The Ponzi Scheme Penny Stock Brush
Posted: Tuesday, June 15, 2010
by John Paul Whitefoot
Penny Stock Insider
For the last three years the Great Recession has impacted much of the industrialized world. In a nutshell, the financial crisis has been linked to unsustainable lending practices, a housing bubble, and the growing trend of securitization of real estate mortgages in the United States. As share and housing prices declined, many large and well established investment and commercial banks in the United States and Europe suffered huge losses and even faced bankruptcy, resulting in massive public financial assistance.
Take for example, hedge-fund fraudster James Nicholson, who was nailed for his bad investments with Lehman Brothers, Goldman Sachs and AIG. Manhattan federal Judge Richard Sullivan recently denied a defense request to reduce the Ponzi schemer's potential prison term on grounds he didn't actually steal the entire $142 million lost by investors in his Westgate Capital funds.
Sullivan said Nicholson never would have gotten his scam off the ground if he hadn't conned his burned backers (including several of his own relatives) into believing he was a financial whiz.
His ever witty defense lawyer, Erika Edwards, argued unsuccessfully I might add, that Nicholson had only pulled off a "partial Ponzi scheme" because Westgate was a "legitimate company" that employed 20 people and tried to make money buying brand-name securities.
"We're not talking about penny stocks. We're not talking about a sham corporation," she said.
How charming. Ms. Edwards eloquently paints her client out of the corner with her magical ponzi scheme penny stock brush. And, maybe like her client, is unable to discern between a good penny stock and a sham.
Regardless, it's easier to show your ignorance and just lump them all together. Not that you could get away with lumping all large cap stocks or medium sized cap stocks, but that's another story.
What she is telling us though, that even without the powers of discernment, her client managed to lose millions of dollars by betting on well established stocks. If so, then lousy management can bring down any size company. Clearly, bigger isn't always better.
Regardless, I'm sure his clients feel better knowing that he squandered their money on houses, cars, trips, and other luxuries and I'm pretty sure on the salaries of his 20 staff.
Though fortunately, he didn't bet his clients money on penny stocks. After all, who would want to invest their money in a penny stock company with strong management teams, good upside potential, proven revenues, patented technologies and solid financial trends?
Mr. Nicholson and his lawyer may not know the difference between a rising star and a dog; but that doesn't mean you can't take some time to check out some excellent penny stocks ($5 and under when you factor in inflation).
Record first quarter results helped Metropolitan Health Networks, Inc. (MDF AMEX) share price trend steadily higher. In early May, MDF reported record first quarter revenue of $93.0 million. The company's first quarter net income increased 77% year over year to $7.1 million or $0.18 per basic share. This financially robust penny stock ended the quarter with cash and cash equivalents of $30.3 million.
Strong Q4 and Q1 results have been helping drive Ballantyne Strong, Inc.'s (BTN AMEX) share price higher over the last fourth months. A provider of digital cinema projection equipment, BTN announced on May 3 that first quarter revenues rose 48% year over year to $25.3 million. Net income doubled to approximately $1.0 million or $0.07 per diluted share.
In mid May, BTN said it was selected to provide 200 NEC digital cinema projectors for China Film Group Corp. in theatres throughout The People's Republic of China. In June the company said it expanded its digital footprint outfitting 20 auditoriums for Caribbean Cinemas with NEC Digital Cinema projection systems.
Strong Q2 and Q3 results helped Taylor Devices Inc. (TAYD NASDAQ) gain steam. A leading provider of shock control devices, TAYD announced in mid January, that Q2 earnings were up 800% year over year at $501,891 or $0.16 per share. Net earnings for the first six months climbed 303% to $822,688 or $0.26 per share.
In mid April, TAYD announced that third quarter revenue jumped 28% year over year to $4.78 million. TAYD reported third quarter earnings of $324,777, a dramatic improvement over the $31,346 reported in the third quarter of last year.
Picking a winning penny stock is no different than picking any winning stock. Separate the wheat from the chaff and you'll be left with the 5% of penny stocks that are worth your while.
No two penny stocks are created equally. Don't make the mistake of lumping all penny stocks in together. Otherwise, you could lose out on a lucrative venture.
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Top-level comments on this article: (1 total)Ms. Edwards chose a very strange defense, I'm not surprised her client lost!There are con artists everywhere in the business world, on the hunt for an opportunity to exploit. I like that you make a good case for penny stocks, but you're still realistic, and advise people to do their own research.
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