Popular online stock forum HotCopper Holdings Ltd (ASX: HOT) boasts 700,000 unique users per month. Personally, I find it a fascinating source of diverse opinions and a useful gauge of sentiment among retail shareholders (or "punters" if you prefer).
As you would expect from such a broad member base, the quality of comments varies hugely. Whilst there exists a minority of well informed and insightful contributors who are well worth seeking out, the clear majority of posts are of little value.
Indeed, having spent far too much time browsing the site I have noticed that there appears to be a strong negative correlation between the most talked about stocks and those that I would consider to be worthy of investment. For example, here are today's top five talked about shares.
SKY and Space Global Ltd (ASX: SAS)
Market capitalisation: $303.4 million (note that Google Finance shows a market capitalisation of $113.1 million but this excludes 880,000,000 shares held in escrow)
First half 2017 revenue: $24,400
First half 2017 loss after tax: $4.7 million
Cash: $5.4 million
Sky and Space "plans to plans to deploy nano-satellites constellations in orbit to provide global communication infrastructure and services to the telecommunications and international transport industries."
This is a heady goal which probably explains why the share price is up 975% in the last six months.
XPED Ltd (ASX: XPE)
Market capitalisation: $46.5 million (Google Finance shows $36 million but this excludes 497.1 million shares in escrow)
First half 2017 revenue: $0.6 million
First half 2017 loss after tax: $3.9 million
Cash: $5.5 million
Xped "has developed revolutionary and patent-protected technology that allows any consumer, regardless of their technical capability, to connect, monitor and control devices and appliances found in our everyday environment."
Sounds like amazing technology, and a market capitalisation of just $46.5 million means this must be a bargain (not).
Slater & Gordon Limited (ASX: SGH)
Market capitalisation: $30.3 million
First half 2017 revenue: $322.7 million
First half 2017 loss after tax: $425.1 million
Cash: $57 million ($737.4 million of debt)
This legal firm makes no money and has borrowed more than it is ever likely to be able to repay in its current form. What is such a company worth?
Mustang Resources Limited (ASX: MUS)
Market capitalisation: $39.3 million
2016 revenue: $0
2016 loss after tax: $10.3 million
Cash: $0.7 million
Mustang Resources "is an emerging gemstone developer and producer focused on the near-term development of the highly prospective Montepuez Ruby Project in northern Mozambique."
Hmmm… a mining explorer with no money, BUT the shares are up 234.6% in the last three months!
Greenpower Energy Limited (ASX: GPP)
Market capitalisation: $35.7 million
First half 2017 revenue: $15,000
First half 2017 loss after tax: $0.6 million
Cash: $2.8 million
Greenpower is developing technology to convert coal to liquid which will "produce greenhouse-gas free chemicals and products from coal". However, in the first half of 2017 the company also acquired a part interest in a Guyanese lithium exploration project.
Wow, turning coal into liquid sounds awesome and everyone knows lithium is a great investment right now. No wonder the share price is up 600% in the last six months.
Foolish takeaway
All five of Hotcopper's most talked about stocks lose money and that does not look like changing any time soon.
They also all have limited funding so dilution of shareholder funds looks like a given in the near-term. These are precisely the qualities to avoid when looking for a company to invest in.
Just because these are the most talked about stocks does not necessarily mean they represent the investing decisions of the typical Hotcopper user. It could be that these stocks are widely discussed because they attract both critics and advocates. Also, they probably say more about the relatively small number of people who post prolifically on the site, rather than the average forum member.
