We’re going to build up to the biggest mistakes, but let’s start with NUMBER FIVE first.
Mistake Number Five:
Don’t trust any source for information about a company outside of information directly from the public company itself. Learn how to determine what the source of a press release is, and only trust those that are authored and truly released by the public company.
Those that make mistakes very often read press releases from entities other than the public company. They do not understand that these are totally and completely worthless. They are hype designed to get you to buy into the stock. They may come out on the traditional smallcap wires, however, they are nothing but fluff pieces designed to get you to make an impulse buy on a stock you otherwise know nothing about. Notice in the image above the source of the press release is actually not any of the companies in the headline. It is the company just above the red bar we inserted. Every web site you use to view press releases identifies the source of the release. If it does not show the name of the public company as the source, then you are reading someone else’s release. In this case it is a small time web site that is trying to sell “premium memberships” for terrific stock tips. I am not even going to list paying for a premium membership in this list of five penny stock no-no’s.
Many times you will see these listed under a stock that you like that is a traditional stock on a major market. They might have several companies listed in the headline making you think that all of the stocks in the “press release” are equal and should be considered on the same level. For example they might be looking at Microsoft, Google, Facebook and some new “social media” stock that has a market cap of next to nothing. The source of the releases will usually be some small cap firm, and most of those will come through “Market Wired” formerly “Marketwire.” There are some other smaller wires that also allow multiticker releases.
On rare occasion some third party entities put out press releases on single companies. This is a bit different, but you have to consider what you read. I trust Zacks Research as it is non-compensated. I trust interview releases which simply announce an audio, video or written interview with a company CEO. Always read their disclosure. See if they are getting paid and why they are even putting out a release.
UP NEXT: MISTAKE NUMBER FOUR
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