You guys have a great knack for finding penny stocks that are financially sound. One stock that you noted, was Tesoro Energy which I recently bought last week. This week, and particularly today, it's up over 140%!
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Why Sure Things Fail
December 7th, 2006
You probably know a few people who got burned by a 'sure thing' on the penny stock market. In fact, you may even be one of them.
I've made a few bucks on sure things in the penny stock world, and I've got burned pretty badly by some sure things, but one thing I learned was to listen to the age old wisdom:
"There's no sure thing as a sure thing."
This is very true in the world of penny stocks because;
- almost every penny stock tries to position themselves to investors as a stock ready to move
- there are hundreds of potential pitfalls, anyone of which could derail the company completely
Based on years and years of experience, with both successes and failures, and seeing things play out with tens of thousands of penny stock traders, I can tell you that sure things will cost you more money than any other types of penny stocks.
There are three reasons for this;
1. Sure things have their potential built into their share price already.
If they are working on a cure for cancer, their market cap may be in the neighborhood of $100 million before they've even generated any significant revenues. If they are successful, you might break even. If they fail, you will lose most of your investment.
2. Sure things focus on the good points.
You don't often hear someone talking about a sure thing, by leading off with their debt, management, workforce, and legal issues. The optimistic story spreads, and from one person to the next the potential upside grows, while the concerns fade away.
3. Sure things gloss over the negative points.
See # 2 above.
So, here's how to make money off a sure thing. Next time a friend touts a sure thing to you, make them a $20 bet that the stock will not be trading higher four months from now.