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Microcap & Penny Stocks : Short Term Picks From the 'Whiz' Kid -- Ignore unavailable to you. Want to Upgrade?

To: Jonathan Lebed who wrote (893)	2/21/1999 5:13:00 PM
From: David in Ontario	Read Replies (1) \| Respond to of 9115

DD on unlisted companies? Here's what I do: In the absence of a 10K or similar, or filings on SEDAR (for Canadian companies) you immediately assume a higher risk when investing in OTC BB stocks, or the junior mining, junior energy or junior technology stocks of the VSE and ASE. Only a very small handful make it out of the penny stock ranks and become established. Ballard Power is one that I can think of that escaped the VSE successfully. Many just have their necks above water and often run short of cash. Hence the News driven promotion when the Insiders sell into strength, then 'poof' once the dust settles it's back to the bottom again. Many pennies are momentum plays so they require closer attention than well established blue chips. Hopefully, some pennies that you select will establish themselves and move above $5 and thus beyond the penny stock ranks - and stay there. I always leave a portion of my holding after I take a profit if I think the company will become established as a profitable small- or mid-cap in the mid-term. Here are some things that I look for when selecting pennies: (1) Chart for the last 24 months. Look at the chart for MPTV - seven 1 day spikes in the last six months - wierd. Are there any recent volume surges in the absence of News over the preceding 3 months? If so it may be a sign of insider buying prior to News, but maybe not, so find out why if you can. (2) If there have been volume and price surges also find out why. The investment threads are a good place to start. I find some good info here, plus DD links. However, there is also deliberate misinformation posted so you need to sift through it. The only believable information is that which can be independently verified. (3) Check the size of the float and principles/Insiders in the company. Do they have a good track record? Many of these junior companies are just shells with one or just a few directors, a mail drop, telephone number and that's it. (4) Stay away from companies with huge floats. They take way too much inertia to move and you're at the risk of a reverse split. (5) Stay away from companies that have just announced an Internet presence and new business, when their underlying business(es) have no direct link. Junior mining and energey stocks do this a lot - plus others. Take a look at the chart for SFAD. They released News about a new Internet initiative, the magic word 'Internet' was in the News and the stock surged. Look where it's at now. This is one way to play the momentum pennies and it can be profitable - but you need to watch them intraday and set a hard unwavering exit point. (6) I stay away from pink sheet 'companies'. Far too risky. (7) Call the company you're interested in - what do they have to say for themselves? Can they offer references? Who are their clients? Who are their partners? What's their strategy going forward? Can they provide a financial statement for the last quarter - audited hopefully? Do they have any legal difficulties - if so what are they? Some are benign - some are not. (8) The reason why I'm in ALFN is because the guy running the company has a solid track record and history of success, the float is small, they announced a share buy back last November, upcoming initiatives look very positive - with the web site due to be up in about two weeks. (9) We all have our own entry/exit strategies. I think it's foolish to try and hold everything until the top is reached in any momentum cycle. Who can judge that well? Answer, no-one. My strategy is to sell into strength and let a set percentage go at every $0.50 or $1 or $2 increase in the share price. Others will sell a percentage to cover their initial investment, so the remainder is 'free'. (10) Furthermore, many pennies are just pure momentum plays driven by News with the greed factor pushing the share price up, followed by the inevitable crash. A quick DD will hopefully indicate which ones they are. If so, a quick entry and exit strategy is the best way to play them. Set a profit level between 10-50% - or whatever you're comfortable with - then get out. However, ALFN does have something substantive to offer and will do well over the long term. A top will come, then it'll retrace, and settle somewhere lower in the most recent cycle. I think the top for ALFN in this cycle is a ways off yet, but the stock will require close monitoring day to day. I'm sure that ALFN will do very well over the next 12 months. I intend to hold a portion for the next several months - all paid for from profits :) In short, by investing in any penny you assume a higher risk by default. However, I find them fun, dynamic and they can move very very fast!! Let's see what this week brings for ALFN! David.