Mysterious call had me intrigued. What does it mean to ‘watch’ a stock?

John Kelly
Columnist May 13

I know a lot of people screen their calls these days, but I still get excited when I hear the phone ring. I answer it eagerly, curious what wondrous story will come at me down the telephone line.

“Hello sir, this is David calling from UndercoverStocks.com to tell you about a stock we think you should watch,” said a man who reached me at home last week. His accent suggested his formative years were spent somewhere other than the United States.

John Kelly writes "John Kelly's Washington," a daily look at Washington's less-famous side. Born in Washington, John started at The Post in 1989 as deputy editor in the Weekend section. View Archive

I know I should just hang up, but I’m so curious about the way some people have chosen to live their lives that I often draw these callers out.

David seemed quite invested in our conversation.

“This is not a sales call, sir. I am calling from UndercoverStocks.com to tell you about a stock you should watch.”

“Watch?”

“That is correct, sir. It is poised to do interesting things.”

“But why would I want to watch a stock?” I said. “Do people do that? Watch stocks? I’ve heard of birdwatching, but not stock watching. Isn’t the point of watching a stock to buy it?”

“I’m not asking you to buy the stock, sir. I am just telling you about it.”

David told me the name of the stock and the phone number for UndercoverStocks.com. Then we politely ended the call. I kept wondering what had just happened.

Curious, I checked out the stock, which was trading for around 36 cents a share. I don’t really understand the stock market, but apparently there are all sorts of things to be wary of in the world of over-the-counter stocks. These companies are not required to disclose as much information as those that are traded on the Nasdaq or New York Stock Exchange. Penny stocks are so volatile that just a few trades can move the share price, making them susceptible to the old “pump and dump”: temporarily inflating the stock price in order to quickly sell them.

In the 1980s this was done in a clever way: Scammers would randomly fax thousands of fax machines a message that said something like: “Hey, this stock is going to go up tomorrow. Get back to me ASAP. — Kevin.” That would be followed a few minutes later by a second fax from “Kevin” that read: “The previous fax was sent to the wrong number. Please disregard.”

Disregard an accidental hot stock tip? Never!

Owen Donley of the investor education office at the Securities and Exchange Commission said, “Investors should always be wary of an unsolicited offer to invest in anything, but especially in thinly traded OTC securities. And always do as much research as possible.” (If you have questions about investing, you can visit investor.gov, a Web site created by the SEC for consumers.)

Of course, David never tried to sell me a stock. He just encouraged me to “watch” one. So I called the 310 area code number that David had given me. A man who said his name was Ethan Jones answered. He seemed unfazed when I identified myself as a Washington Post columnist and was as eager as David had been to chat with me.

Ethan very politely told me that UndercoverStocks.com wasn’t selling stock. It was selling stock recommendations. He hoped that by giving me two or three valuable tips, I would decide to pay $30 a month to subscribe to their investing newsletter.

I asked Ethan whether his company was paid to tout certain stocks. “Absolutely not,” he said. “We identify winners.”

Ethan said his company had been around for 10 years and was located in Santa Monica, Calif. The Web site is registered to an address in Cape Town, South Africa, and was created in November. He said he’d e-mail me the company’s address; he didn’t. He didn’t return follow-up phone calls, and subsequent calls went straight to voice mail.

It could be that I missed a lucrative investment opportunity. I’m betting I didn’t.

For previous columns, visit washingtonpost.com/johnkelly.

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