Keen investors will at some point in their life visit the ASX stock forum HotCopper which has long been the largest forum for discussion of ASX-listed companies, and subsequently received marketing emails for penny stocks they sell advertising for.
Having established the forum in 1994, the site has built up the largest database of Australian investors where registration via verified email and phone number is required. Whilst threads occasionally offer insight into a Company and the investor sentiment, it is also commonly known for its bickering and unfounded promotion of stocks from investors that are heavily invested.
‘Up Ramping’ and ‘Down Ramping’ are common terms used by posters amid flaming other users.
But since the internet has caught up to HotCopper, with social media, news sites and alternative forums becoming more common, HotCopper has become known for selling advertising to ASX-listed companies by sending marketing emails to their database for around $15,000 per send. Such has it become a vital source of revenue for the business, which is owned by The Market Herald (ASX: TMH), there are times the advertiser hits their database with marketing emails twice in a day.
Facebook groups have emerged as a popular alternative to HotCopper where it is more difficult for ‘keyboard warriors’ to hide behind screen names and anonymity. One post today on the Facebook Group ‘ASX Stock Tips Group’ has caused plenty of discussion amongst investors with Jay Brennan having conducted extensive analysis into whether HotCopper’s marketing emails actually impact the share prices of companies they advertise.
Tracking the share price movements for 42 companies that he received a marketing email from via HotCopper, Brennan logged the Company’s open price, daily high, close price and close price 3 days after the email was sent.
“~4/5 Companies moved up from their open price at some point throughout the day. If you were to buy at open and sell at the high throughout the day (i.e before close) your average return would be 17%,” wrote Brennan.
“However, for these stocks that moved up from open price, more than half ended up closing below, and in the red for the day. [The] average one day return of those that went up at open was 3%.
“If you hold for 3 days then that return becomes negative. Those that moved down from open i.e Open price = daily high price, averaged a daily return of -10% and a 3 day return of -13%.
“This suggests that momentum exists in the negative direction but not the positive direction.”
The original post attracted notable attention from investors praising Brennan for his in-depth analysis which was a welcome relief from the abundance of posts about BNPL companies.
Within those that commented was HotCopper Co-Founder Tony Cunningham.
As identified by Brennan, “Holding a stock greater than one day will generally lead to negative returns,” based on the 42 stocks that were promoted by HotCopper’s marketing emails, outside of the intraday sugar hit that most have received.
In June 2020, the company which owns HotCopper changed its name from HotCopper (ASX: HOT) to The Market Herald (ASX: TMH) to reflect their re-brand away from the HotCopper image.
*This article was published with the consent of the original poster who conducted the research and analysis referenced.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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