Penny stocks are for quick trading mostly.
How true. Take for example BCMD, which started the year at 1.00, fell to under .50 thru spring, did a reverse split in May(1 for 10),and continued to fall and fall and fall. It reached a Friday Low Bid of 1/16 on 10/23/98. It was solidly in last place on that date.
Since then, it added an E to its symbol, did a re-org/merger/whatever.
The bid jumped 50% the week of 10/30, up 33% the week of 11/6, up 25% the week of 11/13, and then jumped 300% this past week. (Actually, mid week the stock was even higher).
Now, in spite of the fact that the Friday closing Bid has jumped 1000% in the past 4 weeks, not a bad return for someone who bought that week in October, BCMD is still solidly in last place in the contest.
What strategy to play for these picks? BCMD, it turns out would have been perfect for an average down method of buying same dollar amount but more shares as the price dropped by 50%. Had you done that, look what would have happened.
$1000 --The first buy at 1.00(post-split 10.00), down 93% right now.
And you would have 100 shares now.
$1000/2000 shares--The second buy at .50(post-split 5.00), down 87% right now. And you would have 200 shares of that buy now.
After that, the reverse split occurred and the Friday afterwards, the stock was at $2 5/16 bid. So, a third buy of $1000 would buy you around 400 shares at the ask.
The fourth buy would have occurred at $1 5/16 or so. $1000 would give you 750 shares at the ask.
Now, after that buy, the stock actually popped to over $2 for a while, but since you were already down big on the prior $3000 of buys, would you have sold the last buy for a double? Who knows.
Through the summer, the stock continued to fall gradually. In July, a fifth buy at 11/16 would have been made...1500 shares.
In Sept, a sixth buy of 2900 shares at 11/32 would have been made.
In Oct, when the stock's ask hit 5/32, 6000 more shares bought for the seventh buy.
Later that month, the stock's ask hit 3/32, so another 10,000 shares could have been bought for the eighth buy.
Now, recap all this: Eight buys, $8,000 for 21,850 post-split shares. The average investment thru the year was around $3500 since half the money was spent in the last 4 months and $3000 of that in the last two months.
That $8000 investment was valued at $13,656 as of the Friday close...in spite of the fact that the stock was down nearly 94%!!
Go figure.
TG |
