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Wall St. Eavesdropper
How to spot message board scammers
By Jeff Clabaugh, CBS MarketWatch
Last Update: 11:19 PM ET May 5, 1999
NewsWatch
If you spend a little time reading the stock message boards (like I do for
another MarketWatch column called All Aboard!) you quickly notice
several things:
There are a lot of very enthusiastic traders, a lot of misinformed investors,
some people who think they know a whole lot and many people who
really do. And there are those who try to use those message boards to
manipulate a stock's performance.
Reading and even participating in these boards can be a good thing.
Bouncing your ideas around with others who share your investment
choices can help you invest smarter. But if you're going surfing, bring your
shark repellent.
Stockhouse.com has a dispatch posted called "9 Red Flags That Identify
online Message Board Scammers."
While some of the points may sound like common sense, you'd be
surprised how easily you could mistake a scammer's enthusiasm or disdain
for a stock for objective investment knowledge. That said, here are
Stockhouse's red flags:
1
Someone who hyper-posts on only one stock
2
Someone who uses multiple identities
3
Someone who repeatedly attacks or belittles others on a stock's
message boards
4
Someone who emerges as the stock's moderator, or leader of the
discussion group
5
Look for the poster with a short history in their profile who suddenly
shows up during a stock run up and appears to know "all about" the
company
6
Someone who is nearly always the first to respond to company
developments
7
Someone who continuously hints at upcoming company
developments, unreleased company news, unannounced contracts
and forecasts discoveries in natural resource exploration stocks
8
Someone who hypes the company during the run up and then
"changes" his mind and begins attacking the company, the company
insiders and the project
9
Someone who goes out of their way to find bad news about the
company and makes a "case" out of it
Good message boards tend to develop a feeling of community and a lot of
the big message boards do a descent job of policing themselves. Some
put unwanted posters in "the box" or "label" them as trouble makers.
Others post warnings about individuals of questionable motivation. Read
the full story
Looking for rumors?
It seems a bit hypocritical to follow the preceding item with one about a
website that posts rumors. But you know the saying. "Buy on the rumor.
Sell on the news."
Getting in when the rumors are starting has made many investors rich. It
has also cost many investors their investments when those rumors never
pan out. But for those smart enough to do their homework before
submitting a buy order, a web site called ProfitPicks.com posts a list of
what it calls Rumor Plays; publicly traded companies that have been
inching close to big deals.
For instance, a company called Evolving Systems
Inc. (EVOL: news, msgs) gets a 2 week target
price of $10 a share because ProfitPicks says the
Colorado-based based telecom software company
is rumored to have many deals in the works. In
addition, second-quarter earnings are expected to
shatter expectations with recent contracts, lawsuits
cleared up and big buying expected.
ProfitPicks puts a 1 week target price of $25 a
share on a company called Mastech Corp.
( MAST: news, msgs), which releases its
earnings report Thursday and is expected to
surprise. ProfitPicks says the Pittsburgh based
IT services company is already on a steady rise
with strong recent buying.
LCS Golf, Inc(LCSG: news, msgs), a holding
company that owns Golf Universe.COM gets a one
week target price of $5 a share because
ProfitPicks says it broke a resistance level and
market makers and institutions are rumored to be moving in this week
with shorters expected to start covering furiously.
And ProfitPicks puts Sagamore Trading Group, Inc ( MORE:
news, msgs) on its Rumor Plays list. It says the company, which provides
information, execution systems and office space for day traders, is
expected to release two websites this month and is starting to hire top
engineers to work on them. It says huge buying is expected within the next
few weeks with a strong uptrend likely to start. ProfitPicks puts a one
month target of $25 a share on Sagamore. Read the full story
Peapod sprouting?
Peapod (PPOD: news, msgs) had such great promise; taking the weekly
trip to the grocery store off of our list of chores. But the online grocer and
its competition have not been great successes.
There is an upbeat posting about Peapod by editor
Matthew W. Ragas on RagingBull's web site
though in which he still sees the company's
potential. Ragas confirms things aren't well for the
company right now.
Sales slipped for the first quarter and its losses
widened. Ragas says Internet investors are
comfortable with accepting large losses if there is
top line revenue growth but Peapod's results
provide neither.
Why so upbeat about the company then? He says
Peapod has changed its business model, is making new deals and is
poised to be more than just a grocery delivery service.
Old Peapod took grocery orders over the Internet, then went to a local
grocery store, bought the groceries and delivered them. That put the
company at the pricing mercy of the grocers they'd partnered with. New
Peapod is building its own warehouses from which it can fill those orders.
Ragas says that will be incredibly more economical. But the distribution
centers aren't cheap. The cost will mean a loss at each facility for at least a
year.
Maybe more than cutting the costs of delivering groceries, Ragas is
upbeat about how Peapod and its rivals can grow the business in new
directions with things like delivering video rentals, ready to eat meals and
dry cleaning services. Peapod, he says, did just announce a partnership
with Walgreens to distribute its over-the-counter health and beauty
products to its San Francisco customers. And by the way, Peapod does
have customers. Ragas says being the first in the business is a big
advantage on the web and Peapod has already amassed 100,000
customers. Read the full story
Itching to invest
Biotech breakthroughs can be a boon or a bust for a company's stock.
And investors are always looking for biotechs with some hot new
technology in the pipeline. Problem is, even if it works in the lab, There
are still clinical trials and government approval to go through.
The long, drawn out process can play havoc with a stock's price. Take a
look at a two year chart on a biopharmaceutical company Xoma Ltd
(XOMA: news, msgs).
It began Phase II trials of a psoriasis drug in April of 1996 and has since
seen its stock price gyrate between 8 and 1 1/2.
It's time may be coming though. This week's
biotech update at MarketMavensReport is by Jim
McCamant of the Medical Technology Stock letter
and he says Xoma and Genentech (GNE: news,
msgs) have extended their collaboration to develop
their humanized monoclonal antibody, hu 1124, to
treat psoriasis through Phase III trials.
McCamant says the two companies have poured
$34 million into developing this compound through
Phase II trials over the last two years, and plan to
report the successful results at the Canadian
Dermatology Association's annual meeting this
summer.
Xoma and Genentech, he says, also plan to meet with the FDA later this
month to set up Phase III protocols. Xoma, which ended Wednesday
trading at 3, is, according to McCamant, a buy under 4. Read the full
story
Banner deal
Where's the money on the Internet? Selling stuff. And selling your space.
And those banner ads can mean big money. They can also mean no
money, but a big business deal nonetheless. It is called barter advertising,
and Inter@ctiveWeek's website quotes the boss of one company
involved in it as saying banner services are emerging as the next pervasive
Web service that will help define small business activities online.
Inter@ctiveWeek Online's Steven Vonder Haar writes about a company
called SmartAge, which defines itself as a provider of systems that allow
small businesses to exchange banner advertising space. Haar says
SmartAge is launching a partnership with IBM to expand promotion of its
barter advertising service.
Here's how Haar says it works. IBM's business services group gets to
promote an IBM branded version of the SmartAge barter service to its
small business customers and it gets a share of advertising space that
SmartAge collects as a commission for providing the barter system. IBM
can then sell that space to other advertisers.
Haar says the deal is expected to help SmartAge accelerate growth of its
barter network, narrowing the gap between SmartAge and LinkExchange,
another barter ad service that Microsft (MSFT: news, msgs) gobbled up
last year.
The race to catch LinkExchange may not take that long. Haar says
SmartAge CEO Bill Lohse claims the company provides barter services
for about 150,000 sites right now and is adding 2,000 to 3,000 sites a
day. He quotes Lohse as saying "Banner exchange is the next big sticky
application on the Web after e-mail and site hosting." Read the full story
Jeff Clabaugh writes for CBS MarketWatch |
