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Earn 100% Per 3 Days

By Tim Hanson - Updated Nov 11, 2016 at 4:48PM

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Let us be very clear: It's too good to be true.

"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 Charles Schwab (NASDAQ:SCHW) and Biogen Idec (NASDAQ:BIIB), have returned only 18% per year and 29% 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 zeroes.

That growth rate is roughly 100 gazillion times that of the market's most aggressive growers. Of all stocks on the public markets, Priceline.com (NASDAQ:PCLN), Arena Resources (NYSE:ARD), Myriad Genetics (NASDAQ:MYGN), Baidu.com (NASDAQ:BIDU), and Green Mountain Coffee (NASDAQ:GMCR) are five of the most aggressive growers. For the next five years, analysts are expecting each to grow more than 20% 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 superstock 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.

Metric

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. ET, 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 although 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. Schwab, Biogen Idec, and Priceline.com are Motley Fool Stock Advisor recommendations. Baidu is a Rule Breakers selection. The Fool's disclosure policy summers in Spamtown, USA.

None

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Stocks Mentioned

Keurig Green Mountain, Inc. Stock Quote
Keurig Green Mountain, Inc.
GMCR.DL
The Charles Schwab Corporation Stock Quote
The Charles Schwab Corporation
SCHW
$75.86 (1.15%) $0.86
Biogen Inc. Stock Quote
Biogen Inc.
BIIB
$222.38 (0.63%) $1.39
Booking Holdings Stock Quote
Booking Holdings
BKNG
$2,129.76 (0.41%) $8.78
Myriad Genetics, Inc. Stock Quote
Myriad Genetics, Inc.
MYGN
$27.88 (0.98%) $0.27
Baidu, Inc. Stock Quote
Baidu, Inc.
BIDU
$139.51 (-0.61%) $0.85

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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