The Story Beyond the Press Release

I recently watched a documentary about North Korea. It dwelled upon the puppet population that today has found itself brainwashed and strictly controlled by the military state. In a nationwide effort to save face to the world, those in control have made several efforts to deceive and protect their nation’s image through elaborate facades. Some of these ranged from the existence of fake cities along the 38^th parallel to the building of 40-story high-rises that in reality service fewer than a hundred people. Overall the documentary clearly portrayed an example of a dominant back story that operated contrary to the advertised public story.

In the same sense, investing in penny stocks will sometimes carry a similar model in which a back story (the non-publicized events/progress) will dictate the direction of the share price over the influence of the public story (ie. Press Releases, Conference calls, etc). Most of the time, such instances of this model are scams and deceptive companies that adversely hurt the shareholder. Such companies are the ‘North Koreas’ of the lower exchanges and are so rampant amongst the Pink Sheets that they tarnish the image of trading of penny stocks.

But every now and then… there are the odd outliers that serve as counter examples to the common trend. For these companies, the public typically knows very little of what’s going on as the company fails to press release its success for some reason or the other. Such companies are risks to take in themselves. Despite their positive trends, it is always a good idea to have full comprehension of what it is that is going on with the company and what it is that is driving the share price. Unless you are privy to such inner knowledge, it will always be advisable from this investor to stay away from such companies. Whereas it may seem profitable to follow the crowd, it only takes the one back story event unknown to yourself to leave you hanging dry as the upward trend collapses drastically. Get to know the story, or stay out.

Here are two examples of these oddities that have broken the stagnant trend of the lower exchanges in an unexplained upward trend. (OCTL is a research company that has very odd movement relative to the moderately successful news released to the public, and SRFDF is a major mining operation that has released very little information to justify the multi-bagger it has already become):