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TMFRendezvous (83.08)

The Power of Pennies

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January 11, 2018 – Comments (1) | RELATED TICKERS: BUDZ , LFIN , NVDA

My CAPS page that I have used since mid 2016 includes some of the greatest growth stories in that time frame like Nvidia (+350) Shopify (+175) and Take Two Interactive (+150) of Alpha all which have benefited my real money portfolio as well. As a result I had a modest CAPS score of 75, which a few home runs and a few fizzlers. Upon reflecting on my fizzlers I realized that the socks I often knew the least amount were among my worst performers. I started out as a younger investor up voting stocks that sounded good to me from Motley Fool recommendations, or stocks that I read about in various Seeking Alpha type articles... a trap many young individual investors fall into. I kept the stocks I knew best in my real portfolio which resulted in greater performance, perhaps there is something to keeping within your circle of confidence.

 Sitting at a 75 CAPS score I wanted to boost that into the 80s, 90s range. I studied the scorecard of some of the most prolific CAPS stock pickers. What I noticed is that many of the top preforms downvote regularly, if not all the time. Most of these downvotes were in penny-type stocks. Which makes sense because most stocks are not going to beat the market, especially penny stocks...in the CAPS realm where you can "short" penny stocks much easier than you can in real markers I felt that was a good strategy. So I began scouring over CAPS pages to find some good “short” opportunities.

I have never dabbled in penny stocks but I did so here opening different downvote positions. I picked various companies I thought were complete jokes, the posterchild being “Weed Inc.” Ticker symbol BUDZ. Their website is a complete joke, they are not listed among the more well-established “weed stocks” but that didn’t stop the stock from rocking past my initial entry point of about a 100K company to anywhere between a 1.3B-2B company. The result was catastrophic to my CAPS score. I got hung with a -700 score in one stock! Other examples include Longfin Corp, a blatant fraud attaching itself to the blockchain craze and rising to 2B valuations and hanging a -300 on my CAPS scorecard. There two tiny penny stocks were enough to WIPE out holding some of the best companies of the year in Nvidia and Shopify.

Time will tell if these stocks fall back to their rightful places in my opinion, but I’ve learned a valuable lesson. Penny stocks are irrational, volatile, and can present ridiculous swings in either directions in either direction. When it comes to real money portfolios at least, it is best to not be long or short, but simply “out” of penny stocks. ,  

i will admit, I’ve played against two irrationally hot trends in Weed stocks and "Blockchain" stocks. I hope to look back on this in Pets.com fashion.  

 

 

 

1 Comments – Post Your Own

#1) On February 24, 2018 at 3:57 AM, AnsgarJohn (97.95) wrote:

That's why Buffett said he would like to buy a Put on all crytpocurrencies, but not go short.

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