Our stockpick for this month 2-16-19 - VRUS - COBI
The 3 P's of Investing and the Strategy that can maximize your ROI.
Investing and trading in the pennies is based on one's ability to fully understand what he/she has and when to sell.
Penny companies and the arena they trade in are the most unpredictable and have left investors/traders with losses that with a smart strategy, could have been avoided.
Emotion, Anxiety and Greed, three of the prevailing sentiments that always seem to be the guiding force on investors as when to buy and sell,only to acknowledge it is discipline that will pave your road to a successful ROI.
I'm only discussing the unpredictable and unregulated market,known as the pinksheets...Here the Market Makers and not the investor have the total control and you as the investor must learn to either stay one step ahead or fall victim as most usually do.
When you trade in this market you first must at the earliest opportunity to remove your Principle.. The best way to assess this part is divide your total share account into 3 parts..The first 33% is your Principle,the second 33% is your Profit and the remaining is your Potential.
We have all experienced nice runs only to find your issue floundering at the bottom never to return..It is this first run that one should remove the Principle investment..This should always be applied and under No circumstances should you deviate from this..If you feel that the issue warrants a second run,it is your Profit that will be your next exit..Remember,if you removed your Principle investment you will have taken a huge risk out of the market and your Emotions will become less of a factor..
Potential...The last of the 3 P's is the most difficult and should only be left as an investment if the company has a business model that can generate revenue,but most importantly, can ROI based on the forward fundamentals of the company be realized..One assessment that you must take into account is the share structure verses Market Cap..It is this one and very much overlooked part that will determine the true value and fair value with respect to share price and where it will eventually go..
In the penny arcade,most participants/investors are way over their heads and have a skewed impression what really comprises what is an investment and what is a crap shoot.. From what I have seen in this cesspool of penny garbage, it's all in the timing and being able to stay one step ahead of the market markers and the loansharks...There is no such term as long-term, investment grade, great buy and all the other misnomers that many like to refer to these pennies.. For what it's worth, they are all junk and the only money makers are your day traders and the loansharks that feed offshore on what gullible buyers throw their way and the market makers who execute these buy and sells...
When one comes to the pennyarcade, he/she comes with the idea to make money, but only to be let down.. The understanding of how pennies work is in itself an art and science and not the fact that a stock is priced at .0002, .001 or .10 or whatever, and it should go up because it's so cheap...Most investors if you can call them that in pennies, get the 3rd degree and they lack the sensible approach of admittance that they made a mistake and can't accept their loss..
Since the great tech and birth of the computer, the potential of online trading took off and everybody with a computer thought that the penny arcade was going to make them wealthy.. This has become so far from the truth and 15 years later many have lost thousands and still can't figure it out...
It's simple,98% of all pennies are losers and just plain junk.. Many or most penny companies will have movement beyond a certain entry, but all will without a doubt fall like a rock and flounder at the bottom for years with ever moving north again.. If you hear nonsense like "wait until next year", or "put it in your sock drawer" and there are dozens of brilliant ideas only to have you looking back on why did I pay attention to all those clowns on the message boards.
It doesn't matter on how much DD or other research you do on a particular penny stock, because these companies don't have a future.. It is the art and science of understanding the way market makers play and until you get a grasp at their non-rules and cheating ways, you will lose..
The idea of holding any company is and should be based on free shares after the Principle has been recouped.. This part is the Potential of the 3 P's..Does the company have a future?
First, when a company promotes itself on penny exchange, it is for funding their R/D and this is especially true with BIO and Tech companies.. Once a company can establish that even their product/idea has legs, it isn't the shareholders that gain, but the owners and the largest preferred shareholders.. We as shareholders gain in the cycle of share price movements over a period of time, which allows us to sell on news and reap a decent reward, not hold out in hopes...It is pure nonsense and just doesn't make for an explanation that hold long-term on any penny stock, without exceptions can ever be achieved..
To explain this further.. When a company goes public, it is mostly for funding their R&D programs through stock sales by market makers and picked up by us, blah blah, you get the point.. Once a company has perfected their technology or product, it will usually in most cases shop around for a buyer for their tech/product or merge as a division into a larger company or outright hostile type takeover, again this is very true within the Bio companies.. Companies with large O/S and huge amount in authorized shares generally don't have a problem with hostile takeover practices.
Through this whole ordeal, the company continues to sell shares until it has ballooned their O/S and depleted their authorized shares so much, they are forced to do the most drastic of all moves, a R/S.. All this time they continue saying and moving ahead and convincing us their R/D is on target.. But Then, they announce a R/S, because they feel to stay in operation is a must and probably so, since they haven't found a partner and they are short of funds and we are, or some of us reluctantly go along.. Posters always use the argument that if the company doesn't split it will go out of business and we will not have anything and should be loyal and stick it out.. Loyal!! That's a new one.. Now this is just plain incorrect and management knows this and will be able to keep going with or without a R/S.. Remember the offshore loansharks? Most companies go for these same culprits and is at this moment diluting the pool as we speak with most pennies.. When management and I must say are in general a bunch of sharks that have a printing press for their own benefit and will do everything to keep the printing of new securities going just to fatten their own greed. Management is up against the wall when they parley their shares and this is always a last attempt and absolutely a death sentence, like the R/S. Incidentally, a R/S approved by shareholders is a formality and will always get approval regardless how we as shareholders vote.. This part is always stacked against us.. Of course in certain cases we may be able to thwart a R/S, but that is rare..
In case of any BIO company, they usually disappear into a much larger concern. .Healthcare companies that trade on the penny exchange rarely ever become stand alone concerns.. The R/D and marketing requirements is far to great for any startup to absorb and is too costly, so they usually and that is if the product is all that is meant to be, will be acquired.. In general if a Tech company has a promising product they too will be looking for a buyer, because the tech field is changing so fast that the smaller concerns lack the funding just to stay in the game and will never be able to compete with a much larger firm that have the cash and know how.
Bio companies who have products that can even meet FDA approval will probably be sold or a major PHarma company will become a partner as in a collaboration partner and they absorb or become merger.. Now to get to this stage will be with countless rewards towards shareholders equity, but eventually it will become an entity of whomever becomes a partner.. This is in most cases the way of a startup Bio company with excellent potential.
You as a shareholder will get the most out of a Bio company on the penny exchange than any other company.. The rewards are so great in Bio as well as the tedious long wait and this may require patience that will take years to develop, but eventually if the company has the fountain of youth medicine can make you a wealthy investor, in return on your principle.. Also keep in mind, that the risk is also the greatest threat to a dismal demise of your investment dollar. The latter is more accurate than the success rate..
A Bio company that can hopefully get the FDA seal will give the company the real interest and the potential share price explosion within hours of such a PR, but that will only come with the approval.. The timeline for a nay or yah on acceptance is rather short on devices than the lengthy clinical trials required for drugs and a device, which not actually being a drug could come sooner then think.. So a 6-8 years for even a drug going to trials can certainly be overshadowed with impatience and will keep a stock price from ever achieving the result in the near-term or even pan out all together.. The movement on the stock price with these companies comes with the interval press releases which allow you some trading with potential profit.
So in Short..Trade penny stocks do not use these issues as investment grade..If you have one and believe me they are rare,remove your first two P'3 of Investing and Strategy and fully understand the true Potential of the company that you wish to hold long..
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