My biggest concern with penny stocks is trying to nail down whether
or not the business really exists... I know that might sound extreme
but I lost $7,000 last year in my personal account on DACQ which
basically turned out to be a joke. They are still trading a year
later even though the company has no assets, no business, and management
which were part of a previous scam company. They had a Bolivian tin
mine and we were all going to be rich. ;-) Now how can you check on
something like that?
I like FAMH because:
1) I have physically verified their existance. Nuff said on that! ;-)
2) This industry has real, proven profit potential. Most penny stocks
are high tech stocks which have such high development costs that by
the time they get ready to bring something to market they have to do
stupid things to raise capital to make the development to manufacturing
change in the company's focus. Often development over runs cause them
to do that before the product is even finished. All kinds of things
like Reg S, insane numbers of shares outstanding, and convertible
preferred and debentures that kill a stock through massive dilution.
Now I have no problem with a company raising money, but these get so
desperate they practically give the company away to keep it going.
3) Everyone needs what FAMH does. So often high tech companies incur
extremely high costs and cash burn rates and they can only target a
specific narrow niche of customers. Lets face it, only so many people
are going to buy an electron microscope for example. Take NRID... I
bought some a year ago at $1 and made a lot of money with it. Today
the stock is at $0.25 because they ran out of capital and couldn't
seem to sell their extremely sexy high tech product.... they had gone
as high as $3.25 until it appeared that sales weren't enough to cover
expenses. It is also nice that it isn't really tied to any particular
industry so if one industry sector is doing badly it won't affect
their business... unless the employment services are suffering :-)
4) The company is profitable. We may not have a clear picture of
exactly what their EPS is, although from press releases I think we
can safely say at least .06/shr, but at least they are making money.
There are very few penny stocks at these prices that doesn't lose money
every quarter. FAMH has also made money each quarter they've been
public, with increasing EPS if we take the press releases at face value.
5) The company has been around for 19 years. If the company were
going to fold I suspect it would have done so already. Instead we
are seeing them expand.
6) Offices in more than one major city. This allows them to be unaffected
by downturns in local economies.
7) Institutions own roughly 1/3 of the public float, 2.5MM out of 7MM.
8) Agressive plans for expansion through aquisitions and new offices.
9) National contracts with large, well known companies... and efforts
to land more.
10) Will be a reporting company in January so they don't need to fear
being bumped to the pink sheets.
I guess that's a start! ;-) |
