Edgar Ambartsou...'s  Instablog

What really baffles me, is that even companies that are listed on NASDAQ are beginning to behave like OTC stocks, one of them being a micro cap such as Ocean Power Technologies Inc. (OPTT). Amateur investors get sucked into a surging price per share due to intense promotions, without really diving into fundamentals or growth prospects.

Recently a company was mentioned by National Inflation Association, a website created to scare novice investors that doomsday is coming due to hyperinflation. In reality its a marketing scheme to gather subscribers and then promote small cap companies.

Broadvision, Inc. (BVSN) surged more than 400% since December, after thousands of subscribers were bombarded with e-mails stating the company was the greatest thing since sliced bread. The only great thing about this $146 million e-commerce company is its assets, and the fact that it carries no long term debt. But truth of the matter is that it doesn't have any net income either.

Company has been burning through cash and propping up their losses by showing positive cash flow from their investing activities (which has also been falling). Despite a stable revenue stream quarter over quarter, Broadvision's net loss increased from a loss of $1.64 million to $1.81 million in the past few consecutive quarters.

Besides my humble opinion, other well known short sellers have also noticed the hype. Tim Sykes, a well known millionaire and hedge fund mogul who turned $12,000 into $2,000,000 trading penny stocks, knows an opportunity when he sees one. He has been making thousands a week shorting BVSN, realizing its 400% surge was not warranted to begin with. BVSN's short ratio rose from prior month's 131,000 to currently 279,000.

If an investor is seeking for a turnaround story with low debt that is improving its income year over year, then Crocs (CROX) or Fastenal Co. (FAST) would definitely present better opportunities than the aformentioned.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.