Earn 100% Per 3 Days

"Earn 100% Per 3 Days."

That was the subject line of an email we received the other day.

We're suckers. So we clicked to read on.

Here's what we found
Eva Hilton was the gracious woman in cyberspace who alerted us to the stock that would earn us 100% per three days. Not 100% in three days. No -- she assured us we'd double our money every three days. If that were the case, let's look at how quickly we could retire on a fat nest egg:

Doubling your money every three days

$1,000 would become ...

Third day

$2,000

15th day

$32,000

30th day

$1,024,000

In a month, we could be millionaires -- starting with merely $1,000.

That's incredible! For historical comparison, stocks in general have grown at an average rate of 10% per year. At that rate, it would take more than 70 years for $1,000 to become $1 million. Say it with us: Boring.

Also know that some of the market's historically best-performing stocks, such as EMC (NYSE: EMC  ) and Target (NYSE: TGT  ) , have only returned 11% per year and 15% per year, respectively, over the trailing 15-year period. (For context, the S&P gained about 6% per annum over that time.) In other words, those spectacular 1993 investments still haven't turned $1,000 into $1 million.

And Hansen Natural, the best-performing stock of the past 10 years, averaged just 70% annual returns from 1998 to 2007. It would have to keep up those returns for another three years to turn $1,000 into $1 million.

Reductio ad absurdum
The annualized gains promised in the "100% per three days" claim is too large a number for us to even write. It's a one followed by 36 zeros.

That growth rate is roughly 100 gazillion times that of the market's most aggressive growers. Of all stocks on the public markets, AU Optronics (NYSE: AUO  ) , Weatherford International (NYSE: WFT  ) , VMware (NYSE: VMW  ) , and Salesforce.com (NYSE: CRM  ) are four of the most aggressive growers. For the next five years, analysts are expecting each to grow 20% to 50% per annum.

Those are big numbers from some solid companies. But they pale in comparison with Eva Hilton's monster performer. So what is the mystery super stock that can make us millionaires in just one month?

The juice on a juicy stock
Let's look under the hood of the magical company that is poised to double twice per week.

 

The Mystery Stock

Market cap

Information not provided

52-week range

$0.40-$2.20

P/E

Information not provided

Earnings per share

Information not provided

Income statement

Information not provided

Cash flow sheet

Information not provided

Analyst estimates

Information not provided

Data from Yahoo! Finance.

Because Yahoo! Finance wasn't much help researching this stock, we went straight to the company's investor relations website. Here's what we found: nothing.

Well, nothing financially germane. Although, if you're still intrigued, you can speak with an investor relations representative from 9 a.m. to 4 p.m. EST, Monday through Friday.

We, however, are not intrigued
We've written before about our fascination with penny stocks. Since that article was published, an interesting study was released, and it confirms everything we already knew: The only people who make money on spam penny-stock tips are the folks sending them out.

As professors Laura Frieder (Purdue University) and Jonathan Zittrain (University of Oxford) wrote in their study "Spam Works: Evidence From Stock Touts and Corresponding Market Activity":

Before brokerage fees, the average investor who buys a stock on the day it is most heavily touted and sells it two days after the touting ends will lose approximately 5.5%.

So much for 100% per three days!

You best behave
Why do spam stock tips cause investors to buy? It's because they get at one of the most fundamental human desires -- the quick buck.

And while there are some quick bucks in the stock market, they are neither predictable nor repeatable. And they will never, ever come from spam email.

You can, however, still make serious money by investing in small companies -- albeit those that actually trade on a major exchange and file financial statements. How? By ignoring baseless stock tips and instead using fundamental, bottom-up analysis to find the very best small companies that will grow your fortune over the next decade or more.

Take a page from our Motley Fool Hidden Gems small-cap investing service, where we recommend companies that are:

  • Small
  • Cheap
  • Led by dedicated management
  • Fiscally conservative
  • Profiting from a wide market opportunity

We believe those traits will lead us to the very best small companies. And while we don't think those companies will double every three days, we can say that our returns are better than the market’s.

If you'd like to see the stocks we're recommending in Hidden Gems, click here to join the service free for 30 days. There is no obligation to subscribe.

This article was originally published on Jan. 18, 2007. It has been updated.

Neither Tim Hanson nor Brian Richards owns shares of any companies mentioned. VMware is a Motley Fool Rule Breakers recommendation. The Fool's disclosure policy summers in Spamtown, USA.


Read/Post Comments (0) | Recommend This Article (29)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 751033, ~/Articles/ArticleHandler.aspx, 11/29/2014 4:01:34 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement