Whenever a sector has big winners, cheap, poor and greedy people are gonna look to get in on the action by buying and hyping bottom-of-the-barrel-companies that trade for less than $5/share. It’s science.
Take alternative energy—the rise of superstars like First Solar, Inc. (FSLR) and Energy Conversion Devices, Inc. (ENER) have paved the way for runups in industry laughingstocks Capstone Turbine Corporation (CPST) and SatCon Technology Corporation (SATC), Quantum Fuel Systems Technologies (QTWW) and Hydrogenics Corporation (USA) (HYGS). Worse yet, no matter the rising tide theory, the sector’s true embarrassments, Plug Power Inc. (PLUG) and Beacon Power Corp. (BCON), still can’t even rise much! (laughing at them truly does make you feel better about yourself, try it!)
This kind of gutter trash is my specialty—I’m not even gonna get into the fundamentals—or lack thereof—cuz no matter how bright a future these companies say they have, fancy accounting they use to prop up their numbers, etc. you really gotta think of them as junkies shooting up heroin (or alternative energy) in an alleyway. Message board posters, longs, naïve fund managers (themselves drug addicts…seriously, you have no idea how bad it is, pathetic that nobody talks about it openly) and ANALysts propping up their near-carcasses, feeding them one good meal and dressing them up to go to a big charity event to make themselves look good, only to ditch them later after they’ve gotten credit for doing a good deed (profiting form hyped up prices).
Overly cynical? Nope. 900 out 1,000 of these manure-esque companies will fail within a few years, 950 will fall back waaay below these spiked up prices and 990 of them will trade lower than what they’re at right now. These are just estimates based on industry fact and my decade-long experience and if you think you have the talent to profit from that 0.10% of successful companies, go right ahead.
On the other hand, all you odds-loving, drug-despising people, my bros, my students, my comrades in profit, join me in stalking their charts, patiently waiting to profit from their near-inevitable fall from grace, back to junkie stock prices, that being under $1 and $2.
In order of least disease-ridden junkie to Amy Winehouse:
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