The Zacks Analyst Blog Highlights: Microsoft, Wal-Mart Stores, Citigroup, TransAtlantic Petroleum and Lake Shore Gold
CHICAGO, Feb. 24, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Microsoft Corporation (Nasdaq:MSFT-Free Report), Wal-Mart Stores Inc. (NYSE:WMT-Free Report), Citigroup Inc. (NYSE:C-Free Report), TransAtlantic Petroleum Ltd. (AMEX:TAT-Free Report) and Lake Shore Gold Corp. (AMEX:LSG-Free Report).
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Friday's Analyst Blog:
Wolf of Wall Street: Are Penny Stocks Good Picks?
The myth has been old and strong – Microsoft Corporation (Nasdaq:MSFT-Free Report) and Wal-Mart Stores Inc. (NYSE:WMT-Free Report) were once penny stocks. Jordan Belfort (at least as seen in Martin Scorsese's movie The Wolf of Wall Street) utters the same myth in order to sell the penny stocks. Jordan Belfort had also said: "As long as it gets done, it doesn't matter how." With that belief many traders might trick investors to buy or splurge money on penny stocks, but that might peter out the entire investment.
Before we discuss why investors should stay away from the risky penny stocks, let us take a look at the theory and practice.
What Are Penny Stocks?
According to Investopedia, penny stocks trade at a relatively low price and market capitalization, usually outside of the major market exchanges. These are highly speculative shares being offered by very small companies that hardly have any track record. Generally market capitalization of a penny stock is between $50 and $300 million. Most importantly, low liquidity is a key catachrestic of these stocks.
The Securities & Exchange Commission (SEC) classifies stocks under $5 to be a penny stock. Some also consider $3 to be the benchmark, while many consider stocks lesser than $1 to be a penny stock.
Were Microsoft and Walmart Penny Stocks Ever?
These two stocks were never penny stocks! What has confused investors is their 'split-adjusted' price.
Following stock splits, there were adjustments made to these stocks' historic price to show the effect. Accordingly, the historic price on paper dropped below a dollar, but that never means the stock ever traded at that level.
The tech behemoth Microsoft had closed at $28 a piece on its debut on Nasdaq on Mar 13, 1986. In fact, the historic low for Microsoft is around $15. Considering the stock splits for Microsoft so far, the price on the debut day would drop way below $1.
The same logic of stock splits applies to Walmart, which had its initial public offering in 1970 at a price of $16.50. The stock was unlisted on major benchmarks for a couple of years and traded "over the counter." It got listed on the New York Stock Exchange in 1972.
Wolves May Bite
Jordan Belfort is known to many for his rags to riches headline story and for being convicted for manipulation of the stock market. Now a motivational speaker, he ran a 'penny stock boiler room' and earned millions by selling investors the "penny stocks."
The U.S. Securities and Exchange Commission or related legal bodies have often send subpoenas to broking houses for selling or often compelling investors to buy these dubious micro-cap stocks. If the regulatory bodies have often jumped into action to safeguard investors, there obviously is something wrong with these stocks or the act of trading.
The Pink Sheet or OTCBB stocks are not required to match the minimum standard requirements to be listed on exchanges. Moreover, Pink Sheet stocks are not liable to file documents with SEC and thus investors hardly have any timely information about the company.
Going Home with Profit – Your Choice
Jordan Belfort said this too: "Success isn't only about what you do. Its also about what you don't."
Like Belfort or his company Stratton Oakmont, there were and are other businessmen who had mastered the skill of selling penny stocks. For example, Robert Emmet Brennan ran the infamous First Jersey Securities. We have also seen the U.S. SEC filing charges against Park Financial Group following investigations of its role in running pump and dump scheme in 2002-03.
So be careful to stay away from the pink sheet or fall prey to the 'pump and dump' strategy. There have been tales of people becoming super rich by investing in penny stocks, but there are a larger number of stories where investors' wealth has been "pumped and dumped." Thus, it is a safer bet to invest in securities with a proven history, a large market capitalization, high liquidity and one that conforms to the listing norms.
When $1 Turned Big
Interestingly, we have had examples of major companies that traded below $1 at a time and have now jumped manifold. However, it was just their price dropping to or below a dollar and nothing else qualified them as the micro-cap or the dubious penny stocks.
These included the likes of Citigroup Inc. (NYSE:C-Free Report), whose share price had hit an intra-day low of 97 cents on Mar 5, 2009 before closing at $1.02. On Mar 3, 2009, the stock had a Zacks Rank #3 (Hold). The slump in share price was a beating the stock got during the financial crisis and in no way can one call Citigroup a penny stock. The company currently has a market capitalization of about $150 billion and is trading at $48 a piece.
Want to 'Start Small, End Big'?
If you are interested in buying stocks that technically are not penny stocks but are trading below $1, here are two options:
These two stocks sport favorable Zacks Rank, have market capitalization of at least $1 billion and are also seeing positive earnings estimate revision of late.
TransAtlantic Petroleum Ltd. (AMEX:TAT-Free Report): This international energy company owns interests in 3.9 million net onshore acres of developed and undeveloped oil and natural gas. The latest operational update provided by the company noted it has three active rigs in southeastern Turkey, one active rig in the Thrace Basin in northwestern Turkey and one active rig in Bulgaria. It expects to drill about 33 to 49 wells in 2014.
It currently carries a Zacks Rank #2 (Buy) and has market capitalization of $291.28 million. The stock is current trading at 78 cents (as of Feb 20).
TransAtlantic is expected to announce its fourth quarter 2013 earnings result in mid-March.
Lake Shore Gold Corp. (AMEX:LSG-Free Report): This gold miner acquires, explores and develops gold properties in Canada. In January the company reported that the preliminary 2013 operating cost per ounce sold beat its guidance. Company president and CEO also said: "We have completed a very successful year in 2013, including four consecutive quarters of cost improvements, four consecutive quarters of improved grades, increased mill throughput volumes that were 60% higher at year end than when the year began and record production of 134,600 ounces of gold (previously announced on January 7, 2014), which achieved the top end of our guidance for the year."
It currently carries a Zacks Rank #2 (Buy) and has a market capitalization of $344.96 million. The stock is trading at 83 cents (as of Feb 20).
To Conclude
Former Stratton Oakmont executive Andrew Greene has recently sued Paramount Pictures and other producers for his portrayal in Oscar nominated movie Wolf of Wall Street. Greene says the manner in which he has been depicted in the motion picture has distressed him. Similarly, the truth about the value of penny stocks is only relative, a partial truth at best.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.
Get the full Report on MSFT - FREE
Get the full Report on WMT - FREE
Get the full Report on C - FREE
Get the full Report on TAT - FREE
Get the full Report on LSG - FREE
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
SOURCE Zacks Investment Research, Inc.
Share this article