Penny stocks… penny stocks… penny stocks.
Our mailbag filled up last week after we penned an essay about our grand success with the little-known and little-understood realm of tiny-stock investing.
It’s not a subject we’ve mused about all that much… at least not here.
Manward Trader subscribers, though, certainly know our thoughts and our magic recipe. We’re on a bit of a roll in our trading service designed for folks looking to make big money from little money.
We’re sitting on some big gains these days.
Up 326% in a year… up 110% since December… and we just doubled our money on two separate plays that we entered less than a month ago.
Filling a Need
Truth be told, we didn’t expect the topic of making money to be such a large part of this passion project of ours.
But we get why the demand is so huge.
Being a good man isn’t all about manners and honors.
Money plays a big part in it. It’s the catalyst for our Liberty.
And a quick online search for penny stock information turns up zilch.
With that in mind – and with a big announcement coming later this week (you’re going to love it!) – we reach into the mailbag and answer your questions about investing in the tiniest of companies.
We’ll start with the question we see the most…
I’m surprised to see somebody as conservative as you, Andy, talking about investing in penny stocks. What gives? I’ve always been told their too risky for my money. – Reader R.C.
In the simplest terms, R.C., you’ve been lied to. Or, at the very least, you weren’t given the whole truth.
But have no fear. That’s why we’re here.
The truth is that many penny stocks are risky. But it’s not because of the size of the company or the price tag on its shares.
Saying all stocks under $5 are risky or that all businesses with values under $500 million are dangerous is like saying all Irish folks are drunks or that hair color determines IQ.
It’s just not true.
What is true is that a good number of penny stocks are artificially manipulated by folks looking to push share prices higher and make an easy buck.
Pump-and-dumpers, as they’re called, are the fleas that will always ride the dog. We must deal with them and avoid them whenever possible. But not all penny stocks are manipulated.
In fact, we’d argue it’s a small minority.
There’s a lot of misinformation out there about penny stocks. That’s because the big boys and the army of brokers they hire can’t tout such small stocks. They’re too small to buy in bulk and therefore would take custom analysis and hands-on portfolio management for each client.
And while you may like custom management… we can assure you that your broker doesn’t.
It cuts into his time on the golf course.
Great article. Thanks. Inefficiency is the key word. It leads to winning concepts. Do you have a screened list of your microcap and penny stocks with daily trading ranges? Also the list of your dozens of penny and micro caps? – Reader A.M.
Yes, we do have a list of screened microcaps and penny stocks. In fact, we’ve personally used a unique algorithm to find high-quality stocks for quite some time.
But it’s not public… at least not yet.
As mentioned above, these tiny stocks are tough to dive into when we’re talking to the masses. Telling just a few folks about a hot ticker can send the price soaring. It’s why those pump-and-dumpers have had such success.
And until we quit our old job and took on this gig, giving out penny stock advice was out of the question. We were writing to hundreds of thousands of folks each day. They often invested millions in our advice – more than the market cap of some of the stocks we’re investing in.
But we think there’s a solution… hence some potential big news later this week.
With a much smaller audience these days, we think we’ve found a grand solution.
There’s More to the Story
There are a lot of ways to skin a cat. What criteria do you look for when buying a penny stock? – Reader D.B.
Ah, D.B., we’re not sure if it was on purpose, but we argue your statement is more valuable than your question.
There are indeed a lot of ways to skin a catfish… but few folks know how the rest of that phrase goes.
The earliest use of that phrase continues with this bold idea… “so are there more ways than one of digging for money.”
It ties perfectly to what we’re up to today… and it answers your own question.
There are many criteria to judge penny stocks with.
In fact, we use seven in our screen.
But there’s one notion that is more powerful than all when it comes to the smallest of the small stocks… and that’s to know who’s buying them.
We remember taking the stage as a keynote speaker at the Small Cap Expo in Atlanta in 2005. Our topic was how to get rich from what we dubbed the “internet re-boom.”
It was a time, if you’ll recall, when companies like Netflix, Facebook and even Google were in their infancy. It’s hard to believe they were ever in the category we’re talking about today. But we told the audience that we were hot on the industry not because of fundamentals or some potential headline…
No, we were tracking who was buying… and the amounts they were buying.
The theory proved quite strong… the stocks we touted made a lot of folks a lot of money.
So if we had to summarize our stock selection criteria in a few words (a tall task), it’d be that. We track buying activity.
But there are plenty of ways to skin that cat… and plenty of ways to dig for money.
We’ll have much more on the subject late in the week.