Why I Investigate Penny Stocks

Some may wonder why I investigate and write about penny stocks so aggressively. I have been accused of pursuing this line of research simply to make myself look good so that I can feel important. I do not think that is the case because, as those who know me will attest, I always feel important. In fact, I have occasionally been accused of being a bit of an egotist.

Others may believe that my sole purpose in investigating over-the-counter stocks is to enrich myself for short selling. I do not deny that I make money by selling short OTC stocks. I do not, however, write about all the stocks that short, nor do I short all the stocks about which I write. I started writing about OTC stocks before I even knew that it was possible to short sell them. And I am not convinced that my commentary on the stocks about which I write has any effect on the market price.

The main reason I like to write about penny stocks is because I feel that I can offer something (independent, if not unbiased research) on companies for which there is little information available. Perhaps in writing about such companies I can persuade a few people to avoid speculating in such companies and to choose more appropriate and more profitable investments. It was only with substantial research and a bit of luck that I myself avoided losing a lot of money in a pink sheet stock 2.5 years ago, when I first started investing in individual stocks. If I had not chanced upon some pretty amazing negative information from the CEO’s past business deals, I could easily have lost 99% of the money I would have put into that company.

If you invest in anything, you should always do your due diligence. Do not believe that just because a company is publicly traded (or even because it is listed on the stock exchange) that it is a worthy investment or even a legitimate investment. If I had relied upon the SEC to protect me when I was considering investing in a penny stock, I would have watched 75% of my money vanish in a fraud and would not feel vindicated when four months later the SEC sued the company (US Windfarming, USWF.pk) and its CEO.

Disclosure: I have no position in any stock mentioned. See my disclosure policy.

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