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%|
|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%|
|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.
Here at Nanalyze, we complement our tech investments with a portfolio of 30 dividend growth stocks that pay us increasing income every year. Learn how to build your own dividend growth stock portfolio in our report on Quantigence - A Dividend Growth Investing Strategy - freely available to Nanalyze Premium subscribers.