In today’s inter-connected world of fast paced, algorithmic based trading, where more shares are being traded by computers than by human beings, the average long-term investor needs sound investment advice. Recently, a real-life example presented itself and I wanted to share it with our readers.
For months, Cynk Technology Corporation (Ticker: CYNK) was listed on the pink sheets; commonly known as the Over-the-Counter (OTC) marketplace where penny stocks are traded. However, beginning on June 17th, CYNK’s stock price jumped rapidly from an opening price of $0.18 / share to a closing price of $2.25 / share on 367,400 shares of trading volume according to the Yahoo! Finance (CYNK) trading history.
The monstrous return in CYNK started gaining attention, and suddenly the stock was flying higher and higher on nearly a daily basis. From the opening price on June 17th of $0.18 / share in CYNK to the closing price of $13.90 / share on July 10th, the stock delivered a mind-blowing return in mere weeks.
It was in early July when I personally received a call from a newer client asking if we were aware of the big returns CYNK was posting. This happens rarely, but on occasion we will receive phone calls from our clients who are watching stocks that are posting big day-to-day moves higher.
I explained to our new client that we would not consider a stock such as CYNK because it did not have a long-term trading history and we had not performed any research or due diligence on the stock. During our discussion, I told our client that I would look further into the stock and share what I found.
Upon researching Cynk Technology Corporation’s financial information, I was unable to find information regarding the firm’s profitability, board of directors, or even if the headquarters was actually located in the United States.
I called the client back and explained that I was not confident that the company was a sound investment candidate. I also explained that the stock itself did not fit into the customized plan we had put together based on his investment objectives and stated risk tolerance. Toward the end of the conversation, I told him that I was not confident in recommending CYNK to any of our clients.
On July 11th, the United States Securities and Exchange Commission ordered a suspension in the trading of Cynk Technology Corporation (Ticker: CYNK). The primary reason for the trading halt was related to “concerns regarding accuracy of reported information and potentially manipulative transactions.” [SEC Order of Suspension of Trading ] Whether CYNK stock will ever open for trading again is unknown, but based on the SEC’s findings pennies per share or even less is probable.
I want to be clear in stating that this actual, real-life example is not about boasting or about being right. In the financial world, boasting and bragging is usually served with a slice of cold, humble pie. However, this example demonstrates why paying fees for sound financial advice may help save long-term investors from making painful investment mistakes that are arduous to recover from. Professional, customized advice carries with it an expense which in many cases can be significantly less than potential losses resulting from poor financial decisions. Take care and as always, Happy Investing!