In the video above Timothy Sykes does an excellent job describing how to spot a stock scam from a legitimate investment opportunity. As Timothy explains, there approximately 8500 of these “scam stocks” trading on the OTC Bulletin Board that utilize “pump and dump” strategies to drive the share price of their stock up.

Please note that the marketing tactics of these companies may be overly aggressive, but for the well-informed investor, trading these types of stocks can be lucrative if you know what to look for. As Tim further describes, he has no qualms investing in what he considers horrible companies, but plays the odds when noticing a penny stock jump from 100-200%.

One must always take into consideration that the hot penny stock that was just recommended was most likely aimed at individuals who are susceptible to impulsive buying tendencies based on reading “jazzed up” marketing materials. Those individuals have not done their due diligence and read the fine print contained in the marketing materials. Other times, a chop shop will pump a promoted stock to prospective clients to raise the share price on sparsely traded penny stocks over the telephone.

Always remember that a stock being promoted (by e-mail, message boards, cold calling) is not putting money back into the company, research and development, staff augmentation, mergers and acquisitions, etc. The independent marketing firms pumping these stocks are making out like bandits! Always do your research before moving forward with a “marketed” investment.

Kind Regards,

Nicky Papers

Tags: cold calling, hot penny stocks, independent stock marketing companies, nicky papers, otc bullitin board, penny stock scam, penny stocks jump, pump and dump

This entry was posted on Tuesday, May 5th, 2009 at 9:44 AM and is filed under Business & Investments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.