Blog : Olympus Has Fallen... NOT

by Ed Zwirn on April 24th, 2013

Penny stocks by definition often fly under the radar, meaning that the company you follow may receive little or no media attention, and limited analyst coverage, if any. This can prove to be either a blessing or a curse. Of course, if everybody knew everything there was to know about your penny stock already, there would probably be less chance to make (or lose) money on it. On the other hand, the more buzz that gets attached to your hot penny stock, especially after you buy into it, the better.

Filling in this information void are press releases from the penny stock company itself, and a host of newsletters and fee-based subscription services like Leeds Analysis that are in business to sell their expertise and help you make money.

But, as Tuesday's volatile stock market session proves, you need to go beyond traditional information sources like these if you want to make sure that you're completely on top of your penny stock picks. "Breaking: Two Explosions in the White House and Barack Obama is injured via@AP," read the message hacked into the Associated Press Twitter feed, a message which sent the Dow Jones Industrial Average plummeting about 130 points, or 1% of its value, in a few short minutes.

The market, in a marvelous show of volatility, went soaring back up after the truth got sorted out, and the DJIA closed up 152.29, or more than 1%, on the day to close at a record 14,719.64.  Ironically, this near-meltdown coincided with the release of Olympus Has Fallen, a silly film about a North Korean terrorist attack on the White House.

And yesterday's episode could be considered silly if it wasn't so frightening at the same time. A Syrian group has claimed responsibility for the AP hacking, but whatever the motivation there is clearly something counterproductive about groups or individuals sending out false reports about an injured president.

In addition, investors in penny stocks in particular should make sure they are plugged into every social media outlet associated with the companies in their portfolios and the people who run them and work at them. Company brass are increasingly in the habit of tweeting to help pump up their penny stock volume, a fact recognized by the Securities and Exchange Commission earlier this month when it was forced to set social media disclosure guidelines.

You haven't read these guidelines yet? Well don't feel alone, because maybe your company management is in the same boat, and you don't want to find how after the fact that they hadn't been tweeting fairly. It's better to keep an eye on things, because shareholder suits against bankrupt companies are usually not all that rewarding.