thoughts on investments related to penny stocks
finding the gems.
with all these penny stock scams i guess one can never do enough research. but with all the bad reputation surrounding penny stocks there must be some hidden gems out there or at least one every once in a while. i guess finding such gems would make researching these stocks worth the time and effort. the conclusion is that having found an attractive investment which is provably not a scam you invest in it for the long run.
counting on scams to be bad.
on the other hand, undoubtedly human nature can be depended upon to help create many more such scams for years to come. at the same time, penny stocks, thanks to their reputation, are likely not even considered by many sophisticated investors as worth their time. these penny stocks may be counted on to eventually reach a true value of zero. the conclusion is to then that it may be a good idea to short the stocks of scammers.
finding the good in the bad
a final possibility is that even though a penny stock may be a scams, its true value is not zero. when the scam is uncovered, the price may be driven to zero and the conclusion is that it may be a good idea to gather the remains of a proven scam stock.
the possible upsides.
i don't know specific examples, but i imagine an honest penny stock can grow exponentially to many multiples of its penny stock price. an added benefit is that with small amounts of money a large percentage of the company may be acquired, and control over the business may be exercised. but then again, if someone really has a good idea and starts a company are they not more likely to find alternate sources of funding? for shorting: if there are indeed enough scams to gain even small sums from, research and investment in penny stocks could be profitable for a long time horizon. new ventures by past scammers suggest that spotting targets to short may be as clear as day.
the downside.
buying a promising penny stock after doing adequate research may take years to pay off. on the other hand, the company may continue to add value and grow over the years. in the short run there may be a lot of volatility for which patience is necessary. of course it may turn out that what seemed like an honest penny stock is actually a scam, for which good research is important. the downside of shorting the stocks of scammers is that in the short run the public may be buy into the scam and drive the price up. this would require patience and a sufficient amount of cash to maintain the short position. i have never bought or sold any type of securities, but have heard that shorting penny stocks is difficult. if the difficulty is mostly in the timing then this should not be a major obstacle, since the scam will eventually reach its true value of zero. |
