I'm currently an investor in 2 penny stock companies. Both companies have had their companies reduced to debt or non-profitability over the recent past. Both companies, however, have THIS YEAR fit a theme that is KEY to being a successful penny stock investor.
I've been meaning to save this just in case Motley Fool picks me up as a part-time freelance writer for the website. Since, I can't predict whether that will happen or not and today is an exciting day to talk about penny stock investing, I have to share my strategy to anyone interested.
So.. What do you look for to establish your first position in a Penny Stock as an "Investment" not a short term bounce, "trade." I.E. How do you take the Motley Fool buy and hold strategy with companies that have recently been on the verge of bankruptcy?
The simple answer is that you do not look at these companies under a different method than you look at any company. Whether to invest in Wal-Mart is the same as whether to invest in an Penny Stock trading on the Bulletin Boards.
Here is my list of requirements before I get excited enough to buy into a penny stock for the long haul:
1) Has the Management that reduced the company to near bankruptcy been replaced by better management?
If YES then you can move to #2.
2) Is there an established line of services or products that this company still sells that you can easily become an excited believer in?
----> What to look for: Look for any recent magazine articles praising the company for their services or products they sell. I invested in Southwall Technologies because of the Award it received for its XIR Heat Windows. I invested in Southwall Technologies because everyone is talking about energy efficiency (Democrat or Republican) in our own Government as well as in foreign governments.
If you can not become a believer, fan, fanatic even over what the company sells then do not invest! Otherwise move to #3.
3) Has the company established a turn-a-round strategy that has taken years to establish but is now in full swing and is this strategy now backed up with evidence that it is working well? (such as a recent earnings report)
-------> When did I invest in Penny Stock: swtx.ob? I invested after reading the company's 1st Quarter 2008 earnings report which was a key piece of evidence. That penny stock abandoned their display products to focus on their energy efficient window products. Their earnings report was an increase YoY of 21%. I saw improvements all over the balance sheet.
If you have a penny stock that has nailed down all 3 requirements then you can go to the final requirement:
4) Is the company having success in expanding their services/products?
If YES then INVEST.
But I urge you to find those Penny Stocks that meet ALL 4 REQUIREMENTS.
Here's something to consider. Should you wait until a company has positive cash flow? Should you wait for ZERO DEBT?
That depends on the company. With Clearly Canadian (CCBEF.OB), I looked at their balance sheet and their recent earnings report and I labored for MONTHS before investing. The company carries a negative cash flow but they are coming out of it and I felt that it wasn't too early to invest in CCBEF, because waiting for a positive cash flow was too late.
I believed that investing in CCBEF.OB in spite of a negative cash flow was a smart decision based on the fact that the company fulfilled all 4 of my requirements and the negative cash flow was trending UP to positive. It may be 6 months for the company to get a positive cash flow, but optimism and intelligent analysis have pretty much forced me to make a move.
I have 2 established positions in 2 penny stocks and I am riding them to victory.
SWTX.OB 1,000 shares.
CCBEF.OB 1,250 shares.
By all means... Take a look at these companies if you like to determine for yourself if they are good investments. However, this post should not be seen as stocks that I think you should invest in.
When conducting research on any penny stock, I like to place them on a watch list to track the share price activity over a long period of time so I can buy low. [more]
Turns out I was dead on correct to increase my stake in (FEED) from 187 shares to now 276 shares. I kept buying and buying the thing all the way down to $10.75. I still have some cash set on reserve if the share price keeps plummeting.
AgFEED Industries reports today that they filed a report to the SEC concerning their share price receiving Naked Short Selling action. *Yikes*
But, not a surprise! I suspected that and said so on Scottrade's Community Forums last week when I pointed out the unusually large short, share volumes on this particular stock via www.pinksheets.com. That website provides 15 day increments of short selling volumes for stocks.
I highly recommend that website whenever you are scratching your head over why your stock is falling. [more]
(FEED)'s share price is getting slaughtered like a pig and I am just buying the crap out of it's downfall. It's being slaughtered like a PIG!
But I am bullish on this stock for several reasons:
1) The Negativity about Hog and Feed prices concerns mostly short-term issues:
A) Olympics They end next week!
B) China's continued dumping of pork from their strategic reserves: These reserves are not infinite and China is going to stop dumping or at least slow the pace down at some point near term. So.. again? Who cares.
2) The Negativity about Exports of Pork flooding into China contributing to price declines along with a whole host of other things....
I think that has little impact when you take away the Olympics and China's Strategic Reserve Dumping.
Ultimately, I see all of this negative crap on my stock as nothing for me to be concerned with.
I Really don't. So.. I'll just suck in my chest and see what 2010 looks like for FEED. [more]
Arrrgggghhh!! How frustrating. I am not *wrong* about my statements from yesterday and yet in some respects I am wrong.
Stock Market stuff is really really challenging. All I can do is play the game... A bunch of short selling hooligans want to knock my stock down for 6% off of NO NEWS... NO SIGNS of bad omens.....
I mean... .AgFeed Industries is doing everything right.. I find very little to dislike about the company aside from the large sale of shares back in April of it's newly issued common stock. I think the stock has TOO MANY outstanding shares.
I can nit pick the company to death or I can just face the facts... This is a growth company and anytime someone knocks my stock down 6%, I am going to buy it up.
I just bought a large sum of shares at $10.75 and immediately the stock jumps up to $10.91.
I can only hope that did the trick :-) If not... I got a lot more cash to throw around as I will only gleefully buy more shares if this hits a 9 handle.
Sometimes, you gotta get pissed off when investing:-) [more]
AgFeed Industries recently issued a press release that they have a New Chief Operating Officer.
The guy's resume is gigantron. Purina? Turn-a-round success stories? Feed and Hog production experience? Accounting experience, merger experience....on and on and on.
I love the fact that the COO is 50 years old and looking forward to providing his family with a 2nd home in China. That means this guy could be looking at AgFEED as his final home before he retires. That's a good solid number of years of expertise from this dude.
But, smart, experienced investors are aware of what happens almost every single time a new President, Vice President, C.O.O, Chairman, or Board of Director is appointed....
DAY 1 of the announcement.. The Share Price plummets!
This happened with a number of my stocks that I have traded or invested in.
This seems to happen so often that you may as well expect it to occur every single time.
BUY LIKE MAD on this DIP!
I call it the "Management - MisManagement Syndrome" where a new guy comes in and has to be situated into the role and investors preceive that for 1 day the management is managing the new guy and getting him Stock Options and Office Supplies and a Computer Hooked Up and a Printer and ad nauesum.
This 1 Day Chaotic moment is perceived by investors and so investors bring down the share price for 1 Day.
DAY 2 then becomes a SELL SELL SELL SELL DAY (For Traders of the Stock) or a HOLD HOLD HOLD HOLD Day (for Investors of the stock).
You cease buying on Day 2 because you did your buying on Day 1.
Those who missed out on Day 1's dip will come in and scoop up truck loads of stock and the share price rallies back.
When I posted a comment as a reply on (FEED) that was what I should have said to clarify my bullish attitude over this latest press release. In my opinion... This guy is Lighting in a Bottle and a huge BUYING opportunity was so much fun today.
I've increased my stake to over 200 shares of FEED now!
Granted.. Let's say I am idiot... maybe I am and FEED is not a good investment.
Uhm.. Uhm.. I'll wait for AgFeed Industries to do something monumentally wrong before I ever sell off a single share while the stock price is currently a bargain.
I'll hold my shares because the last earnings report was more than a DOUBLING of their revenues.
I've been an investor of Dr. Pepper Snapple since it's IPO release. You know.. back when Motley Fool's quickly gave it a 3 Star ranking and All-Stars piled on it as a bad investment. Gee? Where have all the Underperforming All Stars gone? Just 1 left.
My stake in DPS started at a mere 30 shares and has already grown to 165.
I guess this calls for a Celebration and what better way to celebrate than to break out a Snapple Apple... or a Snapple Pink Lemonade? Or maybe down a Snapple Raspberry? Strawberry? Mango Madness?? Arrgggggh choices...choices....choices....Oh I know!? I'll suck down a Venom.
Unfortunately for investors who have stayed away from DPS and kept their noses up at the stock here's the situation for NEW BUYS (A.K.A. DPS NEWBIES):
1) DPS is long overdue to sell-off. RSI is above 70 over the past 3 trading days.
2) DPS has been artificially inflated a bit from an onslaught of buying by Hedge Funds, Gurus, Big Pocketed folks.
Personally... These Big Pocketed Folks needs to settle down. We don't need to achieve Standard and Poor's $27 target in a week! (sheesh). S&P calls it a 12 month target for a reason! It should take just about 12 months! Not 12 Minutes!
My prediction for a good DPS entry point into this stock is $23.
This thing strikes $26 but comes down to $23 before recharging and lifting off to $27. [more]
Yaaay! It's High Inflation day! Hip hip hooray!
Let me stop boring you to death with a simple point to make:
Let's say you have a portfolio of 6 stocks.
3 Stocks = Commodities or Agriculture or anything that loves inflation
3 Stocks = Anything your heart desires in "I hate Inflation" section of the stock market. [more]
This is my Ignored Stocks that Shouldn't Be Portfolio:
CHINA PLAYS [more]
Hey, I am not a dishonest investor. I can see when and how I am wrong when I am wrong.
Dr. Pepper Snapple's frightening earnings report is so frightening to me because of the fact that it's non-carbonated portion of the portfolio fell in volume more than twice the carbonated!
When you pin your hopes on DPS's wide array of juice drinks to carry the company forward to some good (albeit slow) growth.... and they totally bomb... That's just not cool.
I know I said I'd siphon shares of DPS and pour them into HANS and any (idiot) would do that.
Problem is that HANS has skyrocketed so much in the past few days and I have no idea if the share price has peaked or where the peak on the thing is. Another concern is that I've already chosen CCBEF (Clearly Canadian) as my "Handcuff" awhile back. I'm invested 1,000 shares into Clearly Canadian because I am a huge believer now in their C.E.O. Bobby G.
Bobby G's the kinda nutcase that a dying company needs to achieve a successful turnaround.
HANS just scares me a bit with it's up $60, down $21, back up $27 roller coaster. Exactly WHAT is HANS worth? I can not even take a gander.
What I do know about HANS is this crazy "MONSTER Energy Drink" is basically replacing Coffee itself as the morning drink of choice. Seriously. It's that insanely popular.
Monster Energy Drink is electric. It's huge.
So, before I fulfill my DPS - HANS Challenge I will need to do some more research into HANS and I will need to digest DPS's upcoming conference call.
It is interesting that DPS is doing real well with Wall Street: Shares up 50 cents. There still are reasons to like DPS, but there seems to be more reasons to Drink Monster. [more]
After reporting last Friday a more than doubling of profit in the 2Q, Darling International share price dropped like a rock.
It is now trading at an insane $11.77. That's insane considering it's July 17th high of $17.72.
This company recycles grease and food waste. It is basically an ethynol play. But, one that is highly profitable. All of the CNBC Fast Money guys bashing ethynol tend to never discuss this high flying stock bucking the trend in that sector. They are doing all the right things.
You want a consistent and reliable stock to invest in? How about DARLING INTERNATIONAL's insane 6 earnings BEATS out of their last 6 quarters. 6 Earnings Beats out of 8 quarters since Q3 2006.
You want a high flying stock that is trading incredibly undervalued and far from it's 52 week high?
This one is it!
Baffling to watch (FEED) after it's amazing earnings report start at $15 a share and slowly collapse to $12.71! And then at $12.50 in after hours trading!
Granted... It's profit taking and short selling and so on. I don't care. With an earnings report like that I took the collapse to my advantage and bought FEED back down to $12.71. (25 shares bought at $13.48 and 25 more shares bought at $12.97).
If this has a lack luster performance out of the gate tomorrow I'll nearly double my stake in FEED or at least consider it. How long will FEED remain a $12 stock given it's great track record so far?
It will only take an analyst upgrade on the stock to squeeze out the shorts and get this stock back to $15 a share. The reality is this thing should be trading at $18 a share right now especially considering next quarters earnings expectations along with their 1 million hogs expectations for next year.
Some people argue FEED is not an investment, just a trade. I laugh at that notion. I couldn't care less about cycling this stock (although I have cycled it once or twice). As long as this company continues to knock the cover off the ball on earnings reports, I know that share price appreciation will keep this stock going for many years to come. It's up almost 50% year to date and that is probably why we aren't seeing anything spectacular. It's already had a spectacular ride.
I'm more interested on how this stock appreciates next year because +50% of $12.71 is 19.06 and FEED ought to reach $19.06 in due time. [more]
Steel Sector has been selling off into a strange abyss of late. This is a time when investors are bailing and panicing out of steel and a smart investor can sit back, biding his/her time, and strike with a big BUY at a really really low price.
A smart investor looks to 2009 and 2010 in regards to stocks like:
X (U.S. Steel)
AKS (AK Steel)
SID (CSN - Brazil)
And so many others.
Virtually all steel stocks are nearly at bargain bin prices. SID is going for less than 10% greater than it was at the beginning of the year. I'm looking to strike big on this stock if it reaches $30 a share.
U.S. Steel is probably the biggest play with a Standard and Poor's 12 month 2009 target price of $235, this stock is trading around $128 today!
The commodity pricing on steel has set off a rapid bailout by investors. The whole sector has lost litterally BILLIONS of dollars since May's Peak. The stocks sell off in spite of their earnings reports.
But, they all seem to have killer dividend payments at now very attractive yields.
There are also acquisitons, spin-offs, and so on in this sector in the near future as well.
SID (is looking to sell off NAMISA)
AKS (AK Steel is seeking a buyer)
And MTL is intriguing because it used to go for $60 a share until Vladimir Putin spoke 5 sentences. Now it's $23 a share.
Given the Russian - Georgian War.... I see MTL as probably the biggest bargain priced deal in the sector right now. Given all the steel that's needed for Russia's tanks, jets, etc. [more]
Dr. Pepper Snapple is set to reach a major milestone. This was going to happen purely because Dr. Pepper is the #3 beverage company and it is absurd to see investors pricing stocks in the beverage sector otherwise.
HANSEN Natural Corp. has released their earnings report with a MEET that is about 1 penny short of EPS consensus estimates for the quarter. Pre-Market Trading has the stock losing about .50 to $1 of its value.
Should HANSEN fall dramatically and Dr. Pepper Snapple hang in there at $21+ a share tonight then (DPS) will finally be priced higher than (HANS).
I guess Hansen investors will have to make a decision. Continue to wait for Hansen's bottom or schedule an appointment with the Doctor?
(FEED) is selling off big-time for the wrong reasons. The commodity implosion in prices should have helped FEED's Grain pricing and thus make it easier to sell more FEED product.
I guess the stock market works in reverse. They want feed prices to skyrocket in order to be bullish on feed? Well... The market reality is that VOLUME trumps PRICING.
Plus.... (FEED) gets most of its revenue from the sale of HOGS. And it can sell HOGS for a greater price if Feed Product's pricing is slipping. I.E. If it becomes cheaper to buy FEED from FEED then AgFEED industries can have leverage to justify higher HOG prices to make up the gap.
Ultimately, I am not convinced (period). So I bought 10 more shares of FEED today for a total of 137 shares.
(RIMM) gets 2 stars on Motley Fool and the stock is up $10 from it's 116 low 2 days ago.
Granted, CAPS investors think long-term. But, short term traders are drooling over RIMM's short-term profit boosts that you can get from cycling the thing.
As an investor you can just hold on to those shares until December, just days prior to the BOLD release in America for T-Mobile which is JANUARY. (it may sell earlier for AT&T customers).
(DPS) Dr. Pepper Snapple is *NOT* trading up because of their earnings report next week.
It is trading up because of what Dr. Pepper Snapple did recently.
Just days before their earnings report, as part of advertising VENOM Energy Drink, they have created a fun website/advertisement in conjunction with a cryptozoology website asking consumers to join the "Venom Monster Squad" in pursuit of a live Montauk Monster.
This Montauk Monster is a creature found dead, washed ashore on the Island called Montauk, which is named after the Indian Tribe. This monster is more than likely a Raccoon, but I digress.
Whenever a Corporation has time on their hands to *goof off* and *have fun* with their consumers then there's plenty of reason to believe Dr. Pepper Snapple is going to hit a Grand Slam on Earnings report day.
After all.. If they are prepared to report a frightening MISS in earnings.... Would they be having this much fun?
I liquidated out of my Fertilizer after hearing about the commodity implosion. That's fine. I took some profit off that stock.
What isn't fine is losing thousands of dollars pretty much across the board in my portfolio. [more]
I'm cancelling the challenge I set up several weeks ago where I would siphon shares of my DPS investment and put them into HANS whenever HANS's share price and earnings reports beat DPS.