Tuesday, June 26, 2007

Why I avoid Pink Sheet Stocks

Why I avoid stocks on Pink Sheets!

Companies that trade on Pink Sheets or .PK are very small and very hard to get GOOD information on.

They are selling a story (read my story stocks article for more details on that) and more than likely issuing MILLIONS AND MILLIONS OF SHARES. Why do I say more than likely? Because on the pink sheets the company isn't required to release an annual report (10K) or quarterly reports (10Q).

They can continue on and on without reporting ANY of their financials. And they can continue to release press release after press release talking about what they are "going to be doing" etc..

Is their money to be made in Pink Sheets? YES!!! A stock can move HUGE in a very short time. It can more than double in a DAY! But getting on the right side of things is rare and knowing when to get out is difficult because its not based on anything but the story.
The company has no sales figures to back it up in most cases.

It is very hard to find data on the companies that trade on pink sheets. (Companies that have .PK behind their symbol when researching them on yahoo finance)

Some companies are on the pink sheets just temporary due to missing a financial deadline etc... I still wouldn't buy a company like that until the financial data is back up to date. Their is just too many ways companies can play with their #'s if they aren't reporting.

If you want more information on pink sheets. Their is a website at www.pinksheets.com where you can do more research. Again I don't invest in any pink sheet stocks nor would I suggest it.

The money to be made is trying to strike it rich quick and rarely does that work. Especially over the long term. A lot of the pink sheet stocks are less then a penny so you need to buy 100,000-1,000,000 shares in order to have any type of sizable amount. Yet the company probably has many BILLION shares outstanding. Its like buying a lottery ticket or hoping to strike gold. Its closer to gambling then investing.

With our investing with StockDoubling project we go thru a LOT of research to understand what the company does what its prospects are for the future etc... Could we lose? YES! But we are giving ourselves an opportunity for success based on research and facts and value of the company. NOT BASED ON A STORY OR HYPE!

My suggestion is avoid pink sheets and just look for solid companies that are undervalued and growing.

Have a good day
Steve Hoven

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