U.S. investors poured money into Chinese stocks in 2009 that went public via reverse mergers amid optimism about the world’s second-biggest economy. The gains were erased over the following two years as the global financial crisis unfolded and some of the stocks were targeted by short sellers.
Zoom Technologies Inc., a Chinese maker of phone equipment, jumped to $126.27 in 2009 from about $4 in about six months in 2009. The stock has since lost all of those gains. Universal Travel Group. reached $16.83 in 2009 from about $1.50 the previous year. The Chinese travel service traded at 16 cents in 2013 before it was delisted.
“It’s very easy to see why day traders love a penny name,” said Yousef Abbasi, market strategist at JonesTrading Institutional Services LLC, a Westlake, California-based broker, referring to the ticker symbol for Medical Marijuana. “They love the hype surrounding these names and there is constant news flow.”
Medical Marijuana Inc. shares trade at 19 cents, up 21 percent since Dec. 31. AVT Inc., which makes vending machine technology, is up almost 300 percent this year. Cannabis Science Inc. has more than doubled to 12 cents. mCig Inc., an electronic-cigarette producer, has risen 54 percent to 14 cents a share.
A phone call to Medical Marijuana was not immediately returned. Shannon Illingworth, founder of AVT in Corona, California, wasn’t available for comment. Messages left with investor relations at mCig, GreenGro Technologies, Tranzbyte and Medbox weren’t returned.
Bruce Campbell, a fund manager with StoneCastle Investment Management Inc., said investors should buy a basket of marijuana companies instead of trying to pick a winner out of a group of small, thinly-traded stocks.
“You want to do it with a basket, knowing a couple of them will blow up and do really well, with the rest somewhere in the middle,” Campbell said on the phone from Kelowna, British Columbia. He helps manage about C$100 million ($92.4 million) with the firm. “Your basket will probably give you some good returns over the next five to 10 years.”