The Easiest Way to Avoid Losing Money on Tech Stocks

Investing mistakes are harder to recover from the closer you get to retirement. One of the worst mistakes you can make is being scammed by the stock market. That's exactly what happens with pumpand dump stocks. Exciting growth stories that end up with well-intentioned investors holding the bag. To avoid being scammed in the stock market, you need to identify obvious red flags very quickly. After decades of exposing stock market scammers, I'm going to tell you exactly how to avoid being the patsy at the table. The first thing you need to pay attention to is the company's origins. How did they become publicly traded? The normal process is through what's called an initial public offering or IPO that includes an institutional vetting process that will quickly uncover scammers. when a company goes public using a method other than an IPO, a reverse merger, as you often see for over-the-counter or penny stocks, or the blank check method or spa that was popularized in recent years, these are immediate red flags. Now, if a company has been publicly traded for a decade or two and accomplished nothing in relations to their core focus, what they'll often do is do a completely unrelated and unexpected pivot. Bob's used auto suddenly becomes blockchain AI graphine 3D printing ink. When a legacy company pivots into the hottest tech theme at the moment, such as AI, from something entirely different, that's a big red flag. Companies that pivot often have to heavily rely on stories to attract investors. Every scam starts out with some great story, some promise of future wealth for investors. This starts with some product or service or technology that they've magically conjured up. Maybe they acquired some other company. Oftentimes, they'll tout some patent or a family of patents that will inevitably lead to greatness. But when every tech stock out there has a great story to tell, it comes down to separating substance from hype. Substance is revenue growth. Hype is often fluffy press releases. We call this science by press release. And it's when a company starts issuing frequent press releases that basically say nothing. The classic example is the memorandum of understanding, which is essentially the equivalent of a legal handshake. A memorandum of understanding or anou is meaningless. And companies that make a fuss over these insignificant events have not much else to offer. The frequency at which a company will pump out press releases, that's a major tell. Ultimately though, they'll never lead anywhere. They're just going to fuel this ongoing narrative that slowly changes over time as the company is unable to meet any of the promises they're making. A great example of this would be a company called Microvision. and they trade under the ticker MVIS. Now, you can see this piece we wrote, this was nearly 5 years ago, questioning why this company hadn't accomplished anything over the past decade, as you can see from this revenue chart. And when you fast forward to today, we tack on five more years to that revenue chart. Look, they still haven't accomplished anything. What's going on here? This is a firm that's now been around for 33 years. Looking back at their history, you see that in 2014, they had this contract with Sony. Now, the stock price surged. This was over a decade ago, and it's when this company first came on our radar. Here's what we had to say about this Sony announcement. The prospect of all their revenues being tied to a single company that didn't look promising at all. It never is. Called customer concentration risk. We noted that there were many other companies with the same sort of technology they had on offer and these competitive offerings were compelling in terms of price and technology regardless of what MVIS would say. The ultimate proof that you have a viable technology is when people want to pay you money for it. We said at that time there was a fair deal of risk associated with MVIS and it seemed more suited for speculators than investors. Then about five years ago, another hype cycle started. That cycle seemed quite coordinated and you can tell by the volume that it generated a great deal of attention. And in their Q2 2021 earnings call, we noted this what 750K in revenues they were talking about that suddenly they decided to name the customer it came from Microsoft. These companies love to mention some marquee name and point to that as proof of their technology validation. This commentary usually gets reflected in the company's earnings call. They'll try to spin this great story. They'll do that for as long as they can. Here's a trick I like to use when evaluating companies that do nothing but tell stories. Go back four or five years and see what sort of promises they were making back then. Look in their earnings call or their 10K and see if they actually came to fruition or not. You'll find these stories evolve over time. There's always something around the corner. Never trust a company that breaks promises. Never trust a company that doesn't deliver on the great things they keep talking about. Now, another simple check you can do is to ask an LLM if any of their key executives have been involved in lawsuits or stock pumps in the past. Now, we used to do this manually through quite a few Google searches. Now, it's rather easy. Here, I've asked Grock about Microvision executives and they came back clean. Which brings me to a very important point to make here. It does not matter if the management team is acting in a malicious manner or they're grossly incompetent. The outcome for investors will be exactly the same. And it's not just the company that's leading on investors. Check what's being said on social media. That's probably where you'll hear about a lot of these stock scams is on social media where coordinated groups of accounts promote stocks. That's right. They're called stock promoters and they'll pedal their services under the guise of investor relations. Sometimes they'll be with an actual firm that has a somewhat legitimate sounding name. >> Hi, Dr. Jacobs. >> This is Chris Marlin over at JT Marlin. >> Marlin, >> right? He's my father. >> He's my mother. So, my associate tells me you're interested in one of our stocks. >> Whenever someone tries to get you to buy a stock, that's a red flag. When you see a group of people collectively pumping a stock, that's a red flag. Now, the company, as I said, may or may not be aware of these malicious activities. And it doesn't matter if they are or aren't. Lazy pumpers always accuse anyone of being critical of their sacred cow as being short. The reality is that most people who are critical of a company are not short. We never ever short stocks. We're most critical the companies we're most bullish about. That's the sign of a sophisticated investor, someone who just doesn't drink the growth story Kool-Aid. I can tell you there are far more people trying to manipulate stocks upwards than downwards. Most smaller stocks are tough to short anyways. Now, we published a fair amount of content on MV, some of it on YouTube, and got the usual loads of lazy comments. Most often you'll hear people do the apple and oranges comparison. Well, Tesla went through the same thing or Tesla didn't go through the same thing. You don't know what you're talking about if you knew anything about Tesla. Or they'll of course accuse us of being short. Dozens of lazy comments we saw on our various research pieces, which is pretty normal for pumped stocks. It's the more detailed comments that start to raise some eyebrows. People who take a great deal of time to parrot company talking points while not addressing our points of contention, they're often acting maliciously. Here's an example from this anonymous individual going under the name McClean Timonss. So, first thing he talks about are the things we didn't mention. No mention of this $25 billion contract Microsoft has with the military. So, what what does that have to do with the price of tea in China? Goes right into talking about what did I say? numerous patent filings referencing Emvis's own patents. No mention of the patent references of their technology, recent hiring of this individual. They often point to people coming from companies like, let's say, Google or Microsoft. So what? It's expected that they're hiring competent people. They say there's no mention of the Mvis office in Germany, >> the Germans, >> or a booth at the mobility conference in Berlin. So what? They talk about MIS technology being the best out there. Yeah, the best technology out there. You know what happens with the best technology out there? People want to pay for it. They talk about some company having a heavy interest in Envis. Yeah, going back to thatou comment, right? And of course, there's more babble about their extensive patent collection, but look, when they use the acronym FUD, fear, uncertainty, doubt. People who do that are blatantly incompetent. That's because they're afraid to be critical of the stocks they're most bullish about. This person concludes that this was lazily contrived surface level research when in fact it was anything but. And they finish off by saying, "You might as well put all your money in QQQ, the NASDAQ ETF, and call it a day." Fine. Let's see what would have happened if we did that. If you listen to what this muppet said and you put your money invis, you would have lost 98% of your wealth today. If you put your money instead in QQQ, you would have gained 90%. Look at the opportunity cost there. So, $1,000 invested in MVIS since then, you'd have 20 bucks. If you invested that in the NASDAQ, you'd have 1,900. That's a big difference. This is why what I'm telling you today is so important in the era of social media. Stock market scams are everywhere. After watching this video, you're going to be better equipped to avoid scams. So, let's distill today's lessons down into a simple set of rules you can share with anyone you love to help them avoid scammers. If anyone tries to convince you to invest in a particular stock, that's a huge red flag. >> Honestly, Doc, I don't have the time. >> This stock is blowing up right now. The whole firm's going nuts. Hold on. Let me open up the door to my office. [cheering] >> Companies that pivot into the latest greatest thing or spin wheels for decades, they should be avoided. So should companies that go public using any method other than the traditional IPO. There are some exceptions in the spa world, but they're far and few between. Press releases, they mean next to nothing. Pay attention to revenues. The greatest technology in the world can result in no viable product or service. Patents mean nothing without execution. When those who are critical of a stock are attacked, that's a huge red flag in itself. The more articulate the attacker, the more likely it is that they're being malicious. Now, we built our entire evaluation process around catching red flags like this early. Then, we focus on six steps that matter most. These six steps are exactly what I'm going to talk about in this next video. Give that a watch next. Thanks so much for taking the time to watch this video today.