Tom Luxsox Coins

Penny Fine

Free Penny Stock Newsletters Can Cost You Everything

Whether you’re a publicly traded penny stock or blue chip behemoth…it’s important to keep an eye on your competition. As Sr. Editor at http://pennystocks.com, I like to keep an eye on other penny stock newsletters. Some are paid subscription, others are mysteriously free.

Yes, normally free things are a good thing. This is not always the case however when it comes to newsletters that pick penny stocks for their subscribers. This week I received an email from Pennypic.com reminding me that their next big pic was coming soon!!!

For those of you not familiar with this free service, Pennypic.com “covers and analyzes active stocks that are typically overlooked by the markets.” Not only that, they provide “small investors” with “authoritative research”. Intrigued, I read on.

Pennypic’s teaser email told me that they had been tracking a number of “huge runners”. So I went in and checked out the background of the 3 tickers in question. One of the company's, they noted, saw its share price climb from 5 cents to over 32 cents in a few weeks – for a gain of over 300%.

I’m not a mathematical whiz, but if you’re going to trust a website that pics stocks, you’d like to think they could figure out percentages. Yes, it’s over 300% - it’s actually 540%. Interestingly, I couldn’t find the stock in question, LPJC. At least it’s not on any North American or European stock markets I could locate.

A second penny stock company they’d been tracking went from $0.0007 to $0.04 cents for “a gain of over 1000% (actually 5600%). EESO trades on the pink sheets. Now, I’m not saying EESO isn’t a good company. But if I take a rudimentary look at their fourth quarter results the company had $832,571 in sales, $127,531 in cash, and $7.77 million in liabilities.

In February the company said it received a letter of intent for a buyout. The CEO noted the acquisition “could be a win-win for our prospective buyer and shareholders.” Huh…could be?

Again, I know Pennypic.com hasn’t selected or profiled either of these company’s for their subscriber base, however, they are tracking them. And it’s important I think for subscribers of any site to know what kind of penny stocks make it through their stock filter and onto their radar.

At the end of the company’s teaser email I read that their next pic could be their first “Multi-Bagger”. In a nutshell, Pennypic.com tracks penny stocks that soar over 5000% but they think their next profiled company could be the first one of theirs to climb more than 200%?

Fortunately I didn’t have to wait long to find out what this “muti-bagger” penny stock was. I received an email after the markets closed on Wednesday directing me to MCTH.OB.

When I’m told a penny stock “could be a potential 1000% gainer or more” – I think it’s important to do some background work. After all, for a stock to soar more than 1000% during the toughest economic recession since the 1930’s…well, it ought to have pretty incredible fundamentals and an interesting chart pattern.

Again, I think all penny stock investors should do a rudimentary background check on any penny stock they’re interested in…let alone one being touted. For the record, MCTH is an employment search company that provides medical recruiting services to the healthcare and medical industries.

The company trades on the OTCBB, has $599,000 in cash and their debt load isn’t immediately available. In March the company announced that full year 2008 revenue climbed 46% year-over-year to $7.06 million. It also posted a net (loss) of $7.54 million.

According to the Pennypic.com report, they think MCTH is an undervalued stock that could get attention from the mainstream very soon! And that at $0.26, MCTH “could be a bargain.” Further, it “could be a recession proof stock”.

Pennypic notes that MCTH operates in an industry that has seen many penny stocks make serious gains. They point to GVHR, JOB, and TBI as examples and have charts to prove it. Sadly, all the red hot charts are from 2002-2005.

Over the last year, JOB, TBI, and GVHR have all seen their share prices give up significant ground. Granted, this does not mean MCTH is going to do the same thing. Correlation is not causation.

That said, penny stocks don’t just trend higher – there has to be a reason for investors to get involved. The stock market is all about marketing and perception. That’s why a lot of penny stock companies put out a large number of press releases, to generate interest.

Speaking of generating interest… Going back to Pennypic.com’s initial email teaser, the company notes “It took us sometime (sic) but we finally found the Next GEM that could turn into a HUGE monster for our subscribers!” Note that they say “we…found”. That’s important. It implies they discovered this stock.

The great British writer, Oscar Wilde, once quipped, that a true friend will stab you in the front. Sadly, I’m not so sure the evidence points that way with Pennypic.com and their latest find.

It’s always important to read the fine print. And Pennypic.com tells its subscribers to read their disclaimer. Sadly, few do. Because Pennypic.com is “often” compensated for issuing their profiles. In the case of MCTH, it received from a third party, two hundred fifty thousand shares of MCTH. Naturally they can sell these whenever they like.

It’s tough to objectively find a penny stock worth authoritatively profiling when you’ve been paid to do so by an interested third party.

I’ll quickly make a few notes about MCTH’s chart. First off, at the time of this writing, the company has daily trading volume of just 492 shares. Should trading volumes remain constant, this means Pennypic.com will have to wait close to two years before they can sell off all their stock. Unless of course immediate interest in the stock sends volume and the share price soaring.

Save for the last few weeks, MCTH’s share price traded, for the most part, above $2.00. Even last fall when the markets were being universally hammered, MCTH’s share price held firm.

Oddly enough, it plummeted from its lofty highs in mid-April to the $0.26 level. This is fortunate for penny stock investors as it is now in a range most people can participate in.

I said previously that penny stocks usually only soar on encouraging news. MCTH did coincidently put out a small press release on Thursday stating it continues to “see overwhelming needs in the medical staffing industry.” That’s about it. For the record, that press release went out at 10:30a.m.

I suppose speculation can make any penny stock soar as well. On Wednesday, MCTH closed at $0.26. It opened trading on Thursday at $0.52, and subsequently hit an intra-day high of $1.25…all before 10:30a.m. With over 1.2 million shares trading hands.

Again, I’m not saying MCTH isn’t a good penny stock. That’s up for anyone to research and decide for themselves. What I am saying is penny stock picking companies need to be more transparent. Just like the stocks they cover need to be.

It’s little consolation knowing you’ve gotten a free subscription to a penny stock newsletter only to discover that it’s been paid to profile a penny stock it “found”. Make sure you find a penny stock newsletter that is 100% unbiased. The last thing you want to know is that the service in question is profiting from you.

Also, make sure you do your due diligence. Don't get snared by, what some may consider, misleading copy designed to make you act with immediate urgency.

When it comes to investing you shouldn’t need to read the fine print to find out what you’re getting yourself into. I don’t want to be told to read the fine print to find out if my penny stock service is profiting off me. That’s not the kind of customer service anyone deserves.

If you are interested in penny stock newsletters…make sure you find ones that go above and beyond the minimum requirements. After all…it is your money. And so-called "free" penny stock subscriptions could end up costing you dearly.

About the Author

John Whitefoot is a seasoned penny stock investor with a keen interest in international business and current affairs. John Whitefoot is Sr. Editor at http://www.pennystocks.com and is devoted to uncovering the news, trends, and ideas that affect penny stocks on a daily basis.

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