Penny Stocks Are Terrible Investments, Especially TOPS
By: Akemi Mokoto
Tags: Biotechnology, Penny Stocks, Investing, Stock Market, Stock

Penny stocks, in this case, are stocks that trade at or below $1. And more often than not, they’re trading at such a low price because they are in a dire situation. Maybe the CEO was arrested, there is a massive lawsuit, their under investigation by the Securities Exchange Commission or Federal Trade Commission or shareholders realized they aren’t going to be profitable. And like blood in shark infested waters, this is where the worst and most ignorant types of “investors” start moving in because it looks like feeding time. But in reality, that blood in the water is actually Bromine because penny stocks are not only extremely dangerous, but they’re pretty much useless with zero nutritional value to shareholders. A majority of those trading penny stocks are Timothy Sykes wannabes that think they'll get rich quick off a stock trading for cump change and that couldn't be further from reality.

According to my research, since 2008, 99.2% of penny stocks ended up delisting. Of that 99.2%, only a small handful delisted because they were absorbed by another company. The rest moved to the OTC, went bankrupt or became a private company only. The 0.8% that remain either improved and moved up again or remain penny stocks to this day. And most of those that improved did so within a year of becoming a penny stock, thought much of those returned to penny territory afterwards. Statistically, you are just as likely to profit from a pyramid scheme as you are to profit from sitting on a penny stock expecting it to return to it's higher trading price, according to the Federal Trade Commission. And for all intent and purpose, penny stocks are just as bad as MLM schemes since it's ripe for scumbags to take advantage of a dying stock and gullible clueless investors.

"But it's just undervalued!" I've seen many sad saps say and that couldn't be further from the truth. We could go by PE, PEG, PS or PB and still nearly every penny stock since 2008 that were supposedly "undervalued" still failed. AKG was undervalued and it's gone, and I remember when even I, a new investor at the time, thought it might be worth holding but it's dead. CLDPQ was also undervalued and it's gone. DCIX, BIOA, COHE, CVRS(one I use to like too as a new investor), etc were all undervalued and all are dead and those are just the well-liked Penny's. Now with the exception of DAN, every "undervalued" penny stock has gone the way of the dodo or still suck to this day. Such as DNN, GPL and GAU which have been "undervalued" for YEARS are still in the toilet being unprofitable to shareholders(bagholders).

As a matter a fact, only 6 penny stocks since 2008 have actually gone above $1.00 and stayed above $1:

SIRI

SID

FCEL

AR

AMRN

PLUG

The rest are still pennys or quickly returned to the pennys. And PLUG is very special because it is the only post-2007 penny stock to actually go TO THE MOON and beyond and as a bonus, it did so without EVER having to do a single reverse split in it's 22 year history.

"Their trading at high volume for a reason, loser". Yeah, sure. Based off backtesting and with Survival Bias, Insufficient Sample Bias and a other common backtesting issues eliminated, I can tell you that volume definitely doesn't mean anything. If I were to invest in penny stocks with the top 8 highest average volume every quarter since 2008, my Annualized Return would be 2% with a Sharpe and Sortino Ratio in the negative triple zeros. So high volume hyped penny stocks are still just as bad as low or no volume penny stocks. Admittedly, previously mentioned ex-penny stocks SIRI, AMRN and SID were super hyped penny stocks years ago and they have since improved but that is out of hundreds, if not thousands of penny stocks that have burst into flames since Q1 2008. PTN and GSAT have been extremely hyped in the past and they are still in the toilet with less hype. Remember MAXY? It was super popular for years until 2012 when it went bye bye - stock and company and all. And that was pretty much the last time a penny stock was popular consistently for longer than a 4 consecutive quarters, by the way.

UPZS was the most hyped penny of 2019 after it left the OTC, where it was a famous pump and dump. So where is it now? Kicked off the big boys markets(almost immediately after joining), and back on to the OTC Pink Sheets under the new ticker GMPR where it has been a popular pump and dump, again, since then. How about BIOA? The most hyped penny of 2018! Kicked off the NYSE. FNHI, most hyped for half of 2017 and it went TO THE MOON....not. It was delisted and is sitting on the OTC recently under a new name and a new ticker(WKSP) and still making bagholders, bagholders. HIVE was the most hyped for the other half of 2017, how'd that work out? Had a big IPO in 2014 and it plummeted from there, delisted and was purchased by another company after delisting so bagholders stayed bagholders and couldn't enjoy the spike it would've generated if it stayed listed.

PGUS and MXSG, shared half of 2016 each as the most hyped penny stocks aaaaand they're gone both off to the OTC, are just as unprofitable as they were when they were on the big boys exchange. As a matter a fact, MXSG was popular for 2 years - or in otherwords, there were bagholders for 2 years, before they delisted. I could go on, but the end result is the same. Currently our hyped penny stocks are TOPS, JAGX, SHIPS, NAKD and SNDL and they are all the same as almost every other hyped penny stock that eventually failed. The worst one is TOPS, which holds the record for the most revese splits in US stock market history yet it's going "to the moon" according to bag holders, the misinformed and pumpers. TOPS has been using reverse splits as if it means much but in reality it's like using a defibrillator on a corpse, but don't tell those bagholders that, because they'll get angry. It doesn't have the common decency to die like the others. And, again, all those currently hyped stocks and nearly every penny stock being traded is unprofitable and worthless and only go up when short interest is high or when someone with a lot of money and influence wants to pump and dump.

Now if you're still desperate for riches and are deadset on penny stocks, don't rely on clueless bagholders and pumpers to feed you nonsense, let's look at the facts that improves your odds. If we are looking for "undervalued" penny stock, then the only valuation metric you should look at is EV/EBITDA and compare it to the stocks respective industry. Also, focus on the safest sector where penny stocks have the highest chance of survival: Comsumer Goods. Avoid biotech and pharmaceutical penny stock like you're approaching a bad neighborhood with expensive clothes and a hot wife with you because those types of penny stocks are the absolutely most dangerous and least likely to succeed. Then again, biotech/pharma stocks are the worst to invest in at any price.

Also, check that the stocks ROE, ROEC, Book/Market, Earnings Yield and Expected Return ALL good, but don't hold your breath for that perfect mixture because a penny stock like that hasn't shown up in my search results since 2016 with SGRP, which didn't improve. And before that, PAYS, which actually improved. The other thing you could do is check it's Piotroski F-score, Altman Z-Score and Beneish M-Score and ensure they are ALL acceptable. Right now, KIQ, BHAT and PFIE are a match but I wouldn't touch them since they're penny stocks.

As I said in my previous post, investing is like gambling but it's different with penny stocks. Investing in penny stocks isn't like gambling, it's like handing over your money to a crack head who promised to pay you back. You aren't getting your money back, no matter how long you wait or how optimistic and confident you are in your decision.

So if there is any advice you'd take from me, this this one: Avoid penny stocks because even though it's commonly said that past performance doesn't guarantee future results, when 99.2% of past results show failure, it's pretty safe to assume it won't change now or in the future. And past performance definitely gives you a good idea of the odds of success. Besides that, it's only said because the Securities Exchange Commission requires it by law for some and others say it to protect themselves from a lawsuit.

Happy trading!