A Santa Claus Rally? Yes, Virginia…

By Tim Edwards, SP Dow Jones Indices

Theories that aim to predict stock market performance range from the complicated and impenetrable to the arcane and simply ridiculous.  But some are wonderfully clear: for example, December is usually a good month.  In the festive spirit, and not to be taken too seriously,  we’ve duly found that the evidence supports the existence of a “Santa Claus Rally”.

Our test of choice, which we may as well call a “Santa Score”, is the result of dividing the average performance each December by the annualized total return over the period.  Since there are 12 months in the year, a Santa Score of around one twelfth (about 0.08) would be expected; a Santa Score above 0.08 indicates that December is a better month for stocks, on average.

With an average Santa Score is 0.36, not a single market fails our test.  December has been, on average, around four times more profitable than the average month.  A Santa Score above 1.00 implies that investing only in December (and doing nothing for rest of the year) is a market-beating strategy; Japan clocked in a remarkable Santa Score of 1.13.

At least in the past few years, December has borne gifts for equity investors.  So, pat yourselves on the back and tuck into your Christmas parties!  Let’s raise a glass to momentum and seasonality. And hope Santa has noticed.

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The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

"Dividend Dogs" Fund Barks its Way to $1 Billion in Assets

By Todd Shriber, ETF Trends

With low interest rates and anemic yields on U.S. Treasuries forcing investors to expand their yield-generating horizons, 2014 has been another strong year for inflows to dividend exchange traded funds.

The ALPS Sector Dividend Dogs exchange traded fund (SDOG) proves as much. SDOG, which is nearly two and a half years old, joined the $1 billion in assets under management club this week. SDOG tries to reflect the performance of the S-Network Sector Dividend Dogs Index, which applies the “Dogs of the Dow Theory” on a sector-by-sector basis using the S&P 500 with a focus on high dividend exposure.

As has been seen over the years with a plethora of ETFs, equal-weighting works and it is working with SDOG. SDOG’s sector weights range from 8% for industrials to 11.7% for financial services.

Although SDOG is underweight health care, the S&P 500’s top sector this year, by over 400 basis points relative to the benchmark U.S. index, the dividend ETF has returned 13.3% this year. That is good enough to be ahead of the S&P 500.

SDOG’s 10% weight to utilities, the second-best S&P 500 sector this year, has helped. Though not excessive compared to some other dividend ETFs, SDOG’s utilities allocation has been enough to contribute to the ETF’s upside. A 10% utilities weight is more than triple the S&P 500’s allocation to the sector.

None of SDOG’s holdings command weights in excess of 2.2%. The ETF’s top-10 holdings, which combine for just 21.1% of the ETF’s weight include Dow components DuPont (NYSE: DD) and Verizon (NYSE: VZ) along with Altria (NYSE: MO), Lockheed Martin (NYSE: LMT) and Reynolds American (NYSE: RAI).

SDOG has a dividend yield of 4.04%.

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ALPS Sector Dividend Dogs Fund (SDOG) a component of the D2 Capital Management Multi-Asset Income Portfolio. Current yield on the portfolio is 4.92% and year to date the portfolio is up 9.21% (as of 24 November 2014).

Disclosure:  I own the D2 Capital Management Multi-Asset Income Portfolio

The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

The Declining Price of Crude Oil: Broad Impacts

By Samuel Hecker, IRIS.XYZ

The sharp and sudden drop in the price of crude oil over the last few months caught many market participants by surprise.  This decline has broad impacts for the economy and, more specifically, the bond market.  As measured by the price of WTI (West Texas Intermediate), the price of oil has fallen almost 28%, from $102.90 per barrel on June 25th to $74.21 per barrel on November 14th.  The effects of the price decline are far-reaching:

U.S. Economy – Much has been made in recent years of the resurgence in U.S. oil production, which has been driven by large-scale discoveries and made more efficient by improved technology.  A concern has emerged as to whether the price decline will slow production levels and hurt economic growth, particularly in the oil producing regions of Texas and the Upper Midwest.  Lorenzo Simonelli, an executive from General Electric’s Oil and Gas division (which supplies drilling equipment), claims the price decline has yet to slow activity.  “The projects so far are still viable,” he said, speaking last week at an event in Brazil.  Even if production were to slow, however, investment in oil and gas represents less than 1% of U.S. GDP, according to Barclays.  The larger impact of lower oil prices is a positive one and relates directly to U.S. consumers.  Americans spend roughly $1 billion each day on gasoline, says Tom Kloza, global head of energy at the Oil Price Information Service, and the decline in costs will save Americans $8.4 billion in November and December compared to the same months in 2013.  If prices were to stay at these levels, it would result in $400 in yearly savings per household.  This extra cash would add nearly a half a percentage point to fourth-quarter GDP growth and generate $70 billion in additional consumer spending next year, says Barclays.  On net, the positives far outweigh the negatives from a domestic economic perspective.

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The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

An Outperforming Dividend ETF Right for the Times

By Tom Lydon, ETF Trends

In a low-yield environment, the Global X SuperDividend U.S. ETF (NYSEArca: DIV) has acted as an attractive investment opportunity this year, outperforming the broader market and generating decent yields.

DIV follows 50 of the highest dividend yielding equity securities in the U.S. and equally weights its component holdings. The ETF has a 0.45% expense ratio and a 3.58% 12-month yield. The fund also generates a monthly dividend yield for those seeking a steady stream of income.

The SuperDividend U.S. ETF has been outperforming the broader equities market. DIV is up 20.0% year-to-date, whereas the S&P 500 is 13.1% higher.

The fund also includes a low-volatility filter to diminish volatility in the portfolio. Specifically, underlying holdings must have a beta of less than 0.85 relative to the S&P 500 to be included in the index. Beta is a measure of volatility, and stocks with 1 reading reflects perfect correlation, so anything below 1 suggests the security is less volatile than the market.

However, potential investors should be aware that while the ETF takes on a diversified approach to high-yield dividend stocks, DIV includes significant exposure to rate-sensitive sectors.

For example, utilities make up 21.4% of DIV’s holdings. As interest rates rise, utility stocks will likely underperform other equity sectors. The rising rates typically make fixed-income securities more attractive on a relative basis to bondlike stocks. So far this year, the utilities sector has benefited from a pullback in interest rates.

Master limited partnerships account for 21.3% of the ETF’s underlying holdings. If interest rates rise, the cost of capital for MLPs also increase, which means that investors would expect lower distributions. The asset class has historically been negatively impacted by rising rate markets.

Additionally, mortgage real estate investment trusts is 15.8% of the underlying portfolio. REITs also rallied this year as rate concerns diminished. However, mortgage REITs are very sensitive to rising rate risks as any changes to short-term rates can have a significant impact on these REITs’ profitability – mortgage REITs have provided attractive yields due to cheap financing, but higher rates ahead would mean higher funding costs.

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Global X SuperDividend U.S. (DIV) a component of the D2 Capital Management Multi-Asset Income Portfolio. Current yield on the portfolio is 4.92% and year to date the portfolio is up 9.21% (as of 24 November 2014).

Disclosure:  I own the D2 Capital Management Multi-Asset Income Portfolio

The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Energy Pipelines Remain Unfazed By Low Oil Prices

By Tom Lydon, ETF Trends

Even as oil prices decline, master limited partnerships (MLPs) and related exchange traded funds will continue to benefit from the rising production from U.S. oil drillers.

Unlike other energy sector stocks, MLPs primarily deal with the distribution and storage of energy products, so their business model is less reliant on the commodities market since MLPs profit off the quantity of oil and natural gas they are able to move around. In the U.S., we are experiencing an oil boom from new drilling techniques implemented in shale oil beds.

The big change has been that U.S. production of crude oil has been really ramping up over the past four years, because everybody has gotten more prolific about getting oil out of the ground,” Stewart Glickman, group head of energy research at S&P Capital IQ, said in an InvestmentNews article.

Glickman also argued that the logical play in the energy market now is through infrastructure and MLPs that contract to transport the commodity, no mater the per-barrel price.

“It doesn’t matter to the pipeline what the price of oil is, because they are getting fees for volume and clearly the volumes are high,” Glickman added.

Despite the falling oil prices, hydraulic fracturing shale drillers plan to expand production, which could mean that MLPs will experience more business ahead as the companies move around all the excess oil.

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Energy MLPs are a component of the D2 Capital Management Multi-Asset Income Portfolio. Current yield on the portfolio is 4.92% and year to date the portfolio is up 8.57% (as of 19 November 2014).

Disclosure:  I own the D2 Capital Management Multi-Asset Income Portfolio

The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Why Funds Make Sense for Municipal Bonds

By Tom Lydon, ETF Trends

When looking into the municipal bond market, fixed-income investors may be better off with a muni bond funds, instead of trading individual debt securities.

Brokers typically mark up the price of municipal bonds they sell to individual investors, writes Aaron Kuriloff for the Wall Street Journal.

However, the markups that funds pay are typically lower since fund companies buy in bulk and are more familiar with the market.

Consequently, Christine Benz, director of personal finance at investment researcher Morningstar, argues that most people should use munis-related bond funds, adding that reducing fees is “absolutely crucial” to efficiently maximize gains from a low-yielding asset like munis.

Muni bond investors can also enjoy the instant diversification benefits of owning a muni fund. The funds spread risk by holding multiple bonds from many different issuers across different states. The large portfolio of muni debt securities help diminish the negative effects of a single issuer default.

Allan Roth, a financial adviser at Wealth Logic, argues that a broad muni fund helps diversify away from an investor’s local economy and the market for his or her home. However, potential investors should be aware that local tax breaks would only apply to a portion of a broad muni fund that come from their home state.

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The D2 Capital Management Tax Free Income Portfolio is currently yielding 4.41% (Trailing 12 month Tax Equivalent Yield at 28% Tax Bracket, as of 17 November 2014).  Year to date the portfolio is up 8.71%

The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

The Temptation of Technology Dividends

By Todd Shriber, ETF Trends

Another year of low interest rates has, once again, sent investors flocking to dividend funds.

But many dividend funds sacrifice exposure to future sources of dividend growth, such as the technology sector, in favor of sectors’ past dividend track records. Hence, the often substantial overweights to consumer staples and utilities and relatively thin exposure to tech in equity income funds.

The ascent of tech dividends has created a captive audience for exchange traded funds like the First Trust NASDAQ Technology Dividend Index Fund (TDIV). TDIV has soared in popularity as the technology has progressively become a more legitimate and attractive dividend destination over the past several years. TDIV has added $406.1 million of its $744.4 million in assets under management this year.

While the concept of dividend growth in the tech sector is still relatively new, that does not mean it will not prove rewarding for investors. The sector is one of largest contributors to S&P 500 dividend growth over the past few years.

Because the information technology sector’s dividend growth rate has exceeded all other sectors over the past 3, 5, and 10 years and the sector currently pays more dividends than any other sector in the S&P 500 Index,” according to First Trust Senior Vice President and ETF Strategist Ryan Issakainen.
The average payout increase from Apple, IBM (IBM), Cisco (CSCO) and Qualcomm (QCOM) this year is almost 14%.

Interestingly, “roughly half the dividend-paying technology stocks in the S&P 500 offer higher dividend yields than that of the S&P 500 Index,” notes Issakainen.

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First Trust Nasdaq Technology Dividend Index Fund (TDIV) is a component of the D2 Capital Management Multi-Asset Income Portfolio.  Current yield on the portfolio is 4.93% and year to date the portfolio is up 8.28% (as of 14 November 2014).

Disclosure:  I own the D2 Capital Management Multi-Asset Income Portfolio

The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Political Mix May Boost Dow

Stock market history suggests the combination of a Republican-controlled U.S. House and a Democratic president is the most likely to see the largest annual gain in the Dow Jones Industrial Average. Interestingly, Democratic presidents outpace Republicans consistently, but Republican Houses beat their Democratic counterparts over time. In the table here, the two purple quadrants show the Dow’s average annual growth in “dual-party” environments:

Even though valuations are somewhat stretched, stock market returns from November through April have dominated May through October by a long shot since 1955. Add that seasonal effect to the political environment, and we could be setting up for a decent tail wind.

Source:  BMO Private Bank

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The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

"A steady and attractive stream of income"

By Daniela Pylypczalk-Wasylyszyn, ETF DataBase

Building a traditional buy-and-hold portfolio has become significantly easier and cheaper in recent years, thanks to the Exchange Traded Fund industry’s wide range of options. But while there are hundreds of funds that could be used as a core building block, there is one ETF that stands outs from its peers and should certainly be given a closer look. The Global X SuperDividend U.S. ETF (DIV) offers investors a lucrative source of steady income, as well as a unique methodology that is designed to withstand periods of market volatility.

Like its name suggests, the SuperDividend U.S. ETF (DIV) aims to provide investors with an attractive stream of current income. It accomplishes this objective by tracking the INDXX SuperDividend U.S. Low Volatility Index, which is designed to measure the performance of companies that rank among the highest dividend yielding equity securities in the U.S.. The index consists of a diverse group of 50 equally-weighted securities, mitigating the risk of a single security having too much influence on the performance of the fund. Sector caps of 25% are also instilled to ensure the portfolio is not heavily overweight in a particular sector.

To be selected for inclusion, a company must meet several requirements, including a minimum market capitalization of $500 million and  an average daily trading volume of at least $1 million over the past six months. The stocks must also have paid dividends consistently over the last two years; if a company suspends or cuts dividends, it will be removed from the index at the next quarterly review.

The index also utilizes a low-volatility filter in its screening methodology. Companies must have a beta of less than 0.85 relative to the S&P 500 on the rebalance date.

Under the Hood of DIV

DIV’s portfolio consists of approximately 50 individual securities, none of which have an allocation greater than 3% of the fund’s total assets. DIV features exposure to a diverse group of sectors, though energy, utilities, real estate, and consumer defense equities do receive the highest weightings. The fund also has an attractive mix of market capitalization sizes, which features almost equal exposure to giant, large, mid, small, and micro cap securities.

Considerations on DIV Performance

Given DIV’s focus on equities that exhibit lower volatility relative to the broader market, investors should note that the fund is likely to log in lower returns than riskier equity funds, such as the S&P 500 ETF (SPY). DIV, does however, offer a significantly higher yield than many of its Large Cap Value Equities counterparts, as well as other broad market funds.

How to Use DIV in a Portfolio

The SuperDividend U.S. ETF (DIV) is a great option for investors looking for a solid core holding. Given its focus on both low volatility and yield, as well as its equal-weighted methodology, the fund’s potential will be realized best over a longer time frame.

DIV’s distribution schedule also makes it an attractive addition to any portfolio; the fund distributes its payouts on a monthly basis. With this lucrative payout, investors should consider reinvesting to take advantage of compounding returns.

The Bottom Line

Global X’s SuperDividend ETF (DIV) offers investors an opportunity to receive a steady and attractive stream of income, while at the same time helping mitigate downside risk. The fund’s unique methodology and focus on key long-term fundamentals certainly make it stand out from its peers.

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Global X SuperDividend (DIV) is a component of the D2 Capital Management Multi-Asset Income Portfolio.  Current yield on the portfolio is 4.94% and year to date the portfolio is up 8.33% (as of 5 November 2014).

Disclosure:  I own the D2 Capital Management Multi-Asset Income Portfolio

The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Elections May Signal Stock Rally

By Spencer Jakab, Wall Street Journal

Investors cheering for a Republican victory in Tuesday’s midterm elections may wind up being pleased by the outcome, but not for the reason they thought. If history is any guide, the combination of Republicans controlling both houses of Congress but not the presidency has been the best of all possible permutations.

Since 1945, returns for the S&P 500 when that situation prevailed were 10.1% compared with 8.8% for all years, according to Sam Stovall, U.S. equity strategist at S&P Capital IQ. But the dream scenario for the GOP—retaining Congress in two years and putting a Republican in the White House as well—wouldn’t rain on their portfolios. Those returns were nearly as high.

The conventional wisdom holds that “gridlock is good” and also that Republicans, the more business-friendly party, are better for stocks. Neither is clear cut, though.

Just looking at three scenarios irrespective of party control, the best returns occurred during periods of a unified government followed by a unified Congress and, bringing up the rear, different parties controlling each house. A split Congress with a Republican in the White House has seen the weakest returns while Democratic presidents have presided over much better average gains in the same scenario.

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The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Returns on Muni Bonds Soar

Municipal bonds have posted their longest string of monthly gains in more than two decades, outpacing gains this year in blue-chip U.S. stocks and corporate debt. The rally is pushing down borrowing costs for scores of municipalities, enabling even cash-strapped ones to tap capital markets.

The gains stand out following the $3.7 trillion sector’s 2.55% decline in returns last year, driven by Detroit’s record bankruptcy and Puerto Rico’s financial woes. That pullback revived calls by market pundits since the financial crisis that municipal debt was vulnerable to an investor exodus.

Municipal bonds have returned 8.32% in 2014 through Friday, including price gains and interest payments, according to Barclays PLC. That compares with 6.86% for the Dow Jones Industrial Average, 6.68% for highly rated corporate debt and 4.07% for U.S. Treasury debt.

Many municipal bonds are considered nearly as safe as Treasurys because they are backed by tax revenue.

Source:  Wall Street Journal

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The D2 Capital Management Tax Free Income Portfolio is currently yielding 4.41% (Trailing 12 month Tax Equivalent Yield at 28% Tax Bracket, as of 31 October 2014).  Year to date the portfolio is up 9.03%

The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

5 Tips to Avoid Penny Stock Scams

The Securities and Exchange Commission’s Office of Investor Education and Advocacy and the Financial Industry Regulatory Authority released Thursday an alert warning investors that some penny stocks being aggressively promoted as great investment opportunities may in fact be stocks of dormant shell companies with little to no business operations.

The investor alert provides five tips to avoid pump-and-dump schemes in which fraudsters deliberately buy shares of very low-priced, thinly traded stocks and then spread false or misleading information to pump up the price. The fraudsters then dump their shares, causing the prices to drop and leaving investors with worthless or nearly worthless shares of stock.

“Fraudsters continue to try to use dormant shell company scams to manipulate stock prices to the detriment of everyday investors,” said Lori Schock, director of the SEC’s Office of Investor Education and Advocacy, in a statement. “Before investing in any company, investors should always remember to check out the company thoroughly.”

Investors should be on the lookout for press releases, tweets or posts “aggressively promoting companies poised for explosive growth because of their ‘hot’ new product,” added Gerri Walsh, FINRA’s Senior Vice President for Investor Education. “In reality, the company may be a shell, and the people behind the touts may be pump-and-dump scammers looking to lighten your wallet.”

Here are the alert’s five tips to help investors avoid scams involving dormant shell companies:

1. Research whether the company has been dormant – and brought back to life.  You can search the company name or trading symbol in the SEC’s EDGAR database to see when the company may have last filed periodic reports.

2. Know where the stock trades.  Most stock pump-and-dump schemes involve stocks that do not trade on The NASDAQ Stock Market, the New York Stock Exchange or other registered national securities exchanges.

3. Be wary of frequent changes to a company's name or business focus.  Name changes and the potential for manipulation often go hand in hand.

4. Check for mammoth reverse splits. A dormant shell company might carry out a 1-for-20,000 or even 1-for-50,000 reverse split.

5. Know that “Q” is for caution.  A stock symbol with a fifth letter “Q” at the end denotes that the company has filed for bankruptcy.

Source: ThinkAdvisor

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The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association.