Just read an article on Kiplinger's about the performance of penny stocks that you get spam email about http://www.kiplinger.com/personalfinance/magazine/archives/2006/01/pennystocks.html.
In the article they claim that Joshua Cyr tracked their performance over about a 6 month period. Net result: Down 52% during which time the Russell 2K was up 12%.
This begs the question, why are people spamming these stocks if they are going to plummet? Spammers aren't usually malicious people, they are usually people trying to make a quick buck - so my bet is that stock spamming is a pump and dump tactic.
So, the expected performance is:
Pre spam price = x
Post spam price = y
6 month price = z
Thus, knowing that they are spamming, it is rational that x < y. But it doesn't make sense to me why z would be less than x. It makes sense that z < y because the price change is driven by an artificial increase in demand and not improving fundamentals.
Great article, but i am left wanting more. I think I will just have to set up my own spamfolio to track the stocks I get spammed about and see what the results are.
If there is a definite discernable negative pattern to the performance of these stocks, then hot stock spam tips might just be the best contra-indicator you can find. I don't know much about short selling, but if 60% negative over 6 months is a generalizable phenomenon, I would kiss the idiots buying the stocks and the assholes sending this spam. Looks like I have two new projects for my to-do list.
If anybody who reads this is familiar with this topic, please post a comment with your knowledge. I know nothing about this beyond what I just read.