HOWTO: How to spot a bad stock in the making

This morning I looked in my mail and noticed a message from "Investors Edge" about a new stock for a company called Molecular Pharmacology Ltd. Generally I dump these into my SPAM filter straightaway, but this one got my attention. I decided to keep an open mind and do some investigation. The results of this investigation form a "HOWTO" of sorts to spot a stock you shouldn't get involved with.

At the beginning of the message is the usual breathless claims of the stock being poised to rocket immediately. This is information they just can't seem to hold in much longer. There is this quote at the top of the page:

Imagine if your family had invested in Bayer in 1899 when Aspirin was first released – now the most common drug in the world...
How wealthy would you be today?

Well, you would probably be very wealthy, no doubt. Let's verify this, shall we? Let's see what Bayer is up to nowadays:

Bayer's stock chart

Looks pretty good so far, although they seem to be having some issues keeping the performance they had in the late 1990s. That's understandable, though, as competition is pretty fierce.

Now, let's look at Molecular Pharmacology Ltd.'s stock symbol:

Molecular Pharmacology Ltd.'s stock chart

Quite a different chart, no? Well, for starters, the company is less than a month old according to the stock market. Plus the stock symbol has changed from MLPH to MPLH.OB. That may be significant.

So, we have a young company here. Actually, it's older than you think. If you take a look at the very bottom of the summary on Yahoo, you'll notice another company's name "BLUE HAWK VENTURES INC". (Google). It appears they had some dealings with mining, but are now focused on pain killing drugs (one to be exact). Here's the story.

So, you have an Australian company that is now focused on selling pharmaceuticals in the US, and the president leaving the company. All of this is interesting, but it's no scam yet, is it?

Wait, it gets better.

Further down the message (after the glowing notes about how the first to come to market with a new painkiller will see untold rewards in the stock market) we see a link to the drug name. Are you ready for this one? The drug is called Tripeptofen, and according to the letter, this has been over 20 years in the making. Molecular Pharmacology Ltd. has the exclusive rights to distribute this drug. And of course, now is the time to invest because with patents on nearly 100 billion worth of proprietary drugs expiring (of course not all of which are related to pain killing. Aspirin's patents are quite long gone, thankyouverymuch), now is the time when corporations are looking for the next big drug. As luck would have it, these guys have it. What LUCK!

Are you seeing a pattern here? They have a new drug. Drug companies like to sell new drugs exclusively. It's been all over the news how drug companies are very protective of their patents (heck, it's even been on NPR!). Now this is a marriage made in heaven, right?

Let's check something here, shall we?

Back at that Google link for Tripetofen, we have a series of links. Most of them are the letter I'm referring to, so you can ignore those for now. The one I'm interested in is here. On that page, you can scroll down to where it mentions Tripetofen. See it yet? There's mention of another company called PharmaNet Group. Now, pay attention, because PharmaNet Group used to be PharmaNet Online Limited. Part-way down the list of links is a link to Aussie Stock Forums, where it appears these guys have heard of PharmaNet Online. you may want to read through the threads, but the gist of it is best described with PharmaNet FPO's chart. See that? What a bargain! These guys managed to ride this stock like a sled into a comfy 0.034. I wonder if those are Aussie dollars too?

So what changed? Why is Molecular Pharmacology Ltd., which is based in the US, going to have a better go of marketing Tripetofen in America than it did in Australia? What will make this stock take off?

Lots and lots of letters to people who don't take time to do research.


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