This page has been archived and commenting is disabled.

Beating Penny Stock Scams With Tim Sykes

madhedgefundtrader's picture




 

My guest on Hedge Fund Radio this week is penny stock trader and Internet entrepreneur, Tim Sykes. Every once in a while I run into a natural born trader, someone who crawls out of the crib quoting options spreads, price earnings multiples, and book values. His first spoken word was “Sell!” While other kids were practicing their ABC’s, Tim was pouring through prospectii.

During his college years, Tim skipped classes and turned a $12,415 Bar Mitzvah gift into $1.65 million by trading the market from his dorm room. By the time he graduated from Tulane in 2003, he was already running his own hedge fund. Barclays Bank rated it the number one short bias fund during 2003-2006.

Tim argues that if you cut through all the hype and manipulation in the penny stock market, it is clear that there are huge opportunities on the short side. Most of the companies trading there are frauds, and most will fail. Mini Enron’s and mini Madoff’s abound.

Defined as trading under $5 a share, these stocks are purchased mostly by individuals desperate for “get rich quick” success. Promoters buy lists of email addresses from major online publishers, sometimes paying millions of dollars, to launch a never ending onslaught of “pump and dump” schemes. Email barrages and Twitter spam have replaced the dinnertime telemarketing calls and junk mail of yore.

The SEC is so inundated with tips on Madoff copycats and competitors ratting out each other, they don’t have time to pursue gripes about $1,000 losses emanating from penny stock scams. It’s like expecting the FBI to pursue shoplifters of 99 cent items from Seven Eleven stores.

Some of the claims made by these bogus IPO’s boggle the imagination. Tim’s favorite was one company’s efforts to promote vitamins infused with stem cells. Another offered a solar spray that turned you house into an energy source. Then there was the BP Gulf oil spill that threw up innumerable crude eating forms of algae. As for my own experience, I’ll never forget the aquaculture farm in the middle of the Saudi Arabian desert. To separate out the obvious rip offs from the legitimate companies, Tim spends hours a day gleaning through voluminous SEC filings, some of which are blatant cut and paste jobs from earlier failed floatations.

Even though most of these companies are fake, prices can run away to the upside, wiping out the early short sellers. So some risk control discipline is required. When a stock truly rockets, “buy-ins” of shorts can also be a problem. A few hundred penny stocks are launched each year, but only about five a month catch on fire. And remember, Apple (AAPL), and True Religion (TRLG) jeans were once penny stocks.

To avoid being taken to the cleaners by unscrupulous con men, Tim offers some very basic advice. If it is too good to be true, it generally is. It also helps to read the SEC filings, which can be obtained online for free.

Tim claims to have a success rate with his short strategy of 75%, which has delivered a 56% return in 2010, proving he still has the golden touch. His problem is that the strategy is not scalable, and can only be executed with a small amount of money. No mega hedge fund for him.

That’s why Tim has turned to online education instead of ramping up a big hedge fund. Today, he is offering several subscription newsletters, trade alerts, chat rooms, along with a DVD course on making money in the penny stock market at his website at http://www.timothysykes.com/

To listen to my highly informative and entertaining interview with Time Sykes on Hedge Fund Radio, please click here at http://www.madhedgefundtrader.com/december-22-2010-time-sykes.html .

To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 01/06/2011 - 15:11 | 853479 Elmer Fudd
Elmer Fudd's picture

What brokerage will actually lend you the shares of garbage so you can short them?  Why do I even click on MSFT's ZH articles?  Oh right, for the laughs.

Thu, 01/06/2011 - 17:14 | 853898 Rick64
Rick64's picture

ThinkorSwim, IB

Thu, 01/06/2011 - 13:10 | 852947 goldmiddelfinger
goldmiddelfinger's picture

Aapl was never a penny stock. It was the IPO of the year 1980.

Thu, 01/06/2011 - 12:48 | 852833 silver.eagle
silver.eagle's picture

"Promoters buy lists of email addresses from major online publishers, sometimes paying millions of dollars, to launch a never ending onslaught of “pump and dump” schemes. Email barrages and Twitter spam have replaced the dinnertime telemarketing calls and junk mail of yore."

 

MHFT outsmarted all of those publishers.  Instead of paying he justs posts his schemes here free of charge.

Thu, 01/06/2011 - 14:27 | 853308 Rick64
Rick64's picture

 Sykes doesn't recieve any promotion fees. He works the other side, shorting these penny stock promoters and pumpers picks that are frauds.

Sat, 01/15/2011 - 21:37 | 879278 timothysykes
timothysykes's picture

Than you but most people here dont care about facts :)

Thu, 01/06/2011 - 12:29 | 852740 Dr. Engali
Dr. Engali's picture

I can't take seriously an article where the writer proves in the very first paragraph  that he is at the best very loose with the truth and at the worst a right out liar.

Thu, 01/06/2011 - 14:24 | 853289 bonddude
bonddude's picture

Uhhhhhh... DITTO !

Thu, 01/06/2011 - 12:07 | 852640 UrbanAnalyst
UrbanAnalyst's picture

Dear MFHT,

Your guests have clearly peaked with this particular online venture stock educator, well done.

You may want to conduct some quick due diligence next time:

http://www.youtube.com/watch?v=i0LXw1HusY8

<Champagne drinking from bottle>

"Hedge fund hasn't done very well this year, actually closed it"

http://www.youtube.com/watch?v=UM2IhLH_0J8

"Check out this scar, yeah, chicks dig scars... maybe not this one"

"I know what I'm doing, I think I do. Maybe I don't, we'll see"

Sat, 01/15/2011 - 21:36 | 879277 timothysykes
timothysykes's picture

Proof is in my performance and that of my subscribers, the strategy works time and again, look at recent penny stock pumps like EEE, XOMA CHGS, HHWW, GRYO, CPOW, CPMCF...do you really need me to go on?

Thu, 01/06/2011 - 11:56 | 852592 alexwest
alexwest's picture

worthless junk.

Thu, 01/06/2011 - 14:07 | 853212 Rick64
Rick64's picture

 I have to strongly disagree with you. Tim Sykes is the real deal and has an excellent strategy of shorting penny stocks. He is a no bullshit guy. Although he does peddle his DVDs and subscription like a used car salesman he backs it up with results. Most of these penny stocks are scams so shorting them at the right time pays off well.

Thu, 01/06/2011 - 13:04 | 852918 Star Warrior
Star Warrior's picture

+1

Thu, 01/06/2011 - 12:42 | 852803 covert
covert's picture

old history, still worth noting. more detail about the same would be great. genious opportunity here.

http://covert2.wordpress.com

 

Do NOT follow this link or you will be banned from the site!