Friday, June 17, 2011

Investor Special Reports

Are you a believer in Solar Wind Power? Do you also believe that investing in solar companies is a good thing? Further, do you believe that you might become rich by doing so? Well, think again.

I received one of those "Investor Special Reports" in the mail from a so-called "expert on solar." This was like a 12 page or so newsletter formatted information sheet on this solar wind turbine maker. It was very convincing how they presented the company. The goal was for investors to rush out and by the company's stock. I am sure many people will, or should I say many people will foolishly do so, because this newsletter appealed to their greed.

Personally, I think it is foolish to invest in one stock. Nevertheless, I thought that I would do some research on the stock to see what I could find. The first thing that jumped out at me is that this was a penny stock trading for less than $0.60 a share. Major red flag.

The second major red flag came when I looked at their SEC filings. Their accounting firm had resigned, because they felt that the company was not "going to make it as a going concern." Another major red flag.

As I shifted through more SEC filings, I discovered that the company has $731.00 in cash on hand as of April 2011. Seven hundred thirty one dollars? Are you kidding me? Final major red flag.

Three strikes and you're out!

What is sad is that most people will make their investment decision based on two things.

  1. The price of the stock is so low, then will believe that they can buy a lot of shares and most likely will do so, thinking they can't lose much money.
  2. They will make their decision based on the newsletter without spending a minute researching the stock.
This appears to me to be the new twist on an old classic; the "pump and dump" of a stock. The idea is for the newsletter to bring in the greedy fools. The insiders wait a little while, then dump their stock at a profit. After that happens, then the stock crashes down to probably less than $0.10 and most of the the investors will end up losing over 80% of their money.

Remember the name of my book?

Keep Your Assets. Take My Advice.

If my book title is not more apropos in this situation, then I do not know when it would be.