Jordan Belfort, the self-proclaimed “Wolf of Wall Street” who served 22 months in prison for financial fraud crimes including pump-and-dump schemes related to penny stocks, has advice for today’s investors: stay away from penny stocks.
In an interview on the Benzinga podcast “The Raz Report” to promote his upcoming book “The Wolf of Investing” (published by Simon & Schuster), Belfort – who now works as a motivational speaker and sales coach – stated that the investment vehicle he once tireless promoted should be avoided.
“I think that by and large almost all penny stocks are garbage, that’s my opinion,” he said. “Knowing the penny stock world really well, I think that for the most part penny stocks are not designed to work. They’re designed to enrich the people that issue them. I think that deck is so heavily stacked against investors in the penny stock world because you’re not dealing in a realm where the companies themselves are designed and the market capitalization are in line with reality.”
Belfort, whose tumultuous rise and fall was the subject of the Oscar-nominated 2013 film “The Wolf of Wall Street,” admitted there were some exceptions to the rule. He pointed to Australian penny stocks tied to local mining companies as being worthy of study. Furthermore, he expressed intriguing over stocks that once were traded on major exchanges but wound up trading as penny stocks when their companies faced financial challenges.
“That’s not to say that every once in a while a penny stock becomes real,” he said, quickly adding that for the most part the current line-up of penny stock should be viewed skeptically because “their market caps are out of whack with what the companies are worth.”
