Top Stock Picks For Growth In 2012
Now that the economy seems to be recovering from the recession that began in 2008, smart investors are looking to put their money back into the stock market and ride the economic upturn to a solid return on their investment. The following stocks are top bets … [Read More...]
Buy Penny Stocks Without Getting Conned
Penny stocks can be a great investment and many great penny stocks DO actually exist. However in any walk of life, unscrupulous characters exist that make their living by taking advantage of others. The penny stock market is no different.
The most common scam a penny stock investor will encounter is the “pump and dump”. A pump and dump is a scheme where insiders and other large shareholders look to artificially raise the price of a stock and then sell their shares when it reaches peak value, at which point the stock price will come tumbling back to earth and any outsiders will be out of luck.
Pumpers use a variety of means to artificially increase the value of a stock, below are some of the warning signs that a stocks price may be being artificially inflated in anticipation of a dump.
Spam emails
It’s hard to imagine a legitimate company like Microsoft or GE sending out spam emails trying to drum up interest in their stock. Legitimate companies use legitimate means to communicate information about the company to the public like press releases and advertisements. As with other products being advertised in spam emails, stock tips received in this manner are likely too good to be true.
Major movement; no news
If a stock’s price rises dramatically, or trading volume sees a large increase out of nowhere and no new news about the company can be found there is a good chance the stock is being set up for a pump and dump.
Financial statements don’t jive with market value
If a company only has $10,000 in assets, how can it have $100 million worth of outstanding stock? The best case scenario for a stock like this is that its price is being fueled by rampant speculation, in which case it should be avoided anyway. More likely though the company is the target of a pump and dump scam.
Message board chatter
A lot of investors visit message boards and forums when researching stocks. The trouble with these places though is that on the internet a person can be whoever they say they are. Insiders can flood message boards talking about how great a company is and how much money they’ve made investing in its stock, all the while claiming to be someone they are not. Always make sure to look for a second and a third source of information on any stock you are thinking of buying.
Claims of breakthroughs
A company that has made a legitimate, major discovery likely doesn’t have to worry about finding funding, and they certainly wouldn’t need to raise capital in the penny stock market. If no confirmation or legitimate news of any advancement can be found it is likely no actual breakthrough has been made, the stock is only the target of a pump and dump scam.
These are just some of the ways that insiders and company officials can conspire to artificially inflate the price of a stock. Be sure to do plenty of research before investing in anything. A great site to get started at is HYPERLINK “http://microcapmillionaires.com/” http://microcapmillionaires.com where you can find a wealth of information on under the radar penny stocks that are actually worth buying.
