I was just cruising through the Trade notes, seeing if there was anything interesting there since I have never looked at them before. There is an overwhelming trend that literally almost every single trade is in regards to a stock under $5 per share.
I notice this on the forum too, a lot of penny stocks, a lot in the $1-$2 range. In looking at the first 5 pages of trade notes, I think I only saw one that was above $10.
Not saying anything is wrong with this at all, don't get me wrong, I am just curious as to why.
I understand the affordability factor, but the volatility risk and risk of the stock and patterns its following itself seem to be huge, and without much data to develop a full opinion or forecast of whats coming.
Just wondering what is keeping people from the higher priced stocks? (and I just mean from $5-$30 or beyond) (aside from volatility swings, which is understandable but very risky)
I wish I could comment on a lot of these stock picks, but most I have never heard of, and others won't have much information out there. Hence, Im stuck arguing in political threads. :)
Seems like we have a fairly speculative group!
Forum > Low priced stocks
Displaying entries 1 - 20 of 29 forum posts in total
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Posted November 05, 2009 (12:13PM)
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Posted November 05, 2009 (12:24PM)
I am a very poor otter who can only play with so much lunch money... I find that the lower price stocks (crawfish) taste almost like lobster. I can eat all I want... and have money left over for other things... I also have the time it takes to watch over these little critters... |
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Posted November 05, 2009 (12:54PM)
Smallcaps chewed me up and spit me out last fall at the height of hedge fund liquidation, deleveraging, manipulation & naked short selling....and the smaller the market cap, the easier it is to manipulate it's price, even for smaller institutional traders with just a few million in capital. One of the problems with this forums display is that the leader board shows massive gains, and the short term leaders at the top are almost always small cap and penny stock winners in a lottery that we don't get to see the entire picture.. What needs to be taken into consideration is that for every massive gain you see that was made by microcaps, there are probably 50 that have taken massive losses, you won't find a "loser-board" to check the statistical odds, I certainly wouldn't just volunteer my massive losses if it were me. Smallcaps and pennies do exceptionally well in a bull run, inversely, they do exceptionally bad in a bear, but even in a bull they can be extremely risky, now that we're into a phase of uncertainty, the pennies would get hit the hardest if we continue to correct. This is the root of my perceived adverse statements regarding pennies, specifically those that hinge on a single factor to make or break it's future, understand I do what I can to stem others making the same mistakes I have. I will still make an occasional bet on a spec or penny stock, but I never spend more than I would on a friendly bet for my hometown football team. To name a couple that I had "played" with in recent months, INO at $1,00, out immediately as soon as it neared $1.50...it hasn't been that high in the three months since. MTXX, in at the bottom, I scaled into it in three parts all the way down to $.77 and sold it entirely at just over $6...that was a short term "deat cat" play and I fully expected to take a loss on the small amount I "bet6". GM, I bought right after the BK announcement at $1.00, fully expecting a loss, but sold immediately when it got to $1.60 DNDN, I shorted, in at $26, scaled once more at about $26.25, dumped it at just under $23. Not one of those trades was made with any expectations of a gain, I got lucky, I make these types of bets for the sole purpose of saving the trip to the local mom & pop for my lottery tickets. Every single one of those trades left me with the ever so slight afterthought that I should have "bet" more, but I never let myself forget what I went through last fall, and there is a reason hedge funds & mutual funds don't buy or hold these stocks. |
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Posted November 05, 2009 (12:57PM)
Correction, MTXX all the way down to $4.77 - not $.77....I wish!
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Posted November 05, 2009 (01:22PM)
For me it's all relevent to the amount of my initial capital and experience. I'm new at this and not learning it anywhere near as fast as I thought I would.
However, my reasoning is that if I own a hundred shares of a stock and it goes up a nickel, I break even (considering commissions). But if I own a thousand shares of a stock and it goes up a nickel, I make 45.00 (again, considering commissions). Plus, if I buy a larger amount, of higher priced stock, I'm essentially having to put all my eggs in one basket. (Now if only I could pick a stock that WOULD go up a nickel) Hopefully my knowledge will increase faster than my capital evaporates and I'll see the value trading higher priced stocks while I still have some money to speculate with. |
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Posted November 05, 2009 (01:45PM)
The original posting was “Why do folks play in the small stakes side of the house; instead of the High Stakes area of the gaming room?” |
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Posted November 05, 2009 (08:16PM)
I don't understand Otter's explanation. If you want to spend $1000, you can buy $1000 worth of stock XYZ, no matter what the share price is. If the share price is $1, then you can buy 1000 shares; if the price is $100, then you can buy ten shares. Why would someone prefer $1000 of a $1 stock over $1000 of a $100 stock? (Isn't that like thinking that "a pound of bricks" weighs more than "a pound of feathers"?)
The only way I can see Otter's explanation making sense would be if the share price is so high that you can't even afford 1 share. E.g., in the case of Berkshire Hathaway, BRK.A, I don't own any, because they cost $100,000 for 1 share. But, that is literally the only stock I've ever heard of where I couldn't afford to buy any. Few stocks are over $100 a share, and it's unlikely that anyone here can't afford $100. |
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Posted November 05, 2009 (09:42PM)
Would you rather own 1000 shares of $1 stock and watch it go up a dime or would you rather have 100 shares of a $10 stock and watch it go up a dime? People want to play with the little money they can afford to play with and hope they can find a winning lottery ticket or two.
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Posted November 05, 2009 (10:09PM)
Despite what the 'experts' saying that you 'get what you pay for' there is a logic to buying lower priced stocks, especially established 'beaten down' stocks that still have viability after a major bear market. There is more potential for Upside improvement over higher stock priced established brands that might be closer to a dynosaur phase than the little small caps (esp. emerging markets w/ Chinese recently started companies). Beaten down ones would be the heavily subsidized ('too-big-to-fail") ones like the incredibly volatile Irish banks that now have come out of a deep, trough of a 'correction' or those famous retail brands that were next to nothing back in March: Ford, Pier One, etc. Due to their generally upside volatility, more profits are made than on established brands like WMT, T or PG for examples.
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Posted November 06, 2009 (01:13PM)
I would rather have 1000 pounds of crayfish than 10 ponds of lobster... Cheap suits me just fine.... But owl... if you ask me out for a date... you'll need to spend a lot on a fine wine.... But you first need to get past the bouncer at the front door... Your a Hootie-Toot-Toot!~!! |
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Posted November 06, 2009 (01:30PM)
Wat? |
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Posted November 06, 2009 (01:51PM)
I'm actually with OWL on this, hence my question.
A 10% move in a portfolio comprised of $5 dollar stock is the same as a 10% move in a portfolio of 100 dollar stock. So whether you have 100 $5 dollar stocks or 5 $100 dollar stocks the gain would be the same. So, with the lobster vs. shrimp explanation, the analogy would be better in my opinion if you said I would rather have 100 lbs. of shrimp (comprising of 1000 shrimp) vs. 100 lbs. of lobster (comprised of 50 lobster) So I think the "watch something rise by 10 cents in a $1. stock vs. a $100 stock" is completely irrelevant. I think Data Dave's perspective is one that I hadn't thought about, in the depressed stock notion. Also to clarify, its not about large cap vs. small cap. Small cap stocks can be $50 a share and ultra large caps can be at $5. I definitely see the difference in terms of volatility. Some speculation is great, but the fact that it seems that a lot of people have entire portfolios comprised of these speculative stocks or are overweight on the speculative stocks. In the theory that 8% succeed, and 92% fail, it depends on how far the fall and how high the rise I guess. It just seems like a lot of those smaller stocks don't have enough information out there to make a quality and educated investment decision, but rather is purely based on business perception and chart trends, which seems dangerous, while companies like apple, who have detailed records and a ton of information out there going back many years, enough years to establish trends and deviations from those trends, make for a more probable gain. I guess I view it as the difference between true "investment" vs. "speculation". To each their own. If its workin for ya keep at it!! |
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Posted November 06, 2009 (01:55PM)
PRD - yes, the math is correct but the volatility of $1-3 shares is much higher than the volatility of $100-priced shares. And if one enjoys the volatility and can use it to his/her benefit, the cheap shares are a clear choice
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Posted November 06, 2009 (02:44PM)
Yes... The main point is the thrill... that's why they put the lights on those cheap 25 cent 1 armed machines.... |
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Posted November 06, 2009 (03:08PM)
I was less than thrilled to watch my money in penny and smallcaps cut in half last year, while the rest of the market only fell 25%.
I've said it dozens of times in this forum, if you'd made money in smallcaps or pennies and you're still holding, consider the saying about bears, bulls and hogs. |
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Posted November 06, 2009 (03:16PM)
But please.... let's not forget about frogs....
I actually have been selling my lower cheap small caps and have been going a little higher...Still cheap though... I'm now in at the 3's... but still hold a few at the 9 cents level... |
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Posted November 06, 2009 (03:30PM)
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Posted November 08, 2009 (10:01AM)
Prd, Inc, and all, Interesting comments here. PRD, I think there is a move towards "quality" now esp. due to Incubus's ideas about how major players in the market want to stabilize their profits to the end of the year. I note that TYH, the huge levered tech. etf is really making money in the last few months so Tech is still king. But BGU (large cap Dowstuff) is keeping up in the last week. I am becoming a bigger fan of Direxion's offerings but it's a costly learning curve. So I don't just do small caps obviously.(big volume, big cash involved in those etf's)
Now, Incubus, why would you even be invested in individual stocks last year when the whole market was in such a bear? And I mean not just after Fall... but the ever since mid year '07.. the Bear was king of the hill. I failed to have faith in the Bull this year and paid that cost but in an early Bull market it's the small caps that take off first I believe, maybe as this bull phase is getting towards a larger correction (probably next year, not this) large caps like T are maybe the way to go. Or short term investments in BGU or TYH and of course my fav. EDC. I refer again to Tom Lydon's simple rule for maintaining year by year profits (in his case modest consistent gains for a large fund) by Staying out of a market that is below the 200 day moving average (ema). I am looking at the trades that I made big loses on this year and see that mostly they are in stocks and etfs that were below the 200 day ema. I foolishly ignored a basic rule.. go with the trend, not against it, however.. in some cases.. seeking a bottom worked. But avoiding inverse etfs in a bull market is a good idea. (except for maybe SRS lately?) But Tom Lydon's refers mainly to the SPY. Except for a minor bump last year, SPY was below 200 day moving averages til our year's March bottom. And low priced and beaten downs are accelerators IMO. They accentuate the extremes of the market. Look at F, Irish banks, CAR,Pier One, KNDI, etc. And new high techs like VECO, STEC, STAR,MXWL,ZOOM, Chinese in general. Volatility is actually a good thing for savvy swing traders, but again, expensive learning costs. The end of gambling on low priced climbers might be getting close to an end but 'seeking safety' and so-called quality might be the thing; technicals on WMT and T are good for example. (dividend's matter in so-called 'quality' too) Hey, Otter, is DGCN going anywhere but down? I think it's bottomed and maybe ripe for a buy out perhaps. |
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Posted November 08, 2009 (12:17PM)
Dave, credit goes to Old Fart for originaly posting the article, the idea is from Mark Hulbert, he was rated the most accurate stock analyst last year amongst all the johnny come lately's that leave results worse than simply guessing or tossing darts at a target to pick stocks.
Also, I adopted a much stronger approach to using ETF's after last falls incredibly painful lessons, I still buy specific stocks, but I evaluate risk/reward and only "bet" small numbers. |
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Posted November 08, 2009 (02:48PM)
dcgn has nothing to give... it's burning cash so fast it would scare me at 10 cents a share....
Mind and intellectual property, patents, copyrights may be the only value... |
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Displaying entries 1 - 20 of 29 forum posts in total
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