How To Find Penny Stocks That Are Scams And How To Take Advantage Of Them

“Scam” is a word you hear all too often, especially down here in penny stock land. It’s true, penny stocks are penny stocks for a reason — that is they don’t have an effective business model, don’t turn a profit, or can’t payoff debts long term.

For now, lets focus on the issue of not being able to payoff long term debt. If a company can’t pay it’s debts off longterm then it’s an outright scam, period.

To find out if a company is a scam bring up the company’s balance sheet and calculate the debt-to-equity ratio( is a measurement of that company’s financial leverage, i.e. the company’s ability to borrow and repay money). To calculate the company’s debt-to-equity ratio you divide its total liabilities by it’s total shareholders equity. If the result is greater than 3 than that company most likely won’t be able to pay its debts off long-term.

Lets take a look at an old favorite penny stock COIN. You can view this company’s balance sheet here. By looking at the balance sheet you can tell that this company is an outright scam. By dividing its total liabilities: 27,571,000 by total shareholders equity: 5,047,000 you get an answer of 5. Since this is above wayy above 3 they won’t be able to payoff their longterm debt. What is a company if they can’t payoff their debt?

Lets take a look at COIN’s 2 year chart.

Penny Stock scams like this are a short sellers dream! Shorting these beast of scams is one of my best strategies.

This particular stock is not the only scam out there. Look around at the 1000’s of penny stocks out there! Many of them will be pumped, hyped, and manipulated to the max by illegal stock promoting and all you have to do is short them and ride them back down to where they came from.

This is exactly how you take advantage of penny stock scams. Wait til they’re pumped up 50%, 100%, or even 500% and short them at the right time and the odds are in your favor.

Ever wonder why I include little snippets like “this company has XXXXXXXX in debt” in my daily penny stock list? Because certain most penny stocks are scams and these are the ones you short whenever they have big run-ups out of nowhere. By shorting these penny stocks you can make tons of money, that’s what you want, right?

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