Google as a Penny Stock Research Tool

Google can be a wonderful tool for researching potential penny stock investments.  Penny stocks are small, unproven companies that tend to trade outside the major exchanges and at a low share price, usually under $5.

Penny Stock Fever

There is an affliction called Penny Stock Fever (PSF) that is extremely contagious and can be dangerous if left untreated.

Every now and then, I will get a call from a friend or relative, excited about a hot penny stock tip they have received and they want my opinion.  It is always the same, their friends or co-workers have caught the fever and they have bet the farm on a company that is about to:

  • cure cancer or some other dreadful ailment
  • hit gold or other precious metal or mineral
  • strike oil
  • develop a new technology that will revolutionize our lives
  • be granted a patent on the best thing since sliced bread
  • corner the market on shipping pallets
  • … yadda yadda.

Oh, and they are MAKING A KILLING!

There is going to be big news and it will break any day now.  The news is never breaking on any particular day like next Thursday or April 15.  The exact timing is vague and this is important and intentional. Any day now, creates the tension and uncertainty needed for a call to action.  That call to action is to buy now before the news breaks (it is being released any day now ya know.)  They don’t want to miss out.

My standard response when asked about penny stocks is this:  “Penny stocks are speculative investments and people should only invest the amount of money they would be comfortable losing in a casino.”

But, people in the grip of PSF can be hard to dissuade so my new approach is to direct them to Google to do a bit of research before making their decision to invest. It is easy to do and you don’t need to leave the comfort of your own home.

Google as a Penny Stock Research Tool

Here are the steps:

  1. Use Google to search for the company and review the material on their corporate website.  They should have information for investors, including annual reports, press releases (ignore these), financial statements, annual meeting information etc.  If the company does not have a website that offers this material, you can continue to search through the various regulatory bodies to find official filing information, but why would you?  If a company cannot even scrape together $10 and the services of a teenager to create a website for them, you need to question the future potential of said corporation.
  1. Locate the address for the head office and other key addresses for the company.  Using Google maps, find these addresses and take a good look around using Street view. If you are not familiar with street view, here is a short video with instructions.
  1. What do you see?  Does it look like this:not a good sign messy money

 Or this?

 

not a company head office messy money

Or how bout this?

 

a swamp messy money

 

If so, don’t feel that you need to go any further.

  1. If you are not yet discouraged, the next step is to gather some information on the officers of the company.  This information should be available in the annual report.  Google the officers names and see what background information you can gather about these people.  Have they served on the boards of 23 other penny stock companies?  Have these companies all gone bankrupt, disappeared or otherwise become defunct?  Also, take note of where the company’s officers reside.  Is the CEO living in the south of France/Bora Bora/Kathmandu but the company operates in North Dakota?  Isn’t that curious?  Maybe they conduct most of their business via Skype?  How very efficient of them. Can’t find any at all on the company officers? That is even better.

If none of these things can persuade you not to invest, then your PSF is beyond treatment and good luck with your investing endeavours.

Updated to add:  I have done this research – and I can tell you that I have been shocked by what I have found.

Photo credit: Flickr Dagny Mol

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