Small/Micro Cap buying journal

I'm starting this journal for everyone to share who trades/buys small/micro cap stocks.

Please don't use this to talk about momentum stocks or stocks/companies that you know are faulty unless it's for the purpose of discussion.

This is a thread to find excellent small/micro cap stocks.

I've made 95% of my money INVESTING in small caps. Some were held a few weeks and I decided I wanted out, others were held for more than a year and rocketed. In later threads I'll discuss some small/micro caps.

Recently, this year only really, I have been trying to take my hand at actively trading in the general markets. I find it very difficult to adapt to and inclined to continue investing in mostly small caps as the gains are far superior when you're right and the volatility is usually not as tied to the greater markets like AMZN or AAPL is. I find that a plus. Reducing the outside factors that affect your investment is nothing but a plus in my opinion.

Thanks and please add any info you may have regarding actual stocks, tips on finding companies, data sources(for small caps is sometimes different than NAZ and NYSE stocks), etc.

Also, please keep a post regarding individual stocks confined to more concise outlines. If you have a stock please summarize it well in one post or a number of contiguous posts just to keep it easier.

Cheers and good luck.

 

YTBL nice channel break yesterday
HMIT dangerous play for a bounce
BRST play on apple infringement lawsuit
URRE play on uranium, have a few uranium fields coming online soon

*note I own BRST

 

Management of Small Caps

I'm just going to discuss how FUCKING IMPORTANT good management in small caps is.

I've been through many rounds with small caps. I've made and lost a lot of money in them. Luckily I've made 20 times more than I lost, but my losses have been substantial and often that was when I banked on management to execute a business plan and wasn't really confident they could. That being said, the flip side of the coin is that if you find management that you feel you can trust, then you have one of the strongest indicators that you're in a stock that's worth INVESTING in.

Good management is in my opinion the single most important factor to look at after a simple glossing over of the company's fundamentals and story.

It might sound totally cliche or obvious to state how important management is, but for the purposes of OTC and other such small cap stocks, it's even more important! It's important because the number one problem with good companies gone bad is DILUTION! Dilution is a factor you deal with in the OTC, it's something that's critically important at times, but if management isn't trusted you have to wonder why they do it. If you trust that management is looking out for the better good of shareholders, then you will know that they are diluting for the sake of the business and to help fuel growth, stem debts, or some other good reason.

Management is also something that is important as in smaller companies they are more likely(or less in shitty OTC companies) to respond to shareholder concerns. I have seen good management swiftly react to fix problems(including one company actually cutting a newly enacted Executive compensation due to shareholder anger) and others stick the knife in and twist.

Simply put, Management is the single largest factor in small caps for me outside of the business plan and fundamental structure of the company. Great management can not only execute their plans, but they can also be trusted to dilute the company with only good intent.

Cheers and I'm sure I'll have more to add as it comes to mind.

 

Like I asked, please refrain from posting blurbs about picks. If you're going to post them, at least some more information about the company, stock, reasoning, etc.

I'd like this not to become a "pump" thread. There's a "longshot" thread in the Stocks forum where you can post that. Thanks.

 

I'm thinking of buying some SMTX for my Roth. I'm thinking the catalysts to move it 35% plus in the next few weeks/months will be the announcement of a restructuring of debt and some other positive news. They paid down a lot of their debt last quarter with four consecutive profitable quarters. A large portion of its float has switched hands recently at the higher levels. The volume is dead today. Perhaps there is a spike down to $4.30. Another stock to look out for is CHNG.OB. Management could start timing news releases with decidedly bullish and unaudited outlooks. The recent news release was "all systems go." ALVR is a WiMax play. There's a lot of froth on buyout rumors. Management and/or manipulators should continue to pump that stock as long as the Naz holds up. NFI might continue to be a good trade when played in concert with key housing news releases. They've already announced that they are "on the block" and have hired an investment bank to find a suitor. A basket of the remaining subprime stocks might perform fantastically over the next 5 years as there is less competition. The idea would be that half would go out of business or merge and the other half would quintuple at some point.

 

best bet with trading otc is not to put too much faith in management, and play the charts and filings, tho there are a few diamonds in the rough that do make it like a FRPT, FWLT, TRLG (i just recently got an audit for 2005 and wish i held a few FRPT freebies from the .30s!)

 

You're wrong. I'm not sure how your returns have been but I've had multiple 10+ baggers in just a few years and the ones that went up with good management stayed up and the ones that went and then down were shit management most of the time. The point of this thread is investing in a good company, not making a quick buck.

Management is absolutely key. You should never put too much faith in any one thing, but management being dependable is totally key. You know how many shit management teams are selling into rallies?

If you're a trader fine. But this thread isn't about trading. That's why I highlighted INVESTING.

Good luck.

 

Do you have specific criteria you look for in the management team, or is it more of a rough look over and "MBA from Yale, couples years in VC, previous small cap employers have done well".
If you do use info from managements past, do you verify it and rifle through the history of companies they have previously been involved with or just take the bio on the website at face value.
Seems like investors due a lot more due diligence and I'm curious about the depth you go into in verifying the "quality" of the management team. Thanks.

 

I play these alot. Probably 90% of my investing is through small caps. The returns are great as the OP states. I look a them more as a call option than a stock. Giving them plenty of leeway and never risking more than 1% of cap on each issue. I use two rules after buying. A trailing stop and capital protection. The cap protection is wide @ 60%. As i`m only risking 1% of equity per pos I can do this no sweat at all.

Someone talked about dilution. This is something you need to be aware of. I hold these for a long time. So I must get at least 2 proxies a week to vote on. Almost everyone of them have a box to check for increasing the issues floats. I dont really care about the shares outstanding cause its future expectations your betting on. Its the stocks reaction that you have to watch(as with any piece of news).

Oh, and the absolute kiss of death for small caps are reverse splits. If they reverse split...i`m outta there. RS`s are smoke and mirrors of the worst kind. Then its a total POS you want no part of. IMO of course...

Happy trading.