It was just a few weeks into the new school year when Connor Bruggemann decided to play sick. He holed up in his bedroom, shut the door, and opened his laptop. Over the summer his father had opened an Etrade account for him, using around $10,000 Bruggemann had saved up over two years working as a busboy and waiter at a local BBQ joint. At first Bruggemann had used that cash to buy some big, well-known stocks: Apple, Verizon, and a few others. But today was different. One by one he liquidated those positions and put almost everything he had into American Community Development Group Inc, ticker sign ACYD, a penny stock selling for $.003 a share.
Over the next year Bruggemann would turn that $10,000 into more than $300,000, principally trading penny stocks, a practice rife with risk, fraud, and wild swings of fortune. He took off school that day, but for most of the time when Bruggemann was trading, he was also a 16-year-old high school junior in Wyckoff, New Jersey. With his iPhone in hand, Bruggemann would buy and sell six figures of stock from his lunch table, the bathroom, and, occasionally, on the sly while sitting at his desk.
What Bruggemann did with penny stocks isn’t new, but technology has changed what’s possible. Twenty years ago even the best home internet wouldn’t have supported this kind of real-time trading. A decade ago you might have done it from a home office. Today, with the supercomputers we carry in our pockets, a kid can put his life savings on the line while sitting in Spanish class.
He sold pieces of his Halloween costume
Bruggemann has always been interested in making money. In kindergarten his parents dressed him up as a concession boy for Halloween, complete with a tray carrying popcorn and candy. “He came home with money, but no candy,” remembers his mother, Lynn. Later he tried his luck with a lemonade stand in front of the house. “We’re on a cul-de-sac, so almost no cars come down here. He didn’t care. He waited for five hours to make that dollar happen.”
He got a job as a busboy at a local restaurant at 14 and worked weekends. He put his money into a savings account, but was unhappy with the paltry interest he earned. His grandfather encouraged him to try the stock market and his father, a former Wall Street trader, eventually agreed to act as the custodian for an Etrade account. “I always talk about the glory days, so maybe it rubbed off a little,” said his father John, a former vice president at JP Morgan who worked on the floor of the New York Stock Exchange. But John never played the penny stocks. “Never. Not my game. You could make money or lose money very, very quickly.”
A weakness for high risk, high reward activities
Bruggemann, on the other hand, embraced the chaos. He was a fantasy football fanatic with a head for numbers and an attention to detail. He had dabbled in sports betting and online poker, getting into trouble with his parents when they discovered it. For Bruggemann,
, penny stocks were another outlet for that risky reward seeking. “There is a lot of fraud and manipulation, a lot of them are not legitimate companies,” he says. “It could be someone like you or I sitting here saying we have a $5 million deal with Panasonic, when in reality that’s not true.” According to the SEC,
over the last two years.
ACYD was Bruggemann’s first big trade. It’s a manufacturer of industrial grade wireless equipment for municipal Wi-Fi systems. He had listened to a conference call where the CEO announced it would buy back shares of the company to try and spur the price towards 1 cent a share. Four days later, Bruggemann accumulated a position of several million shares at the price of roughly one-third of a penny each. Four days after that, the company officially announced its share buyback program, and the price began to climb.
The stock climbed 800X in value
By the end of September those shares had reached a price of a little over a penny each, and Bruggemann’s portfolio was worth more than $50,000. By October, the price of ACYD shares had risen to around 6 cents, 20 times what Bruggemann paid for them. His portfolio was suddenly worth just under $200,000. He sold off most of that position by the end of the December, by which time the stock was down to 4 cents.
By March, ACYD was down to a penny, and today it sits at $.0036 a share, almost exactly where it was when Bruggemann got started. It’s a reminder to him that trading such volatile stocks is a dangerous game. “I guess the rule of thumb is, when you invest in a penny stock, expect to lose every dollar you put in. So there is always that risk,” he told me. “There have been several times where I put every dollar I’ve had on the line, and fortunately it’s worked out almost every time.” He stops, then corrects himself. “Every time! Or else I’d have nothing.”
The Verge reviewed Bruggemann’s trading records and bank statements for this piece. About half of his more than $300,000 came from his ACYD trade. The other half came from hundreds of trades that netted him much smaller amounts.
Despite his strong returns, experts insist, do not mean he’s got some secret formula for success. “Smartphones have exacerbated the monkeys and typewriters problem,” says Paul Kedrosky, a veteran investor. “Given enough people with smartphones, a teen from New Jersey will turn his bar mitzvah money into $300,000, purely by chance.”
Bruggemann’s personal success appears to be equal parts luck and hard work; a combination of diligent research, tolerance for risk, and the discipline to get out quickly to limit his losses. It’s worth noting that he’s only been trading for about 17 months. And it helped, of course, those months took place during the last year and half, while the stock market was climbing to new highs.
Like gambling at a casino, the odds when playing penny stocks are stacked against you. The high levels of fraud and volatility mean it’s very difficult to anticipate what’s coming. Connor’s staggering success, say seasoned traders, is not a magic method others could replicate. In fact, many I talked to doubted it was real at all.
“There are NO prodigies, just bull markets,” says Howard Lindzon, an investor and founder of Stocktwits. He encouraged me not to cover Bruggemann’s story. Other traders I talked to were much harsher. “It’s bullshit. Trust me,” said one. “This is being orchestrated by a penny stock alerts product; it’s a marketing scam.”
At home, in a room he shares with his older brother, Bruggemann has two monitors set up as a trading station. But most of the time, he tells me, “I prefer to trade on my phone.” He monitors trades using a service called Level2, which shows him who the buyer and sellers are, what prices they’re asking for, and how many shares they hold. He also consults the chat room, which he runs, and various message boards he either operates or frequents. Finally he has the Etrade app, where he actually executes all his buy and sell orders. “In school they have a lot of things blocked, Java is blocked, so I use my iPhone instead.”
“I said you probably just cost him money.”
Bruggemann has had his phone confiscated a few times, leading the school to contact his parents. “Last year I got a call from the school saying the physics teacher took away Connor’s cell phone and now I have to come and pick it up,” said his mother. Bruggemann bought himself a new BMW with his earnings, a new Macbook for each of his parents on their birthdays, and iPads for his siblings. “I asked what time did this happen, and she said 9:35. I said you probably just cost him money. He trades stocks, 9:35 means the market just opened, he had to make a move. They told me he’s in physics class, he can’t do that, and I’m like, ok, whatever.”
Tim Sykes, a penny stock trader who Bruggemann cites as an idol. (timothysykes.com)
Bruggemann has applied to college and hopes to study finance, economics, and entrepreneurship. But he has also cooked up his own advice website, where users can learn his trading tips and tricks, follow along with his plays, and converse in a private chat room with Bruggemann and a few other traders, all the for the low price of just $2,000 a year. This is probably where his interaction with penny stocks borders most on the unscrupulous side. Bruggemann is a big fan of Tim Sykes, a former whiz-kid himself, who promises to make his customers rich in just seven days. The site Bruggeman is running doesn’t make any outlandish claims, but he’s still peddling the idea that he has a special skillset others can use to their benefit trading penny stocks, a promise that might be hard to keep.
While the promises on Bruggeman’s website are far less aggressive than “Get rich quick” schemes like Sykes’, there is an element of self-interest in creating a watch list of penny stocks. “If someone is going to pay me for what I’m trading, I don’t want to get in at a penny and they get in at a penny and a half.” Recommending stocks you already own without disclosing that fact is at the heart of many penny stock schemes.
It’s worth emphasizing here that, while The Verge could find no evidence of Bruggeman pushing penny stocks to his followers in an attempt to pump and dump shares, the basic nature of his website is fraught with that potential. Bruggeman says he is careful to indicate which stocks he is in and alerts followers when he enters and exits a stock. For now, the community following his watch list of stocks is fairly small. “We have 16 people it’s emailed out to daily. My Twitter is a little over 1,000. They don’t subscribe to me, but if I tweet, sometimes they will follow my plays.”
His website presents opportunities for manipulation
Bruggemann is at a critical juncture. It would be a short hop to playing the role of the next whiz-kid, using his personal story to charge others, roping them in with a promise that they too will strike it rich. One of the big influences keeping Bruggemann honest appears to be his father, John. He saw the highs and lows of the markets first hand. When John lost his job in the financial crisis of 2008, the whole family felt the impact. “The big expensive vacations aren’t happening as often. The lifestyle that we live, we’ve had to cut back, just like everybody else, until Daddy…gets back to where he was. Even half-way would be nice.”
Along with setting aside savings, John insisted Connor apply to college. He also helped Bruggemann set up his investment advice website, and was careful to keep him from promising too much. “He looks at the Tim Sykes character as his model and believes that he has insight to give. He explains his process, some stuff he’s looking at, but I never want him to give the appearance that he’s promoting a stock. Hey everybody go out and buy X, Y, and Z because I’m promoting the stock. No. Please don’t become that.”
“I’m not supervising him as much as I should.”
While his father is technically in control of the custodial Etrade account, Bruggemann’s parents give him wide latitude to manage his money. “I’m not supervising him as much as I should,” admits his father. “But he turned $9,000 into a lot of money; he’s entitled to it.” He did, however, insist that Connor transfer about half his profits into a much safer long term investment account that his father still controls. “I take money away from him so that he can’t lose it all. I’m gonna trust that he knows what he’s doing, that he’s not going to put it all on one bet, but if it all goes, he still has the down payment for a house. If he lost everything, I would never forgive myself.”
Bruggemann turns 18 soon, and he often teases his father that he’ll be heading to the dealership the day he’s old enough to do what he pleases with his cash. But he maintains no illusions about the world he’s playing in. “The company I’m in right now, the CEO got arrested for embezzling funds. He stole $185,000 from the Girl Scouts, before this.” What he likes about this world is that he is competing against people like himself, mostly small-timers he feels he can beat. “[In] penny stocks, you’re playing against high schoolers. You’re playing Division III.”
“There is way more cheating on Wall Street.”
He says that he’s tried some of the more well-known stock exchanges, but felt that high-frequency traders using sophisticated algorithms were eating into his profits. He keeps a copy of Michael Lewis’ new book, Flash Boys, on his dresser as a reminder that in their own ways, all markets have their unscrupulous players. Penny stocks are a risky game, he acknowledges, but “there is way more cheating on Wall Street.”