For those of you not familiar with that term, it's simply an outfit that "gets paid" to promote a particular company's prospects to people.

I'm torn a bit as to what I think about these places. On one hand, let's say you have a great little company, but no one's heard of you. You trade on the pink sheets and can't seem to get your stock price over a buck, despite making good profits and growing your business each year. What can you do? Well, you can go to a promoter, pay him a fee and he'll go out and "spread the word" about your company, hopefully opening a bunch of eyes to your possibilities.

That sounds relatively harmless right? Well, yes and no. If done properly it is harmless. But some promo houses take it a bit too far, hyping the company with facts that simply aren't true, and making it sound much better than it is. So, what happens is that the average "Joe" gets an email telling him about the hottest new gizmo on the planet, telling him how the company is going to take over from MicroSoft, and that he's got to buy it now, a few days ahead of some "important news" that's about to hit.

So, Average Joe buys XYZ and calls his friends. They buy XYZ. Soon the stock is moving higher and all is well. But then the promo house itself, which may have gotten 100K shares, starts selling into that move. In a matter of days, XYZZ is lower than it was. That my friends is a classic pump and dump.

If you get a piece from one of those promo houses and the info sounds interesting, do some research. If after poking around the company you find that "hey, this does have some merit" then by all means make a decision as to whether you want to invest in it. But don't take any of the "hype" you see at fair value.Make sure you prove each and every point the Promo house has indicated. I've found some good companies after reading promo hype, but I've found a lot more that weren't worth a second look. Do your homework.

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