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Pennies from heaven

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gordon2007

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Found a cracker of a story on 'http://www.theaustralian.com.au'

http://www.theaustralian.com.au/bus...-microcap-stocks/story-e6frgac6-1225965415006



The thought is they're struck at cellar-dweller valuations for a reason: they're serial loss makers, crippled by debt or, conversely, unable to access bank funding.
Some have had their day in the sun but have failed to execute their business strategy. Others are simply vehicles for incompetent or venal management and directors to maintain a lavish lifestyle, at least until the well runs dry.

I'd highly suggest anyone new to shares and hoping to strike it rich with the pennies read it.
 
Its a silly piece of fluff written by a journalist with little understanding of the reality's...ok so the general jist of "its to hard to pick micro cap winners so don't try" is prob good advise to those without a clue...however with some study, research and patience (and a little luck) micro winners are not to hard to come by.

While luck is the most useful asset for a penny-dreadful trader, there's a few rules of thumb to improve the odds.

The cardinal one perhaps is to take profits when a windfall gain materialises.
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Yep that's one of the rules...sell your winners and take your windfall gains while you can :D (its half true :)) ive done ok outa most of my micro caps even including the one that fell over for a 100% loss, the other 5 winners more than covered that loss.
 
Strange that my entire strategy is based around taking advantage of the pretty much all around ignorance of the value inherent in small caps. I'd agree with the article in which there are many companies out there that will be broke, or are just shell companies paying out directors fees, but there are many many quality companies out there for those who can be bothered to put the time into it. Often there are quite silly arbitrages to be had, simply because people don't bother calculating values (TRF would be my example). I also loled at this

"Few folk would have heard of Ukrainian hydrocarbon hopeful Hawkley Oil and Gas (ASX: HOG), but that won't faze happy holders living high on the hog of a 3000-plus per cent share price leap (from half a cent to 18c at the time of filing)."

Given that it was a reverse takeover from a Ukrainian based company who then raised capital, it didn't exactly rise 3000% this year. Also it's currently trading at 30 cents per share, and it hasn't been 18 cents for a while? Just shows that even the journalist doesn't devote much time to the "penny dreadfuls" he derides in his article.

Oh well, public ignorance = cheap shares. I'm happy to read misinformed articles such as this if it means that the shares stay this cheap and easy to pick.

PVF.
 
Oh I realised I'm a bit harsh in my last posting, I reread it and he's only encouraging newer investors to stay away, which is good stuff. Newer investors shouldn't be scrounging around in the lower end of the market, there's more dogs then horses around, and unknowingly they'd probably buy a dog.
 
HI All,

Parle: I totally agree with you about how there are more dogs than horses on the lower ends of the market. But i think there is a flip side to that; there are also less informed investors, people that know more than you and I (e.g. institutions etc), therefore i think it becomes easier to find mispriced stocks on the lower end. They may not all come to fruit obviously but i definitely think that you will find more pricing with stocks like RED, MMR etc (^^) than BHP for example. Less horses offsetted by significantly less...(what a predator for horse?). Good luck trading all.
 
I posted this because I've seen so many people think that pennies to riches is the closest to guarenteed riches you can find. I dare say that on most of these forum boards penny stocks have the most posts.
 
gordon2007 said:
I posted this because I've seen so many people think that pennies to riches is the closest to guarenteed riches you can find. I dare say that on most of these forum boards penny stocks have the most posts.
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I dont know who you mix with but I don't think everyone on here thinks pennies are worthless or arbitage for sulky Directors.

Firstly I look at them on the basis of a day/week/month trade. They dont fit in my PF because I cant wait around that long, because while there are some embryonic companies with great potential like the geothermals, at the moment though they are just trades.

Secondly they do give a much better average return than the 1-2% the majors eke out over a month and brokerage has to be taken into consideration in your play.

Finally if you are trading you need some stocks that have good volumes.

just my 2 cents worth

Cheers
 
Gordon is one of the best chartists Ive seen and been around as long as I have!

I maybe wrong but I think Gordon is saying that many traders here (And if you read the A-Z boards for a while---I agree) think they can place a couple of grand on a penny dreadful (as opposed to a penny!) and actually EXPECT to grab $1000s

Oz is right and I think Gordon would agree that there is opportunity in the pennies but not for the inexperienced who BELIEVE cheap stock = Massive potential.
 
tech/a said:
Gordon is one of the best chartists Ive seen and been around as long as I have!

I maybe wrong but I think Gordon is saying that many traders here (And if you read the A-Z boards for a while---I agree) think they can place a couple of grand on a penny dreadful (as opposed to a penny!) and actually EXPECT to grab $1000s

Oz is right and I think Gordon would agree that there is opportunity in the pennies but not for the inexperienced who BELIEVE cheap stock = Massive potential.
Click to expand...

Even more so when you see posts like "gee this stock's cheap at 1c" even though it's MC might be $40m - fundamental misunderstanding of the value of a company:(:eek:
 
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