Yahoo! Stock Message Boards as a Research Tool

Yahoo! Finance stock message boards are synonymous with online investing.

If you go there for "unbiased investment advice," you are asking for trouble, but if you know how to use them, they can be a great stock research tool.

Explanation for a Stock's Move
If a stock makes a sudden move and you can't find any news to explain it, go to the stock's message board. There usually will be an explanation - a reference or a link to an SEC filing that the company chose not to publicize, to a competitor's announcement, or to an authoritative online publication. There is no need to wade through 20 pages of posts: if you go to the board right after the move begins the explanation is usually right there in one of the current posts. Otherwise, check when the move started and find the corresponding time spot in the postings as your starting point for a search.

Number of Posts as an Indicator
If the board of the stock you are interested in has a dead board, with the last post dating back several weeks or months, it is usually one of two things: a dud or an uncovered gem. It's up to you to decide which, but at least you have a starting point: you are either at a dead end or have just uncovered a hidden gem.

If you believe it's the latter, think about what will happen when the stock is finally discovered. A strong move is usually accompanied by a sudden increase in the number and frequency of posts. If you get in ahead of the crowd, you will have a comfortable profit cushion. If, on the other hand, the stock you are interested in has hundreds of daily messages, you know it has been discovered and should expect a lot of volatility and manipulation. Plus, the move may already be quite old, with limited upside, so check the chart.

Whose opinion should you trust?
In a word: nobody's. You will never know how knowledgeable a poster is or what his real agenda is. It's easy to get influenced by skillful manipulators or "useful idiots" repeating others' mantra.

But shorts know that fear is a stronger motivator than greed, that's why as moronic as their bashing may sound at times, it works if repeated enough times. Multiple negative messages and predictions of an imminent collapse are a sign of heavy shorting. Think about it: in stock trading, nobody is going to open their mouth for your benefit. Why would people go out of their way to warn you against a bad investment on Yahoo! Message boards? A silent board is a better indicator that something may be wrong with a company or at least that there is no reason to get excited about it.