Penny stocks

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
User avatar
gummy
Posts: 340
Joined: Mon Mar 12, 2007 2:34 pm
Location: Burlington, Ontari-ari-ari-O
Contact:

Penny stocks

Post by gummy » Fri Apr 04, 2008 1:49 am

I know it violates Boglehead principles (and nobuddy here would admit it) but does anyone do penny stocks ... for amusement?

Chip
Posts: 2183
Joined: Wed Feb 21, 2007 4:57 am

Post by Chip » Fri Apr 04, 2008 4:34 am

Never bought one, but I used to spend a bit of time researching names on another board. It never ceased to amaze me how awful almost all of these "companies" were.

A couple of examples:

A "company" whose only asset was a certificate of deposit, its only revenue the interest from the CD, with no plans to do anything else in the future. The entire workforce was one guy who spent part time in a leased office. And the stock was selling at more than 1X book value!

Another company that in two years time switched from the television industry to the fast food industry to the ammunition industry, having never come close to making a profit in any of them.

I wrote the following a while ago about them:

"Many, if not most of these companies are extremely unprofitable. Usually the management teams have never proven the ability to grow a business and make money. The companies are often terribly undercapitalized. Many are on the edge of bankrupcty. The equity and debt instruments that they have issued or will issue almost always benefit management and insiders to the detriment of the common stockholders. Typically the stocks are very thinly traded, with large bid/ask spreads. The low trading volume makes them prime candidates for "pump & dump" schemes, where insiders and brokers benefit at the expense of the public shareholders. It's hard to get good independent information on the companies. Typically the only "news" is in the form of self-serving press releases."

dumbmoney
Posts: 2277
Joined: Sun Mar 16, 2008 8:58 pm

Post by dumbmoney » Fri Apr 04, 2008 5:12 am

I agree with Chip. The only reliable way to profit from penny stocks is by fleecing other speculators. There are rarely any economic fundamentals driving the stock price.

User avatar
gummy
Posts: 340
Joined: Mon Mar 12, 2007 2:34 pm
Location: Burlington, Ontari-ari-ari-O
Contact:

Post by gummy » Fri Apr 04, 2008 6:25 am

True statements, indeed.
Yet some (like the one I mentioned in the above link) is a mature company trading over 4 million shares a day and whose stock price is up by a factor of 10 in the last year
... so there may be exceptions, eh?

Indeed, the stock is up 21% in the past four days.

My interest is to see if others have some techniques for identifying "good bets" so's I can write about 'em.
I reckon this ain't an appropriate forum. Sorry fellas. :?

User avatar
LH
Posts: 5490
Joined: Wed Mar 14, 2007 2:54 am

Post by LH » Fri Apr 04, 2008 6:49 am

my mad money is in spdv. It appears like it is not in imminent danger of bankruptcy, but who knows.

Do not buy spdv, stick to indexes : )

User avatar
zhiwiller
Posts: 1254
Joined: Tue Feb 20, 2007 3:47 pm
Location: Central Florida
Contact:

Post by zhiwiller » Fri Apr 04, 2008 10:00 am

I bought a Penny Stock once. It cost me more in commissions to get rid of than I received in proceeds. I sold it for tax reasons at that point.

User avatar
baw703916
Posts: 6679
Joined: Sun Apr 01, 2007 1:10 pm
Location: Seattle

Post by baw703916 » Fri Apr 04, 2008 10:32 am

If the Treasury decides to abolish the penny, does that mean penny stocks will go away? :wink:

Best wishes,
Brad
Most of my posts assume no behavioral errors.

User avatar
ChefJeff
Posts: 107
Joined: Mon Jul 30, 2007 10:48 am

Post by ChefJeff » Fri Apr 04, 2008 10:49 am

I bought some dollar stocks that I eventually sold as penny stocks :cry:

pkcrafter
Posts: 13001
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Penny stocks

Post by pkcrafter » Fri Apr 04, 2008 11:52 am

Well, no discussion of penny stocks would be complete without including the munchkin man.

munchkin man posts....
http://www.diehards.org/forum/search.ph ... nchkin+Man

On Jan 2, MM listed his penny picks.

Performance since 12/31/07

1. byswf.pk -54%
2. dpdw.ob -18%
3. tdcp.ob -41%
4. thpw.ob -39%
5. wwat.ob -35%
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

User avatar
ecastilla
Posts: 209
Joined: Tue Jul 31, 2007 6:24 pm

Post by ecastilla » Fri Apr 04, 2008 12:02 pm

About 3 weeks ago I got a pump-and-dump scam fax The fax said the stock was hot and on its way up..the usual yada yada. I had a desire to put a thousand or two into short selling it. Three weeks later I looked at the price and its down almost 70%. I would have done well.

I'm seriously considering betting the other way next time I receive a pump-and-dump scam.

tjwolf
Posts: 34
Joined: Mon Feb 26, 2007 2:28 pm
Location: Minnesota

Penny stocks

Post by tjwolf » Fri Apr 04, 2008 12:02 pm

Gummy;

You must have more time than the rest of us. Always interesting subjects, though.

For your safety, please be more careful in the future! You might wake up MunchkinMan and get challenged to a contest. He seems to be the resident penny expert on these boards. Self proclaimed and a proven expert in loosing money.

Tom

User avatar
gummy
Posts: 340
Joined: Mon Mar 12, 2007 2:34 pm
Location: Burlington, Ontari-ari-ari-O
Contact:

Post by gummy » Fri Apr 04, 2008 1:25 pm

For your safety, please be more careful in the future!
I intend to. :lol:

I posted on other boards to get a feel for what penny-pinchers do and was quite interested in their strategies.

Posting on Bogleheads was a mistake.
I notice that when questions are asked, like:
"How would one invest in Lower Slobovian stocks?"
the responses avoid the question and advise against the investment.
Interesting, eh?

P.S.
I made 19% in the last four days on penny stocks.
My reason? If 'n I write about 'em I should play with 'em, eh?
Now my playing is over. It was fun ... and an eye-opener.

User avatar
White Coat Investor
Posts: 13362
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Post by White Coat Investor » Fri Apr 04, 2008 1:38 pm

gummy wrote:
I notice that when questions are asked, like:
"How would one invest in Lower Slobovian stocks?"
the responses avoid the question and advise against the investment.
Interesting, eh?

I made 19% in the last four days on penny stocks..
Congrats on your success.

One of the nice thing about Diehards is that we answer the question you should have asked :)

But to answer your question, no, I don't buy penny stocks, and you're the first person I've ever met that invested in them successfully. I hope it continues so you can teach the rest of us how to do it, or so you can start a penny stock ETF :)
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

User avatar
docneil88
Posts: 927
Joined: Mon Apr 30, 2007 3:39 pm
Location: Taxable

Penny Stocks vs. Micro-Caps

Post by docneil88 » Sat Apr 05, 2008 1:24 am

Penny Stocks vs. Micro-Caps
dumbmoney wrote:I agree with Chip. The only reliable way to profit from penny stocks is by fleecing other speculators. There are rarely any economic fundamentals driving the stock price.
Nearly all penny stocks are also micro-cap stocks. According to http://www.fundadvice.com/articles/inve ... estor.html , from 1926 to 2004, micro-cap stocks returned 13.1 percent versus 10.4 percent for large-cap stocks. However, micro-caps have a much wider dispersion of returns than larger stocks do. Still, a micro-cap index or fund (such as IWC) is almost always far less volatile than a basket of several micro-caps. I also once read something by Larry Swedroe saying that micro-caps have the advantage of a lower correlation to large-caps than mid-caps or small-caps have to large-caps.

Many micro-caps sell for more than $1, so there are many micro-caps that are not penny stocks. Does anyone know of a penny stock index? If there is one, it would be interesting to compare its long-term performance to a micro-cap index. Best, Neil

User avatar
linenfort
Posts: 2075
Joined: Sat Sep 22, 2007 9:22 am
Location: #96151D

Re: Penny stocks

Post by linenfort » Sat Apr 05, 2008 9:19 am

gummy wrote:I know it violates Boglehead principles (and nobuddy here would admit it) but does anyone do penny stocks ... for amusement?
I hold a few hundred dollars' worth only.
Plug Power (PLUG) and Atari. I used to have some food or food service company called G Willi (now WILC). I don't know if these count as penny stocks, but I have iRobot (IRBT) and used to hold IMAX, but sold it. All very small dollar amounts.
bogleheads, don't knock state lotteries. They helped defund the mafia.

User avatar
Schooly D
Posts: 256
Joined: Mon Jul 23, 2007 2:00 pm
Location: North Carolina

Post by Schooly D » Sat Apr 05, 2008 9:45 am

When picking penny stocks or microcaps to invest in, it's important to distinguish between those that are simply passing through penny stock territory on their way to bankruptcy and those that are going concerns and that *may* eventually make money and pay dividends.

The Bridgeway Microcap index fund (BRSIX) specifically avoids the former.

David

User avatar
gummy
Posts: 340
Joined: Mon Mar 12, 2007 2:34 pm
Location: Burlington, Ontari-ari-ari-O
Contact:

Post by gummy » Mon Apr 07, 2008 11:07 am

Alas, my penny stocks (chosen to reflect the skyrocketing of coal prices) have risen so much that some are no longer "penny" stocks. :?
http://finance.yahoo.com/q/cq?d=v1&s=gce.to%2bwtn.to

penny-wise
Posts: 1
Joined: Wed Feb 24, 2010 8:48 am

hi

Post by penny-wise » Wed Feb 24, 2010 10:32 am

i had several times invested in penny stocks and by subscribing to various penny stock newsletters i have gained much as they provide regular updates
[banned sig spammer]

User avatar
Random Musings
Posts: 5209
Joined: Thu Feb 22, 2007 4:24 pm
Location: Pennsylvania

Post by Random Musings » Wed Feb 24, 2010 10:47 am

i had several times invested in penny stocks and by subscribing to various penny stock newsletters i have gained much as they provide regular updates
I guess that Money article has brought some new spammers to the arena. Hopefully, penny-dumb will be removed.

More importantly, Gummy hasn't posted in quite a while.

RM

User avatar
ryuns
Posts: 3478
Joined: Tue Aug 07, 2007 6:07 pm
Location: Sacramento, CA

Post by ryuns » Wed Feb 24, 2010 4:26 pm

Random Musings wrote:
i had several times invested in penny stocks and by subscribing to various penny stock newsletters i have gained much as they provide regular updates
I guess that Money article has brought some new spammers to the arena. Hopefully, penny-dumb will be removed.

RM
Disagree. For some reason I really like the signature line:

__________
stocks

It's impressive in its elegance.
An inconvenience is only an adventure wrongly considered; an adventure is an inconvenience rightly considered. -- GK Chesterton

jimlandis
Posts: 77
Joined: Fri Nov 30, 2007 3:16 pm

Post by jimlandis » Wed Feb 24, 2010 5:24 pm

Check out McClatchy .. MNI ..
$.35 - $6.28 .... 52 week range.

Sure they could have been sold, etc. like other dailies.
A $1,000 risk would have been a very cool gain.

Jim

Post Reply