As many of you know, last week was an extraordinary week for The StockGuru Spotlight. While never mentioned as a way to pick and choose stocks blindly, our Spotlight is designed to teach our members the system I have used for years at picking stocks selectively on a one by one basis for potential gain. As you can see from some of the screenshots in the portfolio, some of these were picked because of likely immediate moves based on some factors I look at. More on those later. Some are zero volume stocks (or very low volume stocks) that are more intended to keep an eye on, as they have put out highly significant releases … and nobody is really watching them.
The “portfolio” of results INCLUDES these ultra low volume stocks into account. I point this out so you can see that we assume that people bought even the three stocks that had not traded but a couple of days in all of December of 2011. We do not seriously expect someone to step up and put money down on those. For calculating our performance, we are assuming they did. In the future, I will likely throw those out. I just do not want to use that kind of slight of hand in giving you our performance.
Full Disclosure – we own none of these stocks. In looking very closely at the list of Spotlight Stocks last week, I can say I have never had a long or short position in ANY of them. Never. Nobody in my company has, and no contractors or writers have. I never share the Spotlights with anyone until they are picked and released. Besides being good business, it is also morally the right thing to do when I consider so many of my members look at these stocks every day.
See our report on our Spotlight Performance for the first trading week of 2012. Last week’s StockGuru Spotlights Hit a Combined total performance of greater than 20%, and they traded greater than 20% on average over the prior day’s close when we released the Spotlights. That’s twenty stocks with solid gains on average of 20% on average – with some much higher.
That’s right: We had twenty total spotlight stocks last week. If someone had invested $2000 in each one, the value of that $40,000 portfolio would be worth over $48200, less any broker fees. Now – it is never possible to buy at the absolute low and sell at the absolute high.
No one should ever buy stocks by just blindly taking the advice of anyone. We point this out because we want you to understand two things:
– Number One: We understand the smallcap market. We understand there are certain ways of potentially making a profit by understanding how smallcap stocks trade. I pick these in a very certain way. It is not flawless. A down market can pull down any gain. I have always believed that. In the past, I have often published that it is my belief that a wise investor in a higher risk smallcap stock should always bank a twenty percent gain, no matter how quickly it came. Blindly buying gives some people too much faith in the picks. That is like trusting Timothy Geithner with the United States economy. Who would do that?
– Number Two: Many out there who cover smallcap stocks are really trying to hype a stock and create movement. Our goal with the StockGuru Spotlight is just the opposite. We want to find the stocks likely to gain separate and apart from the hype of the markets, and those are the ones we publish. That being said, sometimes we see releases and technical movement in a stock that shows us that a stock is gaining interest. Then a promotion drops a day or two later. Our job is to predict activity, and that is what we do.
“The Factors” as Mentioned in the First Paragraph:
I am going to share a few of these. Remember, I have been full time in the smallcap market for about ten years. Also, I have consulted a lot of companies and have written probably a thousand press releases for companies.
Part One: The Releases Tell You More than You Think
One of my “secrets” is I know how to read press releases. Like I said, I have written probably a thousand of them over the past ten years in the smallcap industry. I can read these releases in a dispassionate way which allows me to see if they are “ramping up to get the word out” at the company. That seems so simplistic, and it really is.
I cannot tell you how many conference calls and face-to-face meetings with this kind of management I have had in the past. They have great news. They are excited. They write one release. It falls flat. They call and investor relations firm to step in and help. A string of releases come out.
I like to catch those companies early in this process. I simply try to catch the FIRST release in the string of releases, as that is the beginning of a likely move in the company’s stock.
Part Two: Know About The People, The Consultants, and the Investor Relations Firms
Now they have hired the consultants. The IR firm. The promoters. I either know these people directly, or know of their reputation and ability in the markets. Based on who they hire, I can generally tell you what direction the stock is going. The great IR Firms only deal with great clients.
Technical Trends, Yes – Technical Indicators, No
There are other things I look for as well. Let’s face the facts that the typical technical rules do not apply to the smallcap stocks, due to the simple fact that the volume is usually too low to really give accurate technical indicators. So I look at the technical trading patterns, trends, live Level II, and time and sales at the start and end of ever day for weeks on end. One more note on technical indicators, buy signals, etc.: Even the smallest investor will do a tiny closing trade to make a stock close where he wants it to. Some firms that have large portfolios will do a tiny buy at the close so they do not have to report the real value of those shares most of the day in the market. These people are “painting the ticker,” and they are doing so in a way that will fool those who trust the charts too much. Nobody can paint the ticker on AAPL or GOOG. The Bulletin Board and the OTC is totally different. It is just too easy to do so.
Fundamentals: The Management and a Very Special Product or Service
Fundamentally, I am looking at the management. Any stock that does not publish biographies on the management is suspect. If you cannot get them on the phone, that could be an issue. Every successful company has a phone that gets answered. Maybe you only get to leave messages after talking to someone, but it gets answered.
Product or service is the other key in the fundamental arena. If the product or service does not sound viable to you, then forget about it. Harvard dropouts can create Facebook and make billions, while Harvard Law graduates may destroy everything.