Stock Picker Is On-Line Star,
But His Trading Stirs a Storm
By CARRIE LEE
THE WALL STREET JOURNAL INTERACTIVE EDITION
Go to any one of dozens of investing forums on the Yahoo! Web site and there's a good chance you'll cross the path of "Lion Master."
Amid the chatter on the electronic message boards, where investors -- usually cloaked in anonymity -- swap stock picks and investing ideas, the man who goes by "Lion_Master88" has developed a broad following. When he sounds in with stock picks, many people listen -- and act on his advice.
Some followers swear by his stock-picking prowess, but detractors denounce him as a market manipulator who uses the Internet as a vehicle to hype stocks he owns and disparage stocks in which he has short-sale positions, bearish bets that a stock will fall in price.
Finding the Lion
The man behind the roar is Sam Ko, a 27 year-old computer systems engineer from Milpitas, Calif. Mr. Ko doesn't invest for a living, but he says he spends about 25 hours a week managing his own money, as well as the accounts of six friends and relatives. All told, he controls investments valued at $1.5 million.
His fame on-line began modestly. Early this year, he was one of the few participants in a Yahoo! (quote.yahoo.com) message board who was bearish about Fine Host, a food-concession company whose shares later plunged amid financial troubles. That caught people's attention, as did Mr. Ko's performance in an informal stock-picking contest that developed on the Yahoo site.
"If enough people get on the bandwagon, you can see an uptick, and novice investors are getting burned."
Today, Mr. Ko continues to make picks -- mainly on a Web site that grew out of the Fine Host discussion group, called KingFine (www.kingfine.com). But he concedes that he posts his picks on-line not just for the sport of it, but also for personal gain.
Mr. Ko says that in most cases, he purchases shares of his stock picks before going on-line to announce them. That has many other participants in on-line message boards angry. Because of the following he has developed, his picks do seem to have an impact on thinly traded stocks, and that means he can benefit when he makes purchases before unveiling his recommendations.
Pat Brotzge, a systems analyst from Louisville, Ky., who uses on-line message boards, says he used to read the boards several times a day, looking for advice. Now, he feels the advice is often tainted. "I used to think people could not manipulate stocks, but now I believe you can. I've seen it happen many times," he says. "If enough people get on the bandwagon, you can see an uptick, and novice investors are getting burned."
'Join Me and Let's Make $$$'
Mr. Ko justifies his trading practices by saying that others on-line can benefit along with him by buying his stock picks and cashing in on the market gains. He calls the situation "win-win. I'm sharing my knowledge with others and people can profit from it." In the on-line message boards, under the "Lion_Master88" persona, he says: "Join me and let's make $$$."
"Cyberspace disclosure is fairly murky at this time."
-- Louis M. Thompson, National Investor Relations Institute
He also likens the situation to trading by Wall Street brokerage firms around the time that their research analysts make recommendations. But New York Stock Exchange rules bar member firms -- which include all of the major U.S. securities houses -- from profiting from trading in stocks of companies about which they are planning to release research reports.
Louis M. Thompson, president the National Investor Relations Institute, a trade group of corporate investor-relations representatives in Vienna, Va., agrees that Wall Street regulations are strict on the matter of analysts' trading. But he says the rules aren't enforced for on-line stock enthusiasts. "Cyberspace disclosure is fairly murky at this time," Mr. Thompson says.
Many of Mr. Ko's stock picks during the past six weeks have been winners. Consider:
Purchase of research company Progenitor shares was recommended on the morning of May 4 when the stock was trading at around 2. The stock climbed as high as 3 5/8 that day on the Nasdaq Stock Market. It fell back to close at 2 the following day, and has closed between 2 and 2 1/2 each day since then.
Purchase of digital film producer Netter Digital Entertainment was recommended shortly after the market opened on April 14, when it was traded at around 2 7/8. The stock soared to its 52-week high of 6 within 30 minutes on Nasdaq. It closed between 2 and 3 most days since then, before edging above 4 last week.
Purchase of advertiser Leap Group was advised on April 8 when the stock traded between 1 and 3 on Nasdaq. The stock climbed as high as 7 7/8 on April 13. Since then it has closed below 4 on most days.
The sale of shares of marketer Think New Ideas was recommended on April 17, when the stock trading around 34. A week later, it was trading in the mid-20s. Since then it has climbed back above 30.
"I read a lot of materials, study the tech stocks and do a lot of research on-line. I've been trading for 10 years and have a lot of knowledge," Mr. Ko says. Most of his picks are in the technology realm, he says, because that is where he feels his expertise is. He says 90% of his picks are designed to be held for less than three days, sometimes less than a day. Mr. Ko says that he always advises people to do their own research before investing.
Mr. Ko isn't alone in taking advantage of the time sensitive nature of his stock picks. Two other participants in Yahoo's Fine Host message board created the KingFine Web site to track the winning on-line stock picks of Mr. Ko and others. The two are Steve Marek, a 51-year-old Indianapolis psychologist who goes by "Stock_Meister_98" on-line, and Stephen Carnes, a 34-year-old sales representative from Auburn, Ind., who calls himself "Dechtar."
Touting the Lion
Mr. Marek closely follows what Mr. Ko's recommends. "I buy it instantly," he says, and once he makes his purchases, Mr. Marek says he posts word of Mr. Ko's pick on other areas on the KingFine site and on the Yahoo message boards. When Mr. Ko recommended buying Krantor, a merchandise distributor, on May 11, for example, Mr. Marek posted the following on a Yahoo message board: "Bulletin!! Lionmaster88 just made an intraday pick. Hurry, go to kingfine.com."
Mr. Marek says he made $6,000 during the last week of April alone by following Mr. Ko's stock picks. He says Mr. Ko's picks comprise about 60% of his $20,000 portfolio. "I'm not qualified to do stock research. All my losers are the ones I picked myself," Mr. Marek says.
"I buy it instantly."
-- Steve Marek, a creator of the KingFine Web site, referring to his reaction when Mr. Ko makes a stock pick.
"The KingFine site promotes whoever is the best stock picker, and I'm one of the most consistent winners. I think Stock Meister has made a lot of money following my picks, [but] it's up to them to decide what to do," Mr. Ko says. In addition to making picks, Mr. Ko also has written several articles for the KingFine site, a feature called "The Lion's Den."
Mr. Carnes says 80% of his $250,000 portfolio is based on stocks he has chosen himself, but he pays attention to Mr. Ko's advice, too. "Many times I haven't looked to see what [the stock] is ... I just buy it," he says of Mr. Ko's recommendations.
Messrs. Ko, Marek and Carnes became acquainted in Yahoo's Fine Host message board, but have never met face to face. Mr. Marek calls the KingFine site a "mutual admiration society" among the three.
The Lion's Imitators
The KingFine Web site was started in mid-April as a home page hosted by GeoCities (www.geocities.com), an advertising-supported Internet service that provides free space to users, whose sites are organized by subject matter. The GeoCities site initially tracked the goings on at the Yahoo Fine Host message board. Mr. Marek shifted away from GeoCities, expanding the KingFine site and registering its Internet address on April 27.
The Fine Host bulletin board on Yahoo has come to be dominated by sniping over Mr. Ko and his trading practices. Imitators and detractors have flooded various Yahoo message boards, many taking on aliases similar to those of Messrs. Ko, Marek and Carnes, including "Lion_Master98", "Lion_the_King" and "theLYINGMaster."
Mr. Marek is attempting to use this confusion to steer on-line investors to his nascent Web site and its message boards. Messrs. Marek and Carnes have since incorporated the KingFine site.
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