustainable strategy that you can use to build your fortune. Instead, it’s just another way to pad the pockets of insiders at those penny stock companies who get to sell their shares for even bigger profits. They’re climbing right into your wallet.
Look, most penny stocks will never make anyone any money. A few will make millions for the insiders, but only a handful will make money for investors, and that handful is the only stocks you want to invest in. The good news is, as you’ll see in the next video in this series, it is possible to identify that handful with surprising regularity for surprising profits.
Now, let me give you some examples of pump and dumps that I’ve exposed on my blog over the years so you can get a better idea of how this works.
My first example is a company called Genova Biotherapeutics. Here’s a screenshot from my blog when I first exposed this company. Genova was a company that supposedly developed, and I quote, “novel therapeutic proteins that disrupt the advance of life-threatening cancers.” And they paid stock promoters hundreds of thousands of dollars to pump the stock price. And if you read the company’s promotions, you’ll be impressed. After all, just imagine what an actual cancer cure would be worth to a company and its shareholders. The mind boggles. But research revealed that just one month before the pump started, Genova was a travel company that transformed itself into a pharmaceutical company almost overnight. It had purchased its three patented cancer cures for a lousy 75 grand. How likely is it that a cure for cancer would be available to buy for just 75 Gs? The company put out more than a dozen press releases, all of them loaded with fluff, all in just one week. The company’s CEO wasn’t a scientist or a doctor but a former video game executive. Genova’s supposed business partners had the same address as the company and had many of the same people working for them.
The company’s New York address was the same of that as a well-known penny stock spammer. And get this, as some readers of my blog pointed out to me, at least one of the company’s press releases was virtually identical to a press release issued the year before by a defunct biotech company called NextGen Bioscience, Inc. Furthermore, Genova’s management was the same as NextGen’s management. Even more amazing, the disclaimer on Genova’s website was identical to the disclaimer on NextGen’s site. They didn’t even bother to change the name from NextGen to Genova.
In other words, they had run this scheme before and figured investors would never notice, and many didn’t. As the stock price soared from just $0.02 a share all the way up to $1.18 at which point insiders dumped millions of shares of stock, raking in several million dollars. Around that time, the SEC woke up and noticed the pump and stopped all trading in the stock, which then sank right back down to $0.02 a share. The insiders made out like bandits; the average investor got absolutely screwed. The only good thing I can say about this is that readers of my blog knew all along that Genova was a scam, and they didn’t invest a penny in this miserable excuse for a company.
My next example is almost as absurd. It’s a company called Emergent Health Corp. These clowns claimed they could inject stem cells into vitamins as a way to rejuvenate life. And while it sounds great, it was actually a completely bogus claim with no science to back it up, and almost no sales either. In fact, while the company’s promoters were predicting $100 million in sales and $20 million profits, its revenue was a paltry $90,000 or so a year, with profits of just $20,000 and yet its market cap was an absurd $85 million.
And get this, a quick Google search revealed that the company’s CEO had lost its license to practice osteopathic medicine in the company’s home state of Pennsylvania, thanks to a disciplinary action taken against him. In other words, this company had all the marks of a scam, and I said so on my blog recommending that my readers steer clear.
But unfortunately, the company had a great story to tell even if it was bogus, and excited investors quickly bid up the stock from $0.50 to $4 per share. And just about every one of those investors had their heart broken when insiders began selling like crazy and the stock price began falling. And then to add insult to injury, the SEC began asking questions and stopped trading in the stock. Ultimately, the stock fell all the way down to $0.10 a share and once again, small investors got ripped off.
My final example is a real doozy. A stock promoted by no less than 24 different promoters and a stock that became so popular, I had investors on my blog defending its profit potential right up until the day the federal agents arrested the company executives. Executives who had masterminded one of the biggest penny stock pumps ever.
The company was called SpongeTech, and it actually had a real product that was sold in Walgreens, a sponge that had soap built right into it. And according to the company, these unique sponges were selling like hotcakes. And to make itself totally legit and prosperous, the company put up expensive ads in major league ballparks, at the U.S. Open and even in Madison Square Garden. And these promotional efforts paid off, no, not for the product but for the stock as it shot from a third of a penny all the way up to $0.30 a share. That’s a mouth-watering 9900% return, enough to turn 10 grand into a million dollars.
Now, I’m nothing if not skeptical, and whenever my stock screens show a stock starting to pop like that, I investigate. And when SpongeTech showed up on my computer screen, it really didn’t take much digging to discover that there was something fishy about it. For starters, there was the matter of those 24 stock promoters. Successful companies simply don’t use them.
For example, the company freely admitted paying one stock promoter a $30,000 fee and giving them 750,000 shares of stock. Now, why would a company do this if it has a hot-selling product that’s already made its way into Walgreens.
There was also something screwy going on with the number of shares the company had issued. Every few months, the company was issuing hundreds of millions of new shares and quickly went from having just over 100 million shares outstanding to more than 1.86 billion shares in less than six months.
And get this, when the SEC finally went after the company, it alleged that company insiders had dumped an astonishing 2.5 billion, yes billion, shares of the stock on to the market once they’d driven the price up. Even if they had only gotten $0.20 a share, that’s $500 million, almost all of it pure profit.
I began warning investors that SpongeTech was a scam on my blog almost from the beginning. And before it was all over, the New York Post had picked up the story and ran a lengthy exposé on the company that revealed, among other things, that the massive sponge sales the company was reporting were almost all bogus, and many of them were coming from a warehouse in Dubai.
In other words, SpongeTech was pretending it had amazing sales to keep its stock price robust. They had also conjured up the company lawyer out of thin air and accidentally gave him the same fax number as one of the company executives. In any case, before long, the SEC and FBI crashed the party, and it was all over for SongeTech and its executives who are being charged with perjury, fraud, conspiracy, obstructing justice and money laundering. And what’s truly hilarious is that even as federal agents were closing in, the company was issuing a press release promising to sue me for supposedly conspiring with others to drive down the stock price so I could short it. I’ve got to tell you, I’ve never been so happy as when the bunch got taken away in handcuffs by the Feds.
Full disclosure, I did short the stock but made a grand total of $600 for my efforts. In other words, I didn’t expose SpongeTech in order to make money. I exposed it because it was a scam designed to steal millions of dollars from unsuspecting investors. I’m happy to report that nearly a year later, I’ve never been served with a lawsuit. Apparently, these guys are too busy trying to stay out of jail to bother with me.
Not surprisingly, they’re not the first to threaten to sue me. As I mentioned earlier, I once got a cease and desist order from basketball star Shaquille O’Neal for exposing his involvement with a pump and dump called NXT Nutritional Holdings. Shaq was given more than two million shares of the company’s stock in exchange for his endorsement, and he helped pump the stock price up by a whopping 300% before the dumping began, dumping that saw the stock lose 90% of its value within a matter of weeks. In any case, I had my lawyer draft a letter to Shaq’s attorney, essentially telling him to buzz off. And wouldn’t you know it, I never heard from them again.
The skepticism that has made me so successful at spotting these pump and dumps is rooted in something that happened to me a number of years ago, when I lost an astounding $356,763 on just one penny stock, Cygnus eTransactions Group, Inc., a provider of online ticketing solution, a penny stock I failed to be properly skeptical about, a penny stock with a great story that I believed in and fell in love with, and a penny stock that I thought would make me wealthy beyond my wildest dreams. In the end, however, the stock broke my heart, and I was forced to take the biggest loss of my career. But believe it or not, the loss I took on Cygnus is actually the best thing that ever happened to me because it forced upon me a skepticism that has served me well ever since.
You see, the company’s CFO was a family friend, and he personally convinced me to take a position in the company, a position that I increased on two different occasions when the company ran into trouble. Initially, I regretted being so gullible with regard to the company’s actual prospects but now I’m thankful for my experience because it opened my eyes to the fact that penny stock executives and penny stock promoters will say and do almost anything to support the price of their company’s stock, right up to and including ripping off friends and family.
That’s why you need to have your BS meter on full alert whenever you receive a promotion for a penny stock, no matter how good it sounds. In fact, my advice to you is to never ever buy a stock that’s pitched to you via direct mail or Email or social media, no matter who’s pitching it, and that includes mailings disguised to look like research reports. Run, don’t walk away from these promotions because legitimate companies simply don’t promote themselves this way. Look, I know the allure of a great story in a big payday. It’s how I got suckered into buying Cygnus and wound up losing over $300,000. But if you allow yourself to be taken in by these scammers, you’ll be kicking yourself for years.
So if you’re ever tempted to ignore my advice and to buy one of these stocks, before you do, please just fire up your computer and do a 10 or 15 minutes of research. Number one, read every word of the disclaimer in the sales pitch so you’ll at least know about any conflicts of interest. Find out who’s getting paid what and note how the guru disclaims all responsibility for the quality of the stock he recommends in the body copy.
Number two, Google some of the key items mentioned in the promo, the company’s name, the guru’s name, the members of the management team, and the name of the product and anything else that seems important.
Number three, take a look at the company’s SEC filings. You can find them in the menu whenever you look up a stock at Yahoo Finance or Google Finance. Or you can go right to the source www.sec.gov/edgar.shtml.
Do any or all of these things, and I’m betting you’ll find enough in 10 minutes to convince yourself that the stock is an outright scam that isn’t worth risking your hard-earned money on. In fact, I urge you to go through this exercise even if you’re not at all tempted just so you can see what I’m talking about firsthand.
Now, after all this, you might be tempted to avoid penny stocks like the plague. I mean who can hope to make money in a niche like this? Well, there’s no need for that. You see, despite everything I’ve said in this video, penny stocks, when properly selected, are about the best, most reliably profitable investment opportunity going. In fact, they have a number of advantages that other investment vehicles can’t hope to match.
First of all, their profit potential dwarfs that of big blue chip stocks by an order of magnitude. For example a big blue chip stock like Bank of America already has a market cap of $153 billion and yearly revenue of $79.5 billion. With numbers that big, it’s just about impossible to make decent returns on your money. Heck, even a billion dollar increase in revenues is barely a blip on its income statement.
But when a penny stock’s revenues jump by just $25 or $50 million, thanks to a new product or a distribution deal or a lucrative joint venture with a big company, that alone can make the stock explode by 25%, 50% or even 100% in mere months, sometimes in just a few weeks.
Bottom line, it’s a heck of a lot easier for a hot penny stock to jump from $0.50 to a dollar than it is for a $60 blue chip to double to $120 per share. That kind of profit potential is what allowed me to turn that 12 grand in Bar Mitzvah money into $1.65 million in just four years.
Now, obviously, I can’t promise you’ll do as well but you can clearly see the profit potential. And on the next video in this series, I’m going to share with you some of my secrets for finding the stocks that can bring you those outsized profits.
Let me give you just three basic examples of some of the stocks my system uncovered in the past few months.
First, there was Zagg, Inc. which I told my subscribers about in the mid $1 per share range because the stock was enjoying a technical breakout, and I figured it could increase nicely given they make accessories for the hot iPod and iPhone market. Long story short, within a few months, the stock was over $8 per share as I was right on the money, and it performed even better than I expected because they alter came out with an award-winning accessory for the iPad which only made the story even more appealing to investors.
Then there was Diedrich Coffee which I couldn’t stop talking about when the stock was hitting new highs in the $4 range. The stock was up nearly 100% in one day after a great earnings report, and when I issued my buy alert, some of my subscribers thought I’d lost my mind. But I know a good story when I see one, and some quick research told me that their strong earnings and the popular home coffee brewing trend were important long term rather than it just being a one-day wonder. Now, within a few months, the stock had climbed to over $20 per share, and the company was later acquired for over $30 per share, a 700% plus winner from my crazy initial buy alert.
Those stocks took time to really surge but my fastest winner was on a company called Liquidmetal Technologies which surged from under $0.50 per share to over $1.70 in just three days after one of their SEC filings showed they had signed a deal with Apple.
After I alerted my subscribers at $0.54 per share saying “mysterious deal with Apple means the stock could really ramp,” several technology blogs picked up the story and the financial media wrote speculative stories too. The media hype really helped spike the stock but it was my fast research and trade alert that gave my subscribers and me an edge.
Perhaps most tellingly not one other penny stock newsletter wrote about Liquidmetal’s contract with Apple despite their website claims that they can pick the next great penny stock. Do you know why they didn’t write about Liquidmetal? Not because the deal with Apple wasn’t huge but because no penny stock newsletter got paid or bribed to write about this company, and that’s the difference between those newsletters and mine. I’m a real and a proven stock picker, and the others are fakes. I will never take compensation in stock, cash or marketing expenses from any penny stock or penny stock shareholder. All my picks are my own. My trading profits are real, my track record is real, as is my research and my strategy that I’ve refined over the past decade.
As Liquidmetal proved big profit potential isn’t the only reason I love these stocks. You’re also going to love the speed at which you can make money. I don’t know about you but I’m an impatient man. I hate the idea of watching my portfolio increase by a measly 5% or 10% a year. And the fact is, most investors haven’t even begun getting that over the last few years.
Don’t get me wrong. Long-term investing works. If you earn 10% a year over 40 years, you’ll have a pretty good pile of money waiting for you at the end of the road. But let me ask you, do you want to wait 30 years to make money? Do you even have that much time left before you retire? No. I’m betting you’d like to speed things up a little, and that’s exactly what penny stocks can do for you.
The stocks I recommend move quickly, and when you pick them right, you can easily double your money or better in a year. The proof is in my track record, profits of 197% in 2008, 141% in 2009, and 55% in 2010. And remember, those numbers include every single losing trade too.
In other words, if you had taken $25,000 and begun following my advice back in 2008, today, you’d have $277,360, not too shabby for a period of time when most investors were just scraping by.
(continues in next post)
The Dirty Little Secrets of the Penny Stock Industry
This is a complete transcription of Timothy Sykes video Penny Stock Scammers EXPOSED (http://wealthinsideralliance.com/timsykes/stockscamalert/?aff_id=664).
You can view the video here (http://wealthinsideralliance.com/timsykes/stockscamalert/?aff_id=664) or read the contents below.
[Video Begins]
Hey there. My name is Tim Sykes, and anyone who knows me will be stunned to hear I’m not making the case against penny stocks. It’s a little like hearing Mick Jagger announce that he’s forsaking rock and roll. After all, I’ve made millions of dollar over the last 12 years trading penny stocks, and during that time, I’ve developed a reputation as a loud mouth penny stock fanatic.
I’ve also been ranked the number one trader out of 50,000-plus traders on www.Covestor.com for the past three years in a row by trading penny stocks exclusively. And I ran my own penny stock hedge fund from 2003 to 2006, and I was Barclay’s number one ranked short bias hedge fund all three years. I was also named to Trader Monthly’s top 30 traders under the age of 30 in 2006.
More recently, over the last three years, subscribers to my penny stock trading service have been reaping windfall profits with returns of 197% in 2008, 141% in 2009, and 55% in 2010. That’s good enough to turn $25,000 into over $277,000. Not too shabby for a period of time when most investors were losing their shirts. And get this, unlike the phony track records, most investment advisors boast about those returns include not just my winners but every one of my losers as well. Yes, I do have losing trades from time to time, every trader does. But according to CXO Advisory, an online service that ranks investment advisors, over the last two years, my trades have been profitable 76% of the time, and on average, my losers lost the paltry 5%.
My biggest claim to fame, however, and the thing I’m probably most famous for, is having taken $12,415 in Bar Mitzvah money at age 17, investing it all in penny stocks and turning it into $1.65 million in four short years. How did I do that? I can sum it up in one word: research. You see, I’m something of a nerd who gets off on reading long, dull and boring SEC filings. I love digging into balance sheets and income statements, and I relish reading technical charts until my eyeballs feel like they’re about to fall out.
I’m going to tell you more about that on the next video in this series, but suffice to say for now that my obsessive-compulsive research is the real reason for my success. Now, I know it’s hard to believe that someone so young could have had all this success with penny stocks, and I don’t expect you to believe a word of it. After all, I could be the world’s biggest liar, making this stuff up as I go along, as do a surprising number of investment advisors and newsletter editors. But I’m not asking you to believe anything just yet. All I ask is that you refrain from disbelieving until I show you my proof.
So at the end of this video, I’m going to give you a website you can go to, to verify my track record. This website has a track record of every trade I’ve ever made, and it also includes scans of my brokerage statements, audits and my tax returns for the last 12 years. I did this because I want you to be absolutely convinced that I’m the real deal, that I know what I’m talking about, and that I’m worth listening to. You can be that transparent when you have nothing to hide, and your track record is 100% real.
My track record has gone being featured on dozens of TV shows including being featured for seven minutes on 20/20. I’ve also been on Fox’s Neil Cavuto, and I was once a regular on CNBC until I got kicked off for using some bikini-clad female models that carried my charts during one of my segments. It’s on YouTube. Watch it; it’s good. I was also selected to be on the hit TV show Wall Street Warriors.
But before I go on, let me tell you something about getting on TV. It proves nothing about my abilities as a trader. And if you were to study the track records of TV’s financial talking heads, you’d be appalled at how terrible they are. And you wouldn’t believe some of the outright penny stock scams a few of these scumbags have been involved in. I say this because in the end, there is only one reason to listen to me, the track record I laid out a moment ago and the proof you’ll find on the website I’ll list at the end of this video.
So after all the success I’ve had with penny stocks, what’s the deal? Am I really turning my back on the investment vehicle that has made me and many of my subscribers wealthy? Actually, no. I still believe penny stocks are the best investment for the little guy who’s looking to make a killing without the risks associated with trading options and commodities.
The fact is every investor, even the most conservative, needs to have at least a few penny stocks in their portfolio. But I have to tell you, for many investors, penny stocks have become a black hole for their money. Every year, hundreds of thousands of investors are taken advantage of – robbed actually – by penny stock executive, hucksters and gurus who pitch worthless penny stocks as if they’re the greatest thing since sliced bread.
They send out slick direct mail packages, many of them cleverly designed to look like magazines or special reports, and millions of Emails that tell expertly crafted stories revealing all the wonderful things a particular penny stock supposedly has going for it. Maybe it’s a breakthrough new product or technology that’s going to change the world. An oil and gas discovery overlooked by the major oil companies, a new drug that’s going to cure cancer, or a massive gold find on a forgotten piece of land in Nevada, Canada or South America. Whatever it is, the story is usually crafted so beautifully and so compellingly that many investors find themselves chomping at the bit to get a piece of the action.
Especially, since the story is always accompanied by outlandish profit promises, outright lies actually, of turning $5,000 into $50,000 or even $100,000 practically overnight. In other words, these stocks sound really good, and they’re always promoted by a respectable figure; the editor of an investment newsletter, a talking head from your favorite TV financial channel, or even in one case professional basketball star Shaquille O’Neal who, as you’ll hear in a moment, threatened to sue me for exposing the crummy company he was promoting.
These expert endorsers, almost all of them are unethical, liars and destined for the underworld, put your mind at ease. After all, they’ve done the research. They like the stock. They think it has a chance. Who are you to argue? So you throw a few thousand dollars at it and, sure enough, the stock starts to rise. Over the next few weeks, it goes from $0.50 to $1to $2, maybe even $3. You can hardly believe your good fortune. Pop the bubbly, you’ve got a 500% winner on your hands. Your only regret is that you didn’t put $20,000 or $30,000 into it. But then, just like that, things suddenly turn bad. You notice the stock falls back to $2.50. No worries, you’ve still got a good game, and markets after all do fluctuate. There’s no getting around that. But then, before you can even blink, the stock crashes back to $2, to $1, and it blows right past $0.50 and keeps falling until it’s worth a measly $0.25 a share, and your nifty 500% gain is now a painful 50% loss. So you pour out the champagne and berate yourself for not getting out when the stock was $3. Maybe you curse the guru for recommending such a volatile stock. You may even vow to never invest in a penny stock again.
I don’t know if something like this has happened to you but I do know that it happens to hundreds of thousands of investors all over the U.S. every year, and a very few of them know the real reason why they lost their money. Yes, it was a crummy stock; yes, the guru made a lousy recommendation; and yes, they have been better off selling at $3. But what you may not know is that the only reason the stock rose to $3 in the first place is because all the promotions, the direct mail and the Emails I mentioned a moment ago, plus Twitter messages, Facebook postings, text messages and press releases, sent so many investors scurrying to buy the stock, that the price had to go up.
Then, once the stock got up to the $3 level, thieving insiders at the company, people who controlled millions and perhaps even billions of shares, shares that were given to them or that were purchased for just pennies a share, dumped their stock on to the market, raking in millions of dollars in profits and driving the stock price into the ground at the same time.
Think about how lucrative this is. Say, you bought a million shares at $0.05 a share. That’s an investment of $50,000. When a stock gets pumped to $3, just like that, and you’ve made a cool $2.95 million. Not bad. And in most cases, multiple insiders have these big paydays. You, on the other end, got screwed by a bunch of crooks who are now living the high life, taking fancy vacations and drinking expensive champagne at your expense. Bottom line, the soaring stock price had absolutely nothing to do with the quality of the company or its products and everything to do with the thousands of investors piling into the stock at the same time, thanks to a successful promotion.
In the industry, this is known as a pump and dump, or as I like to call it a hype and wipe. These scummy insiders do whatever it takes, including telling outright lies, to pump up the price of the stock. And then when the share price rises, they dump the stock and rake in the profits. The company itself is actually beside the point. It’s just a means to an end. In almost every case I’ve seen, the company behind the stock is a joke, regardless of how great it sounds on paper.
But the only ones laughing at the joke are the scumbags who just got rich by screwing small investors like you. What makes these companies a joke? Simple, in almost every case, the promised technology either doesn’t exist or is completely inconsequential. The massive oil-and-gas discovery exists only in the minds of the company’s scum executives. The breakthrough cure for cancer is a ridiculous flop that couldn’t cure a hangnail. And that overlooked gold property in Nevada is nothing more than a worthless, weed-filled vacant lot that was picked clean of any gold it may have held more than a century ago.
Now, wait a minute, you might be thinking, why on earth would my favorite investment guru, or any investment guru for that matter, recommend such a stock? Don’t they know any better? Of course, they do. They know very well that the stock in question is a stinking pile of you know what, and they simply don’t care because promoting these stocks is actually quite lucrative for them. And these scumbags care a lot more about fattening their own wallet than they do about helping investors like you.
You see, what these fakers want to keep under wraps is the fact that they are paid, or should I say bribed, to promote worthless companies. How do I know? Because every single one of these pump and dumps, scam and slam promos has a legally required disclaimer that keeps them out of trouble with the SEC by spelling out exactly who was paid what.
Check out this disclaimer, it tells you everything you need to know about these supposedly hot stocks and the thieving scumbags who promote them. Let me read it to you: This publicly distributed report of stock prospector is a sponsored advertisement. This paid advertising issue of stock prospector does not purport to provide an analysis of any company’s financial position and is not in any way to be construed as an offer or solicitation to buy or sell any security. Stock prospector is a paid advertiser. Amarok Resources, Inc. is the featured company.
Did you catch that? This Email is a sponsored advertisement, a paid advertising issue. It doesn’t provide an analysis of the company’s financial position, and the newsletter is a paid advertiser. That’s not me saying it, it’s them.
But here is the real tip-off of the rip-off. The distribution cost of this report to new subscribers, $80,000, were funded by Benchmark Media Ltd. in an effort to create investor awareness of Amarok Resources. Benchmark Media Ltd. is neither a broker dealer not investment advisor, but is a shareholder in Amarok Resources, holding 1.5 million shares of Amarok Resources stock which can be publicly traded (sold) at any time by Benchmark Media. In other words, the $80,000 cost of creating and distributing this mailer was funded by a company that holds 1.5 million shares of Amarok, shares that can be sold at any time.
Does that sound a little suspicious to you? I don’t know this for sure, but it’s my guess that Benchmark was given those shares by Amarok as their compensation for, number one, putting this deal together with the guru recommending the stock; and number two, writing and sending the Email pitching the stock.
Now, just imagine the profit Benchmark Media can make selling its 1.5 million shares, especially if it were given the shares in the first place. If they can get the share price up to just a couple of bucks, they’ll clear a cool $3 million. That’s just what the promoters make. Insiders at the company control many more shares and typically make many millions more. Not bad for creating a worthless company with worthless products, and they’re not the only ones making out. The guru promoting the stock does pretty well too. Take a look.
It is anticipated that this report will generate new subscriptions for stock prospector and expect to receive an unknown amount of revenue from new subscriptions from the subscription offer contained herein. Eric Dany, the reviewer/analyst, has been paid $10,000 in compensation for research preparing and publishing this report and other publishing venues.
So for starters, this so-called investment advisor doesn’t have to spend a dime advertising his newsletter, which is always the most expensive cost in a newsletter publisher’s budget. He gets to keep any subscription revenue that is generated, and he was paid $10,000 on top of that.
Do one or two of these paid promos every month and combine it with your regular newsletter revenue, and you’ve got a pretty lucrative business going. Now, let’s finish off the disclaimer.
Neither stock prospector nor Eric Dany is a broker dealer. This report, including the opinions expressed and the statements made within is for informational and advertising purposes only and should not be construed as investment advice and does not constitute an offer to sell any securities, and is not soliciting an offer to buy any securities in any state or other jurisdictions where the offer is not permitted.
That last sentence is one of the longest in recorded history, which makes it even harder to read and comprehend which is their intention in the first place. But the key line is that the report is for informational and advertising purposes only and should not be construed as investment advice.
What the heck? This guy just spent nearly 12 pages telling me what a great stock Amarok is and how it could hand me a whopping 500% gain, but he’s not giving investment advice? Then what exactly is he doing? I’ll tell you what he’s doing. He has simply whored himself out to pump up the price of the stock so that insiders can sell it and leave you holding the bag when the price comes crashing to earth. It’s as simple as that.
And the fact is, these so-called gurus, who love to boast about all the research they do, never do anything resembling true research. They just take what the company’s executives and their press releases tell them and regurgitate it to millions of investors. In my world, that’s not research. It’s BS.
Now, let’s take a look at the final paragraph of the disclaimer.
The information used to prepare this report is believed to be from reliable sources but no representation is made as to the accuracy or completeness of such information. Investment in securities carries a high degree of risk and involves risks and uncertainties which may results in investors losing all of their invested capital.
I think that paragraph speaks for itself, and it’s all the reason you need to simply ignore these promotions when they hit your mailbox. In just a second, I’m going to give you a few examples of some of the more egregious pump and dumps I’ve come across over the years. But first, I want to make it clear that on occasion, one of these pumped up stocks does make it to the big time.
Probably, the best known example is True Religion Jeans, a Vancouver pump that actually turned into a viable company, and it’s now a major company in the fashion world. Investors who bought its stock and stuck with it made some serious profits. So it does happen, and this leads many investors to adopt a sort of lotto mentality about buying penny stocks. The idea is to buy 10 or 20 penny stocks in the hopes that one of them will hit the jackpot and erase your losses on the remaining stocks.
This is an actual penny stock investment strategy taught by some penny stock gurus. And while it may sound great in theory, it simply doesn’t work in the real world, and that’s because chances are all 20 of the randomly selected stocks are completely worthless. Not always, of course, but that’s the way it works for most investors who wind up losing everything.
Believe me, you’re most likely better off putting your money on double zero in Vegas. And think about it for a moment. Suppose you did buy 10 penny stocks and one of them went to the moon. That’s fantastic, and it’s worth celebrating. But what do you do next, buy another 10 stocks and hope for another winner? What are the chances that lightning will strike twice?
My point is this that even though this might work for the occasional investor, it’s not a sustainable strategy that you can use to build your fortune. Instead, it’s just another way to pad the pockets of insiders at those penny stock companies who get to sell their shares for even bigger profits. They’re climbing right into your wallet.
Look, most penny stocks will never make anyone any money. A few will make millions for the insiders, but only a handful will make money for investors, and that handful is the only stocks you want to invest in. The good news is, as you’ll see in the next video in this series, it is possible to identify that handful with surprising regularity for surprising profits.
Now, let me give you some examples of pump and dumps that I’ve exposed on my blog over the years so you can get a better idea of how this works.
My first example is a company called Genova Biotherapeutics. Here’s a screenshot from my blog when I first exposed this company. Genova was a company that supposedly developed, and I quote, “novel therapeutic proteins that disrupt the advance of life-threatening cancers.” And they paid stock promoters hundreds of thousands of dollars to pump the stock price. And if you read the company’s promotions, you’ll be impressed. After all, just imagine what an actual cancer cure would be worth to a company and its shareholders. The mind boggles. But research revealed that just one month before the pump started, Genova was a travel company that transformed itself into a pharmaceutical company almost overnight. It had purchased its three patented cancer cures for a lousy 75 grand. How likely is it that a cure for cancer would be available to buy for just 75 Gs? The company put out more than a dozen press releases, all of them loaded with fluff, all in just one week. The company’s CEO wasn’t a scientist or a doctor but a former video game executive. Genova’s supposed business partners had the same address as the company and had many of the same people working for them.
The company’s New York address was the same of that as a well-known penny stock spammer. And get this, as some readers of my blog pointed out to me, at least one of the company’s press releases was virtually identical to a press release issued the year before by a defunct biotech company called NextGen Bioscience, Inc. Furthermore, Genova’s management was the same as NextGen’s management. Even more amazing, the disclaimer on Genova’s website was identical to the disclaimer on NextGen’s site. They didn’t even bother to change the name from NextGen to Genova.
In other words, they had run this scheme before and figured investors would never notice, and many didn’t. As the stock price soared from just $0.02 a share all the way up to $1.18 at which point insiders dumped millions of shares of stock, raking in several million dollars. Around that time, the SEC woke up and noticed the pump and stopped all trading in the stock, which then sank right back down to $0.02 a share. The insiders made out like bandits; the average investor got absolutely screwed. The only good thing I can say about this is that readers of my blog knew all along that Genova was a scam, and they didn’t invest a penny in this miserable excuse for a company.
My next example is almost as absurd. It’s a company called Emergent Health Corp. These clowns claimed they could inject stem cells into vitamins as a way to rejuvenate life. And while it sounds great, it was actually a completely bogus claim with no science to back it up, and almost no sales either. In fact, while the company’s promoters were predicting $100 million in sales and $20 million profits, its revenue was a paltry $90,000 or so a year, with profits of just $20,000 and yet its market cap was an absurd $85 million.
And get this, a quick Google search revealed that the company’s CEO had lost its license to practice osteopathic medicine in the company’s home state of Pennsylvania, thanks to a disciplinary action taken against him. In other words, this company had all the marks of a scam, and I said so on my blog recommending that my readers steer clear.
But unfortunately, the company had a great story to tell even if it was bogus, and excited investors quickly bid up the stock from $0.50 to $4 per share. And just about every one of those investors had their heart broken when insiders began selling like crazy and the stock price began falling. And then to add insult to injury, the SEC began asking questions and stopped trading in the stock. Ultimately, the stock fell all the way down to $0.10 a share and once again, small investors got ripped off.
My final example is a real doozy. A stock promoted by no less than 24 different promoters and a stock that became so popular, I had investors on my blog defending its profit potential right up until the day the federal agents arrested the company executives. Executives who had masterminded one of the biggest penny stock pumps ever.
The company was called SpongeTech, and it actually had a real product that was sold in Walgreens, a sponge that had soap built right into it. And according to the company, these unique sponges were selling like hotcakes. And to make itself totally legit and prosperous, the company put up expensive ads in major league ballparks, at the U.S. Open and even in Madison Square Garden. And these promotional efforts paid off, no, not for the product but for the stock as it shot from a third of a penny all the way up to $0.30 a share. That’s a mouth-watering 9900% return, enough to turn 10 grand into a million dollars.
Now, I’m nothing if not skeptical, and whenever my stock screens show a stock starting to pop like that, I investigate. And when SpongeTech showed up on my computer screen, it really didn’t take much digging to discover that there was something fishy about it. For starters, there was the matter of those 24 stock promoters. Successful companies simply don’t use them.
For example, the company freely admitted paying one stock promoter a $30,000 fee and giving them 750,000 shares of stock. Now, why would a company do this if it has a hot-selling product that’s already made its way into Walgreens.
There was also something screwy going on with the number of shares the company had issued. Every few months, the company was issuing hundreds of millions of new shares and quickly went from having just over 100 million shares outstanding to more than 1.86 billion shares in less than six months.
And get this, when the SEC finally went after the company, it alleged that company insiders had dumped an astonishing 2.5 billion, yes billion, shares of the stock on to the market once they’d driven the price up. Even if they had only gotten $0.20 a share, that’s $500 million, almost all of it pure profit.
I began warning investors that SpongeTech was a scam on my blog almost from the beginning. And before it was all over, the New York Post had picked up the story and ran a lengthy exposé on the company that revealed, among other things, that the massive sponge sales the company was reporting were almost all bogus, and many of them were coming from a warehouse in Dubai.
In other words, SpongeTech was pretending it had amazing sales to keep its stock price robust. They had also conjured up the company lawyer out of thin air and accidentally gave him the same fax number as one of the company executives. In any case, before long, the SEC and FBI crashed the party, and it was all over for SongeTech and its executives who are being charged with perjury, fraud, conspiracy, obstructing justice and money laundering. And what’s truly hilarious is that even as federal agents were closing in, the company was issuing a press release promising to sue me for supposedly conspiring with others to drive down the stock price so I could short it. I’ve got to tell you, I’ve never been so happy as when the bunch got taken away in handcuffs by the Feds.
Full disclosure, I did short the stock but made a grand total of $600 for my efforts. In other words, I didn’t expose SpongeTech in order to make money. I exposed it because it was a scam designed to steal millions of dollars from unsuspecting investors. I’m happy to report that nearly a year later, I’ve never been served with a lawsuit. Apparently, these guys are too busy trying to stay out of jail to bother with me.
Not surprisingly, they’re not the first to threaten to sue me. As I mentioned earlier, I once got a cease and desist order from basketball star Shaquille O’Neal for exposing his involvement with a pump and dump called NXT Nutritional Holdings. Shaq was given more than two million shares of the company’s stock in exchange for his endorsement, and he helped pump the stock price up by a whopping 300% before the dumping began, dumping that saw the stock lose 90% of its value within a matter of weeks. In any case, I had my lawyer draft a letter to Shaq’s attorney, essentially telling him to buzz off. And wouldn’t you know it, I never heard from them again.
The skepticism that has made me so successful at spotting these pump and dumps is rooted in something that happened to me a number of years ago, when I lost an astounding $356,763 on just one penny stock, Cygnus eTransactions Group, Inc., a provider of online ticketing solution, a penny stock I failed to be properly skeptical about, a penny stock with a great story that I believed in and fell in love with, and a penny stock that I thought would make me wealthy beyond my wildest dreams. In the end, however, the stock broke my heart, and I was forced to take the biggest loss of my career. But believe it or not, the loss I took on Cygnus is actually the best thing that ever happened to me because it forced upon me a skepticism that has served me well ever since.
You see, the company’s CFO was a family friend, and he personally convinced me to take a position in the company, a position that I increased on two different occasions when the company ran into trouble. Initially, I regretted being so gullible with regard to the company’s actual prospects but now I’m thankful for my experience because it opened my eyes to the fact that penny stock executives and penny stock promoters will say and do almost anything to support the price of their company’s stock, right up to and including ripping off friends and family.
That’s why you need to have your BS meter on full alert whenever you receive a promotion for a penny stock, no matter how good it sounds. In fact, my advice to you is to never ever buy a stock that’s pitched to you via direct mail or Email or social media, no matter who’s pitching it, and that includes mailings disguised to look like research reports. Run, don’t walk away from these promotions because legitimate companies simply don’t promote themselves this way. Look, I know the allure of a great story in a big payday. It’s how I got suckered into buying Cygnus and wound up losing over $300,000. But if you allow yourself to be taken in by these scammers, you’ll be kicking yourself for years.
So if you’re ever tempted to ignore my advice and to buy one of these stocks, before you do, please just fire up your computer and do a 10 or 15 minutes of research. Number one, read every word of the disclaimer in the sales pitch so you’ll at least know about any conflicts of interest. Find out who’s getting paid what and note how the guru disclaims all responsibility for the quality of the stock he recommends in the body copy.
Number two, Google some of the key items mentioned in the promo, the company’s name, the guru’s name, the members of the management team, and the name of the product and anything else that seems important.
Number three, take a look at the company’s SEC filings. You can find them in the menu whenever you look up a stock at Yahoo Finance or Google Finance. Or you can go right to the source www.sec.gov/edgar.shtml.
Do any or all of these things, and I’m betting you’ll find enough in 10 minutes to convince yourself that the stock is an outright scam that isn’t worth risking your hard-earned money on. In fact, I urge you to go through this exercise even if you’re not at all tempted just so you can see what I’m talking about firsthand.
Now, after all this, you might be tempted to avoid penny stocks like the plague. I mean who can hope to make money in a niche like this? Well, there’s no need for that. You see, despite everything I’ve said in this video, penny stocks, when properly selected, are about the best, most reliably profitable investment opportunity going. In fact, they have a number of advantages that other investment vehicles can’t hope to match.
First of all, their profit potential dwarfs that of big blue chip stocks by an order of magnitude. For example a big blue chip stock like Bank of America already has a market cap of $153 billion and yearly revenue of $79.5 billion. With numbers that big, it’s just about impossible to make decent returns on your money. Heck, even a billion dollar increase in revenues is barely a blip on its income statement.
But when a penny stock’s revenues jump by just $25 or $50 million, thanks to a new product or a distribution deal or a lucrative joint venture with a big company, that alone can make the stock explode by 25%, 50% or even 100% in mere months, sometimes in just a few weeks.
Bottom line, it’s a heck of a lot easier for a hot penny stock to jump from $0.50 to a dollar than it is for a $60 blue chip to double to $120 per share. That kind of profit potential is what allowed me to turn that 12 grand in Bar Mitzvah money into $1.65 million in just four years.
Now, obviously, I can’t promise you’ll do as well but you can clearly see the profit potential. And on the next video in this series, I’m going to share with you some of my secrets for finding the stocks that can bring you those outsized profits.
Let me give you just three basic examples of some of the stocks my system uncovered in the past few months.
First, there was Zagg, Inc. which I told my subscribers about in the mid $1 per share range because the stock was enjoying a technical breakout, and I figured it could increase nicely given they make accessories for the hot iPod and iPhone market. Long story short, within a few months, the stock was over $8 per share as I was right on the money, and it performed even better than I expected because they alter came out with an award-winning accessory for the iPad which only made the story even more appealing to investors.
Then there was Diedrich Coffee which I couldn’t stop talking about when the stock was hitting new highs in the $4 range. The stock was up nearly 100% in one day after a great earnings report, and when I issued my buy alert, some of my subscribers thought I’d lost my mind. But I know a good story when I see one, and some quick research told me that their strong earnings and the popular home coffee brewing trend were important long term rather than it just being a one-day wonder. Now, within a few months, the stock had climbed to over $20 per share, and the company was later acquired for over $30 per share, a 700% plus winner from my crazy initial buy alert.
Those stocks took time to really surge but my fastest winner was on a company called Liquidmetal Technologies which surged from under $0.50 per share to over $1.70 in just three days after one of their SEC filings showed they had signed a deal with Apple.
After I alerted my subscribers at $0.54 per share saying “mysterious deal with Apple means the stock could really ramp,” several technology blogs picked up the story and the financial media wrote speculative stories too. The media hype really helped spike the stock but it was my fast research and trade alert that gave my subscribers and me an edge.
Perhaps most tellingly not one other penny stock newsletter wrote about Liquidmetal’s contract with Apple despite their website claims that they can pick the next great penny stock. Do you know why they didn’t write about Liquidmetal? Not because the deal with Apple wasn’t huge but because no penny stock newsletter got paid or bribed to write about this company, and that’s the difference between those newsletters and mine. I’m a real and a proven stock picker, and the others are fakes. I will never take compensation in stock, cash or marketing expenses from any penny stock or penny stock shareholder. All my picks are my own. My trading profits are real, my track record is real, as is my research and my strategy that I’ve refined over the past decade.
As Liquidmetal proved big profit potential isn’t the only reason I love these stocks. You’re also going to love the speed at which you can make money. I don’t know about you but I’m an impatient man. I hate the idea of watching my portfolio increase by a measly 5% or 10% a year. And the fact is, most investors haven’t even begun getting that over the last few years.
Don’t get me wrong. Long-term investing works. If you earn 10% a year over 40 years, you’ll have a pretty good pile of money waiting for you at the end of the road. But let me ask you, do you want to wait 30 years to make money? Do you even have that much time left before you retire? No. I’m betting you’d like to speed things up a little, and that’s exactly what penny stocks can do for you.
The stocks I recommend move quickly, and when you pick them right, you can easily double your money or better in a year. The proof is in my track record, profits of 197% in 2008, 141% in 2009, and 55% in 2010. And remember, those numbers include every single losing trade too.
In other words, if you had taken $25,000 and begun following my advice back in 2008, today, you’d have $277,360, not too shabby for a period of time when most investors were just scraping by.
(continues in next post)