Every year, financial reporters (like myself) publish "best of
the year" and "worst of the year" lists of investments.
Usually, these lists only look at the biggest publicly traded
companies - in the Dow Jones Industrial Average or the S&P
500, for example.
But the best and worst performing stocks are almost never in
Today I'd like to talk about one of the biggest traps in the
stock market over the past year - and what will likely be the
worst class of stock investments you could ever buy.
Under most circumstances, you should strive to condition
yourself to seek out hated, cheap investments. Buying assets that
are hated and cheap isn't just a sound strategy; it's probably
the ONLY sound strategy - in the commodity sector especially.
But the worst performing
of 2012 will likely be the worst performing commodity investments
of 2013, 2014 and so on - for as long as the stock market exists.
That's because the commodity investments I'm talking about almost
always go bust the overwhelming majority of the time.
And while I'm still a very bullish commodity investor
I avoid these commodity investments at all costs.
I'm talking about commodity investments that trade only on the
Pink Sheets (.PK) or Over the Counter Bulletin Boards (.OTCBB).
You can recognize these investments easily because they almost
always have longer ticker symbols of four and sometimes five
characters. And of course, they're always followed by either a
.PK or .OTCBB.
If you learn nothing else from reading my daily column, I hope
you will learn this lesson now: most of these companies go broke.
They have no earnings. They might not even have any assets,
property, sales, or even an office.
The best way that you can avoid losing money in stocks is
to avoid these companies completely.
They're the fool's gold of the investment world because they
look like real companies, they have fancy literature,
advertising, websites and they trade just like any other stock on
any other real exchange.
To be clear, it's not just commodities investments that trade on
the Pink Sheets. But it's typically the commodity investments
that are among the worst of the pack. That's because being a tiny
gold or oil explorer is hugely capital intensive. So these PK and
OTCBB companies will continually issue shares because they need
to access ever greater amounts of capital.
But I avoid all PK and OTCBB stocks - not just commodity related
Ignoring these companies is easy - and it makes your investment
decisions easier still. That's because when you ignore Pink
Sheets companies, you immediately cut out thousands of stocks to
For a quick example of how poorly these companies perform, take a
look at the biggest losers in the Dow Jones Industrial Average
Hewlett Packard (
is down 45% and
is down 15%.
(The biggest winners were
Bank of America (
with a year to date gain of over 101%, and
Here are two of the worst performing Pink Sheets as of last
in just one day of trading
Adelphia Recover -
down over 97%
Synvista Therapeutics Inc. -
These two companies will likely never trade again, as they
currently sell for minute fractions of one penny.
Every day, dozens of these companies go belly up. Eventually, all
but a small minority go broke. Only about 1 in 3,000 of these
companies will get up-listed to a real exchange like the NYSE or
So please, do me a favor - do yourself a favor, and just don't
buy them! Not this year. Not ever.
Have a great Christmas.