NEW YORK (TheStreet) --Let's cut to the chase: Those articles that seem to pop up daily across financial media sites -- 5 Stocks Under $10 That Will Double in 2012 -- make me nauseous. They should turn your stomach as well.
Not only do the authors make outrageous claims that could lure investors into low-probability trades, but they give hard-working and credible folks such as David Peltier, who runs TheStreet's Stocks Under $10 premium service, bad names.
I'm convinced that most of the folks who claim that 5 Stocks Under $10 Will Double in 2012 run a scan, pull a few optimistic-looking financials and let her rip.
For goodness sake, I am long a few stocks under $10 that I feel like I have pretty solid handle on. I don't even think they'll double in 2012. And I sure as heck would not make such a bold and outrageous claim if I only had a hunch.In fact, when you consider buying any stock, particularly a sub-$10 one, you should probably enter the trade with the exact opposite mindset. What a terrible way to start off a relationship with a stock, expecting a 100% return within a year. That's quite presumptuous. It's like expecting to round third base and not only slide, but slide headfirst, into home plate on the first date. As much as we all love instant gratification and getting "rich" quick, there's something about the chase and being able to nurture a position. A "take it slow, don't expect too much" approach tends to pay off when you least expect it and prevents you from experiencing frequent disappointment. This not the lottery. It's investing. Stocks do double. But, you're nothing short of a fool if you go into a trade expecting that to happen, particularly in an unrealistically short period of time. Consider Research in Motion (RIMM) and Nokia (NOK). I am long the latter and consider the former a national disgrace. I do not expect either to double in 2012.
RIM could get bought out tomorrow for $18-$20 a share. That's a double. If Nokia moves from $2 to $4, that's a double. That really doesn't seem like much. In fact, it's "only" two bucks. But myriad reasons exist why RIM is down 84% and NOK is off by 76% over the last two years.
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