Nanalyze

18 Reasons Not to Invest in Penny Stocks

We first started the Nanalyze forums 12 years ago because nanotechnology sounded like one of the most exciting technologies we could imagine and we wanted to figure out how to make money from it. Along the way we learned many things about investing, technology, and over-the-counter (OTC) stocks or as they are more often called, penny stocks. For our readers who are institutional investors or sophisticated retail investors, you can stop reading now. Institutional investors already know not to touch penny stocks with a ten foot pole.

The primary reason for this is that these “companies” that trade as penny stocks are not held to the stringent reporting standards that companies on major exchanges are. Consequently, the entire penny stock space is rife with pump-and-dump scams or incompetent management teams who drive their companies into the ground while issuing shares left and right to keep them afloat.

In the early days of Nanalyze, we were a lone voice that warned retail investors, many of whom were retirees, against the dangers of investing in penny stocks. Many of these investors have thanked us over the years for saving them money. Fast forward to today and we still feel strongly about warning investors not to invest in penny stocks. While articles on penny stocks and OTC companies make up less than 10% of the nearly 500 articles published on Nanalyze to date, we always keep our ears open for any penny stocks that may be trying to “commercialize disruptive technologies”.

While we have been adamant about being vocal in this respect, it has come with a price. We’ve have been threatened with lawsuits, threatened with  physical harm, and had every criticism you can think of thrown our way. One thing we will not do is be intimidated or stop alerting investors about the dangers of penny stocks. Even the SEC warns people about penny stocks.

We thought this would be a good opportunity to take a look back through the list of penny stocks we’ve highlighted over the years to see just how they have performed over time. What better way to justify our continued efforts to warn investors about what not to invest in. Let’s take a look at 20 penny stocks we’ve highlighted in 2014-2015 and see where they are today.

Company Disruptive Tech Article Date Article Today Ret
Sigma Labs (SGLB) 3D Printing 13-Jul 0.068 0.042 -38%
Champions Oncology (CSBR) Oncology 13-Aug 1.14 0.3 -73%
Quantum Materials Corp (QTMM) Quantum Dots 13-Sep 0.07 0.11 +57%
Nano Labs Corp (CTLE) Nanotechnology 13-Sep 0.045 0.0002 -99%
Liquidmetal (LQMT) Materials 13-Oct 0.14 0.132 -6%
American Graphite Technologies (AGIN) Graphene 13-Nov 0.194 0.0221 -88%
Makism 3D Corp (MDDD) 3D Printing 13-Nov Suspended -100%
Tauriga Sciences (TAUG) Nano-Robotics 13-Dec 0.015 0.007 -53%
Industrial Nanotech (INTK) Nanotechnology 13-Dec 0.018 0.0067 -62%
Rainbow Coral Corp (RBCC) 3D Printing 14-Jan 21.5 0.18 -99%
Bio Matrix Scientific Group (BMSN) Oncology 14-Mar 0.006 0.0002 -97%
Nanoantibiotics (NNAB) Nanotechnology 14-May 0.29 0.06 -79%
3D Pioneer Systems (DPSM) 3D Printing 14-May 0.39 0.0102 -97%
Regen BioPharma (RGBP) Stem Cells 14-Sep 0.38 0.106 -72%
Manhattan Scientifics (MHTX) Nanotechnology 14-Nov 0.1185 0.0601 -49%
Principal Solar (PSWW) Solar 15-Feb 1.24 0.15575 -87%
Pharmacyte Biotech Inc (PMCB) Oncology 15-Apr 0.165 0.0695 -58%
Propanc Health Group (PPCH) Oncology 15-Jun 0.093 0.028 -70%
Car Charging Group (CCGI) Electric Vehicles 15-Sep 0.32 0.37 +15%
Drone Aviation (DRNE) Drones 15-Oct 0.152 0.07125 -53%

 

So aside from QTMM and CCGI, 18 of these 20 companies would have lost you money. An equally weighted basket of each penny stock acquired at the time we published each article would have lost -57% to date. A quarter of these penny stocks would have lost over -95% of their value so far. Would you really want to take a chance and invest in a penny stock when you see how this sample of 20 penny stocks has fared over time?

In fairness to QTMM and CCGI, we took a look at what they’ve been up to since we first wrote about them. QTMM has just closed a recent financing round and expects to achieve “significant revenues starting later in 2016“. CCGI just announced results for the first half of 2015 yesterday and has managed to reduce their losses by nearly a half. We have no idea why they didn’t just tell everyone their 2015 yearly results instead of just for the first half of the year. As for these two companies, the jury is still out.

So why don’t we just short all penny stocks and make a fortune? Well firstly, we will never short any penny stock or OTC stock discussed on this site to avoid conflicts of interest. Secondly, you don’t want to be short one of these volatile penny stocks when a “public relations campaign” takes effect and the price momentarily skyrockets (typically the pump before the dump). Thirdly, it’s often difficult finding a broker who will lend you shares of penny stocks to short.

Robo-advisors like Betterment provide a low-risk way to invest that we recommend for beginner and advanced investors alike. You can open an account with no minimums and contribute as often and as much as you'd like. Don't have cash on hand to invest? You can roll over your 401(k) or IRA in just 60 seconds. Click here to get started.

  • guy de byl

    aren’t most of the lithium stocks discussed in a previous article penny stocks? And they’ve been making me money.

    • Nanalyze

      Your approach sounds like speculating, not investing. Investors will be left holding the bag inevitably wondering where their savings went. People who chase prices will inevitably end up buying at the top then holding until “it takes off again” and lose their investment. It’s good to hear you made some money but be aware that you are speculating when you buy penny stocks, not investing. Buyer beware.

      • Relly Rell

        It seems strange to try and draw that distinction given the fact that we’re talking about penny stocks.

        • Nanalyze

          You’re right. Much more interesting things to discuss… like legitimate technology startups that we might actually want to invest in.

  • Chad

    While I respect the writer’s position, I have both built and run penny stocks, invest in and help finance them as well. My greatest success was a turnaround I led where the stock moved from $0.12 to approx. $1.50 share based on legitimate fundamentals. Get closer to what is going on and I believe you will understand the formula here..

    I just released my new book, call the Penny Stocks Bible; An Insider’s Proven Formula for Building and Picking Winners.

    I hope my insights help you along your way..

    Best of luck to all!

    Rgds,

    Chad

  • Will.

    If you have a link to that book Chad, I’d like to see it…

    W.

Fintech doesn’t have to be boring

Get our unique take on all things tech once a week.