From: keith@iscp.Bellcore.COM (Keith Hawkins)
Subject: Re: penny-stocks
Reply-To: keith@iscp.Bellcore.COM (Keith Hawkins)
Organization: Bell Communications Research (Bellcore)
Date: Thu, 17 Dec 92 21:21:28 GMT

In article <v3m2h!f@rpi.edu>, floydb@rpi.edu writes:
|> In article <BzDurE.7IK@news.cso.uiuc.edu>
|> cs101a64@ih-nxt09.cso.uiuc.edu (cs101 student) writes:
|> >In article <1992Dec16.223532.9269@rose.com> andrew.delic@rose.com
|> (andrew  
|> >delic) writes:
|> >> I'm new to investing and 'playing the market' - and I recently
|> bouught a 
|> >> pile of shares which are penny-stocks.  My financial advisor told
|> me he
|> >> felt 'very comfortable' with this stock.

I would be cautious of any finacial advisor who recommends penny-stocks
as one's
initial investment in stocks.  Penny stocks are quite risky by nature. 
There
are plenty of companies which are less risky than penny stocks which
still
offer a nice potential for gain.  I believe there is a point beyond
which
the risk far outstrips the potential reward.  Many penny stocks exists
beyond this point.  I wouldn't hold more than 1% of my total porfolio
in penny stocks.  I personally stay away from them completely.  I'd
rather
by lottery tickets.  At least then some of my losses will help the
elderly!!


|> >> 
|> >> I found out (after buying the stock) that penny-stocks are
|> extremely
|> >> dangerous and very risky.  I went for another visit to my
|> advisor,
|> >> and he re-assured me that this company has earnings, etc, etc.
|> >> 
|> >> Should I be feeling safe with my money now?  After all, I am
|> dealing
|> >> with a reputable company and a professional advisor who is in tune
|> with
|> >> the market and knows what's going on and whats coming up, etc.
|> >
|> >DUMP THE PENNY STOCKS AND YOUR ADVISOR!  You should probably file a 
|> |> >complaint about your advisor and a lawsuit for any losses.  Your
|> advisor  
|> >may be the company's way of dumping stocks it does not want or
|> he/she may  
|> >be trying to inflate commissions.  Obviously, your advisor did not
|> inform  
|> >you of the risks.Then read some good books on investing.  
|> 

Don't bother with the lawsuit stuff.  Its cheaper to just cut your
losses
(or take your gains) and move on.  Don't waste your time and any more
of your money.  One has to know when to pick one's battles in this
world.

|> 
|> IMHO, The alarmist reaction of 'cs101 student' should be taken with
|> a
|> grain of salt as well. Few situations in life are a black-and-white
|> as
|> cs101 would attempt to lead people to believe. Think about if for a 
|> second, Why are there separate markets (e.g. NYSE, AMEX, OTC, Phil,
|> Tor.)?
|> 
|> Each market has its own requirements that must be met before a stock
|> is
|> "listed". Some stocks may be listed on multiple markets, though they
|> |> might have a primary arena. NASDAQ may evolve into a sort of
|> 'after-hours'
|> market but this is another story...
|> 

Yes.  And penny stocks are those which don't meet any of the larger
exchanges
criteria.  They are the rejected ones!  Also, many of the penny stock 
exchanges themselves are being examined for being centers of
unscrupulous
activity.

|> As an investor you have the right to receive an up-to-date
|> prospectus
|> (primarily for recently issued stock) and/or any available annual
|> reports,etc.
|> You should review this material and any other material you feel is 
|> important before investing in a stock, but even more so, before
|> investing
|> in 'thinly traded stocks'. What is the average daily volume of the
|> stock
|> you invested in? Was you trade the only trade in the stock for that
|> day?
|> 
|> Risk has many faces, and some of the books mentioned most likely
|> discuss
|> various kinds. In addition to 'fundamental analysis' of a company's
|> situation
|> you might need to look at the market for its stock (e.g. trading
|> history,
|> volume, high's, low's, etc.). Penny stocks may in fact be readily
|> effected
|> (price) by one or more significant trades (e.g. insiders, large share
|> holders).
|> These factors may play a role in your comfort level, to the extent
|> that you
|> probably will not know what may significantly effect the price of the
|> stock
|> until after it has happened, advisor or no advisor.

It is often much harder to get this kind of information about penny
stocks.  Thus
making informed dicisions for trading in these issues is much more
difficult, adding
to the level of risk.  Also, the thin trading nature means its harder to
offload
this stocks should some bad news arrive about the company, or whatever. 
You might
get more enjoyment out of a day at the track or a night at Atlantic
City.
"But that's gambling!" you say.  So are penny stocks!  Much less
investment
prospects in the penny stock arena.

|> 
|> With respect to your advisor, its is good advice (often given advice)
|> to keep
|> in mind that no matter what is recommended the advisor only make
|> their income
|> on trades. If you have serious concerns regarding the advisor you
|> might try
|> contacting other 'market makers' in a particular stock; you could
|> post more
|> detailed information to the list; you could contact the SEC inquiring
|> about
|> your advisor, his company, and the stock (e.g. any investigations
|> on-going...)
|> 

This is best done before one has bought in.  Afterwards... might be just
as well
to get out, call the cost your "tuition" at Hardknock University School
of
Investing, and move ahead with some valuable experience gained.

|> I wouldn't "dump" your advisor or his company cs101's advice alone,
|> especially
|> if you approached the company looking to specifically invest in
|> penny-stocks.
|> They may be taking advantage of you otherwise, but regardless, it is
|> your 
|> money and you ultimately are responsible for what is bought and sold
|> and when.
|> 
|> 2 cents

2 cents will get you 300 shares of this hot company I'd like 
to talk to you about.....  :-)

|> 
|> barry
|> 
|> 


-Keith