The Penny Stock Experience

This morning I decided to click on one of those annoying links and remembered fondly of how once upon a time I traded penny stocks . Anybody who tells you that there is a way to beat markets and prove yourself somehow consistently superior, clearly didn't day trade in the 90's. Bigger fools than you can imagine generated better return rates than the most skilled traders and investors of today. In fact, it is not a far stretch to say that a big reason America faces economic perils today is because there are just too many lucky idiots with too much money in their pockets.

The underlying message is that when things are good everybody can get rich, when they are tough even the skilled will starve. History has no mercy for losers, no matter what the circumstances. Conversely, the winners are great even if completely incompetent and undeserving. In times of peril, drastic people are the victims of drastic measures.

It brought back memories of Viragen . This bottom-of-the-barrell biotech never turned a profit in 25 years. Luckily, I made out well playing around with it back in 2004. Was it a news release? A pump and dump? Don't know. Don't care. I never had the pleasure of working in a bucket shop, but felt that the trickle-down effect which was in full bloom that day.

As you age, risk aversion grows, there's no two ways about it. Today, I wouldn't throw a fraction of what I used to on pure spec. The game is different today. I am curious if any of you guys trade pennies or know someone that does? I'd love to hear some tales...

With HFT being such a hotly debated topic, I wonder how far we are from the strange synergy of old-time bucket shops and new school arcades...morphing into one penny pushing monster?

I know many scam artists already do this, but with the sort of uncertainty spikes we've seen over the past year who's to say the Pink Sheets won't revert to their money laundromat mean of a century ago? With reactionary algorithms trading info, isn't the pump and dump, mini-tick, superfast, illiquid, non-transparent world of pennies perfect for today's bucketeers? Isn't this under-the-counter game ready for prime time?

For those who echo my bearish sentiments of us being in a de facto depression, warmed by the illusory quilt of recession/sluggish recovery/new normal, etc...how long before we start seeing the sort of old school stock scams Eddie wrote about not so long ago?

Check out the due diligence on this penny... smell it's yummy aroma, taste the gooey additives, think about how nice it would be, you're getting sleeeeeepy...

Buy from Midas...I'm your buddy.

 

Played with it back in 1998/99 after begging my parents for money (birthday, holiday, and everything else combined) it burned a 12 year old very bad lol. Lesson learned but I still enjoy the occasional dabble on seasonal or pure spec play once in a while. I guess inside I am nothing more than a thrill seeking gambler.

 

Been there, done that. Back in '06 hotstockmarket.com was my home. I still remember names like NDOL, FHAL and so many others. All gone of course by now.

However it was not all useless, because when you look at the big board in comparison, it seems so orderly and "easy." So at least for me it was useful, I just wish I did not play with it with real money...thankfully I had practically nothing back then :)

 

I just had a two thousand percent return trading one stock, CPMCF. Getting into penny stocks was the best thing that I did in college. I started trading in 08, didn't get the returns that I thought were worth the effort and started trading pennies, and I have not looked back since.

I am not cocky, I am confident, and when you tell me I am the best it is a compliment. -Styles P
 

^^^ Nice, company actually struck silver tho and plenty of it, Penny stocks are ready for prime time I keep hearing about many pennys getting a lot of marketing way more than before.

"The higher up the mountain, the more treacherous the path" -Frank Underwood
 

Yea Barboon, but it all but guaranteed that CPMCF will hit rock bottom very soon. That rise is nothing but pure speculation. You have to know when to get in and when to get out. For the aforementioned stock, at one point during last week, volumes were in excess of 80 million, now it less than half that. P/E and any other metric for securities is worthless when you have 2000% returns in such a short period of time.

I am not cocky, I am confident, and when you tell me I am the best it is a compliment. -Styles P
 

I'm a senior right now, started trading pennies two years ago. I've had both terrific gains and horrible losses. Overall, I'm down by a substantial margin. I think the "gambler's mindset" is very prevalent in penny land, i.e. whenever you make money you spend it on trying to recoup your losses. I've definitely learned my lesson -- all of these pinksheet companies are scams. I remember one specifically that was trading at .0002, bought 1,000,000 shares, then they did a 1 for 2500 reverse split a month later. Lost that 200 bucks pretty quickly. I've also had a 1500% gain in 3 weeks, but not enough to cover the losses, which always hurt more than enjoying the gains. It's all pure speculation, news releases, pump & dumps, etc. I won't even begin with the dilution.,,

MKballer
 
yeahright:

I'm convinced two markets that will grow exponentially in the next few years, pot and e-sports. Remember this day...

The day online sports betting becomes legal/starts trading I'm BUYING. I'm usually real conservative on multiples and look for value, but this is a long-term goldmine.

@"Edmundo Braverman" is turning into a real Tim Sykes. I have to say that I've been dabbling in penny stocks lately again too. Not quite the same success as Eddie's, but my 2 BioTech pennies are up quite nicely in the last few weeks and I really believe one of them still has quite a run up to go.

Pennies are fun and can be very profitable, but long term you need to have some sort of an edge to profit on these semi-liquid stocks.

twitter: @CorpFin_Guy
 

@"duffmt6" Nice, but they should have done a little more research. They said the stock has gone from 4 cents to 23 cents in 2014. It's actually never been under 19 cents this year.

@"Gstar88" I use OptionsHouse. Been with them for at least three years now and the platform is fantastic, especially if you're an option trader like me. Low rates and fast, accurate executions. Can't ask for too much more than that.

 

It's only at 48x revenue right now...

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."
 
duffmt6:

It's only at 48x revenue right now...

Is there a serious exit in the future for companies like this? This company is a manufacturer, store operator, distributor, etc. So, it can only grow so fast, and certainly not in any fashion that would justify 48x sales. It's not like some software company that can take on a million users in one day. If they want to get listed on a reputable exchange at some point, do they have to experience a serious crash first?
 

They did $1.3 million in revs in Q3 2013 and have actually been showing steady increase, BUT -

The 48x is actually understated as it's based on yesterday's close. Here's a nice tidbit as well:

GrowLife, Inc. will be held special meeting of stockholders on February 7, 2014, to approve an amendment to the company's Certificate of Incorporation to increase the authorized shares of common stock of the company from 1,000,000,000 to 3,000,000,000.
"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."
 

What would the implications of this be on stock price?

I spoke with PHOT's IR today. If the vote goes through they would get a $40 million investment from CANX USA, which would be huge for future growth and crucial to turning a profit for the first time.

A few other notable things I picked up from the PHOT IR call:

1) Management: Very strong executive team. CEO used to work in Washington DC in regulation, President came from Yahoo/Microsoft, a number of other strong execs at the top of the company

2) There is no other competitor that does exactly what they do, and they are the only company in the space to fully report financials.

3) Strengths: Largest annual revenue and growth in the industry, high demand for market products, only 7 brick and mortar stores with many more on the way depending on incoming regulations. (New Hampshire, Alaska, and a number of other states with legislation in the works)

This seems like a pretty unique way to get in on the marijuana trend, and I am going to let this pullback ride out and get some skin in the game.

Thoughts @"Edmundo Braverman" ?

"I must create a system or be enslaved by another man's." William Blake
 

Growlife on its way back to earth. Trading at 0.21 right now. Eddie - looks like you played this one just right. That CNN article was timely.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."
 

@Eduardo Braverman Unfortuantely can't post links yet but there is a recent detailed and lengthy post on Quora about an alleged P&D scam that you might find interesting.

It's currently the most upvoted post under the question 'What are the most successful scams that consumers are regularly subjected to?'. Here's part of the intro:

I've had personal experience dealing with a pump & dump stock scam. I should point out that the scam hasn't been busted yet and is still ongoing to this day (and is highly profitable.) Several top professional athletes are involved who I will mention. This is actually a Quora exclusive so you're hearing it here first…
 

There is a big shareholder vote on Friday for PHOT on whether or not to dilute shares and bring in a big investment from CANX...that should cause some volatility one way or the other

"I must create a system or be enslaved by another man's." William Blake
 

On top of that, there is a ton of info starting to come around about legislation and votes to be held in the coming future. Apparently the vote for Alaska to legalize could be happening in August or so. With Oregon coming around the same time if I read it correctly.

...
 

Aaaand this is why you don't buy penny stocks:

http://www.forbes.com/sites/nathanvardi/2014/04/10/sec-halts-trading-in…

Trading halted until April 25, and no guarantee it will start again then. Wow. I've traded in and out of it several times over the past 3 months. I've bought it for as little as 9 cents and sold it for as much as 70 cents, all in a 90-day period of time. I've also traded it between 50 and 60 cents at least four times, maybe 5, and more than once in the same trading session. That's normal, right?

Fucking penny stocks. So glad I was out when they stopped trading.

 

Eddie makes...mistakes? I believe my world has been turned upside down.

On a serious note, I dont think I've ever owned a penny stock. I believe I will continue to avoid them for the time being.

 
Edmundo Braverman:

Why can't I sell? Well I was wondering that myself. So I called my brokerage. Turns out the new stock hasn't been delivered yet, and I can't sell something my brokerage doesn't own. Well how long does it take to deliver the new stock? No clue, says my brokerage. Sometimes a couple days, sometimes a couple weeks. Meanwhile the stock works it way back down to a penny a share while I'm waiting. So I tell my brokerage I want to short the stock and wait for my shares to be delivered to cover. No can do. Can't short anything under three bucks a share.

Why is that? I have never heard of brokers dealing in physical certificates unless they are requested. Was this Reg T?

"He that hath a beard is more than a youth, and he that hath no beard is less than a man." ― William Shakespeare, Much Ado About Nothing
 

Haha, oh the joys of penny stocks!

My only penny stock story stems from the classic too-greedy-it-will-go-even-hire-EFF-it-tanked situation. Also bought a stock from an under represented segment, in this case at $0.08. Was feeling super rich as I watched it steadily tick up a bit each day till I was staring at a ~90% gain (including commission) with PLENTY of liquidity. Was the company actually doing ANY better? Absolutely not. Were certain short term sentiments fueling the rise? Absolutely. But 90% in a month and a half just isn't enough! No sir! this was going to be my ticket to the good life-jets, hot tubs, mansions, exotic animals and silk robes. I held strong to my ticket as over three weeks I watched it trend down from my 90% gain to a ~70% loss (plenty of opportunities to jump out along the way with a healthy gain). And there it sits.

What did I learn? When you buy a company that has consistently posted losses and it rises sharply (with no actual changes in the company itself), if it starts to fall, don't expect a rally. It's not coming. Sell.

"I know you think you understand what you thought I said but I'm not sure you realize that what you heard is not what I meant."
 

Sounds like you own some vacant land.that is 50 miles from the nearest road.

Full disclosure, I own land that is at least 50 miles from the nearest road.

Follow the shit your fellow monkeys say @shitWSOsays Life is hard, it's even harder when you're stupid - John Wayne
 

This makes me laugh because it sounds pretty similar to one of my biggest learning experiences.

Two things I've learned through situations like this: 1. Penny Stocks are the equivalent of Roulette at the casino. Gamble away if you want for entertainment, but it's a tough way to make $. 2. You should just assume there is fraud in all "cheap" Chinese stocks. Seriously, don't go to sleep while owning one of these fuckers.

twitter: @CorpFin_Guy
 

Never trade penny stocks... They are like a poison pill. SHIT liquidity most the time,also. Interactive brokers let you short penny stocks, but the fees are high. Only way you can make good moves with penny stocks is to trade using a psychological approach. ie: look for a penny stock that has been traded, with higher than usual volume, wait for the reversal, and short it. Proceed to cover when the volume is still high so you have liquidity coming out, and when traders who initially bought the penny stocks want out realizing they just got merked.

 

In Vegas when you loose at blackjack you continually double down until you win. You can only loose 2 ways, one you run out of money two, the table has a limit.

Follow the shit your fellow monkeys say @shitWSOsays Life is hard, it's even harder when you're stupid - John Wayne
 

Guys.... I'm gonna lose all my fucking money tomorrow if I don't figure this shit out. I don't wanna call my broker. They as weird questions like what street did I grow up on.

"Mr. Perkins poses an extreme risk to the market when drunk."
 
RustyFork:
Working9-5:

Hahaha. No wonder you fail so much at trading.

Nice job changing your post after realizing it was retarded.

The shit stock you're toting is only up 2.2% today (on 2x ADV after a few hours of trading) and still down ~28% from Tuesday. If that's your definition of gapping, then you better retake your Investing 101.

There's a reason why retail investor and retard share the first few letters. You're a prime example of that.

CNBC sucks "This financial crisis is worse than a divorce. I've lost all my money, but the wife is still here." - Client after getting blown up
 
Working9-5:
RustyFork:
Working9-5:

Hahaha. No wonder you fail so much at trading.

Nice job changing your post after realizing it was retarded.

The shit stock you're toting is only up 2.2% today (on 2x ADV after a few hours of trading) and still down ~28% from Tuesday. If that's your definition of gapping, then you better retake your Investing 101.

There's a reason why retail investor and retard share the first few letters. You're a prime example of that.

Classic. And true, for the most part.

"When you stop striving for perfection, you might as well be dead."
 
Working9-5:
RustyFork:
Working9-5:

Hahaha. No wonder you fail so much at trading.

Nice job changing your post after realizing it was retarded.

The shit stock you're toting is only up 2.2% today (on 2x ADV after a few hours of trading) and still down ~28% from Tuesday. If that's your definition of gapping, then you better retake your Investing 101.

There's a reason why retail investor and retard share the first few letters. You're a prime example of that.

I enjoyed my 3%.

"Mr. Perkins poses an extreme risk to the market when drunk."
 
RustyFork:
Working9-5:
RustyFork:
Working9-5:

Hahaha. No wonder you fail so much at trading.

Nice job changing your post after realizing it was retarded.

The shit stock you're toting is only up 2.2% today (on 2x ADV after a few hours of trading) and still down ~28% from Tuesday. If that's your definition of gapping, then you better retake your Investing 101.

There's a reason why retail investor and retard share the first few letters. You're a prime example of that.

I enjoyed my 3%.

What ticker is this? I thought you were all about SSN?

 
peinvestor2012:
RustyFork:
Working9-5:
RustyFork:
Working9-5:

Hahaha. No wonder you fail so much at trading.

Nice job changing your post after realizing it was retarded.

The shit stock you're toting is only up 2.2% today (on 2x ADV after a few hours of trading) and still down ~28% from Tuesday. If that's your definition of gapping, then you better retake your Investing 101.

There's a reason why retail investor and retard share the first few letters. You're a prime example of that.

I enjoyed my 3%.

What ticker is this? I thought you were all about SSN?

SSNI I mostly made that thread because it started dropping after I bought and it was my attempt to move the market. And I thought it would be funny. I was gonna post a pic of a thigh gap too, but I forgot. But everything worked out okay.

"Mr. Perkins poses an extreme risk to the market when drunk."
 
RustyFork:
peinvestor2012:
RustyFork:
Working9-5:
RustyFork:
Working9-5:

Hahaha. No wonder you fail so much at trading.

Nice job changing your post after realizing it was retarded.

The shit stock you're toting is only up 2.2% today (on 2x ADV after a few hours of trading) and still down ~28% from Tuesday. If that's your definition of gapping, then you better retake your Investing 101.

There's a reason why retail investor and retard share the first few letters. You're a prime example of that.

I enjoyed my 3%.

What ticker is this? I thought you were all about SSN?

SSNI
I mostly made that thread because it started dropping after I bought and it was my attempt to move the market. And I thought it would be funny. I was gonna post a pic of a thigh gap too, but I forgot.
But everything worked out okay.

brb, calling SEC.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."
 
RustyFork:

Guys....
I'm gonna lose all my fucking money tomorrow if I don't figure this shit out.
I don't wanna call my broker. They as weird questions like what street did I grow up on.

hey bro, don't give up, try harder tomrrow, #YOLO

 
KaySpectre:
RustyFork:

Guys....
I'm gonna lose all my fucking money tomorrow if I don't figure this shit out.
I don't wanna call my broker. They as weird questions like what street did I grow up on.

hey bro, don't give up, try harder tomrrow, #YOLO

yolo2late

2late4dis

"Mr. Perkins poses an extreme risk to the market when drunk."
 
RustyFork:
KaySpectre:
RustyFork:

Guys....
I'm gonna lose all my fucking money tomorrow if I don't figure this shit out.
I don't wanna call my broker. They as weird questions like what street did I grow up on.

hey bro, don't give up, try harder tomrrow, #YOLO

yolo2late
#2late4dis

I do not remember posting this. Oh god, I went out in public in that condition.

"Mr. Perkins poses an extreme risk to the market when drunk."
 

If you're an idiot investor,

  1. Listen to Cramer, halfway decent contrarian indicator (do the opposite of what he suggests most of the time).
  2. Look at Fous Alerts or Tim Sykes. If you have a minute-ish of free time during the day you can put an order on one of their trade alerts with a trailing stop and sell limit, basically money printer on autopilot. 3.I hear the yield on US Treasuries is pretty appetizing. Around 2% on the 10Y.
 

Penny stock investing is a sophisticated form of gambling.

"He that hath a beard is more than a youth, and he that hath no beard is less than a man." ― William Shakespeare, Much Ado About Nothing
 

LMAO penny stocks. We are bankers. We only buy stocks that cost more than $100 per share. Now get the fuck out.

-------------------------------------------------------- "I do not think there is any other quality so essential to success of any kind as the quality of perseverance. It overcom
 

Highly unlikely you can short a penny stock - it'd be very difficult to get the borrow.

I know a guy in Canada who pulls down 7 figures using a list of grandmothers and mass-sending "confidential" earnings report to the "wrong" fax number for a flat fee for pump-and-dump schemes. Of course, the downside is that he has interpol and FBI warrants open for his arrest, and can't fly in to or over Europe or the US...

 

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