NOTOLDTOBOOGIE: " think that statement is an oxymoron! Contradictory in terms."

I don't think so. If you look at guys like Warren Buffett, they started out with small-caps, microcaps, and penny stocks. I'm not saying it has to be a tiny company; it can be a small-cap that's worth a couple of hundread million. I think if Buffett had a small portfolio today, he would be looking at the smaller companies.

Originally posted in thread: 10861

He didn't take small positions in small companies. There is a big difference here. I own a microcap, but I run it and I make decisions every day that either adds or detracts from its value.
When he bought the mobil home manufacturer a couple of years ago, he got several of his other companies involved with the new entity to turn it around. They now finance the purchase and furnish components to the new entity. There are synergies at work that a simple investment in a company could not do. IMO

Originally posted in thread: 10861

portfolio but PENNY STOCKS are a different matter altogether as it has little to do with the size of the company though penny stocks are usually SC. Rather it has to do with the health of the balance sheet and the viability of the business model. And on those two points penny stocks more often than not fail to be a serious consideration for investment for all but the least risk averse and even then prudence would dictate that they would be a very small part of a diversified portfolio.


Having said THAT your point about the potential of A FEW of these companies is valid and I'd also agree that 'value' investing would be the prudent way to go. So here's what I would look for:

A business model that's survivable, i.e., a unique product or service which has little market penetration and most importantly little prospect of being easily, quickly or cheaply duplicated by potential competitors.

Sound, honest and transparent management which has 'skin in the game', i.e., the managers have their own money (NOT STOCK OPTIONS ONLY, please!) tied up in the business AND they have oversight from an independent board of directors.

Preferably more than one product or service currently marketed and profitable with a healthy dose of R & D to
fill the pipeline in order to grow the business down the road. This is especially crucial in the health care and tech sectors.

Abundant free cash flow, excellent profitability, high margins and little or no debt on the balance sheet are paramount. If a dividend is paid that's so much the better.

The stock is priced below its peer group and/or below its historical range of valuations.

Not rocket science here, NTTB, as these are characteristics of any sound 'value' investment regardless of company size or market sector.

I hope this helps you.

Peace and love,

Flakey

Originally posted in thread: 10861

If you're going to buy penny stocks (and I don't), value investing is far more prudent that chasing after stories of potential growth. I have no doubt that there are hundreds of penny stocks that are great values, but the reason that they are that way and will stay that way is because it is very difficult to research them. Information is limited on many of them and you're really going to have to go out of your way to find as much data as you can. Even then, there may be a lot of pieces missing and the insight as to whether the stock is a buy has to come from you, not outside opinions.

Originally posted in thread: 10861

there's little reliable info available for penny stocks, which makes it hard to determine a fair value. in that sense, it's hard to be a penny stock fair value investor.

now, there's exceptions: Angiotech pharmaceuticals (ANPI) used to be in the $30s, now trades aroun $7, and M* has a fair value of about $14 (I can say that, because the fair value was given on the video profile, which is available to everyone).

Originally posted in thread: 10861

How can you find the value of a stock/class of stocks which

A. Dont provide financial information
B. The information if provided is unreliable?

The whole concept of value investing is based on the premise that you can come up with a reasonable valuation of a stock and have a margin of safety. If you cant determine the value, how can you invest?

Unless you have the financial might or the know how of Warren Buffet, quoting him as a example to justify your process is wrong. Can you sprint like an olympic champion? If not, whats the point of saying because the champ did it in 9 seconds flat, you can do it as well?

If you are quoting Warren Buffet as an example, here is a quote from him "In my early days as a manager, I, too dated a few toads. They were cheap dates - I've never been much of a sport -- but my results matched those of acquirers who courted higher priced toads. I kissed and they croaked"

A little later in the same report he says "And thereafter I revised my strategy and tried to buy good businesses at fair prices rather than fair businesses at good prices"

Do your own DD.
Onemore!

Originally posted in thread: 10861

OneMore: "A little later in the same report he says "And thereafter I revised my strategy and tried to buy good businesses at fair prices rather than fair businesses at good prices""

I'm not sure how valuable his quote is. Buffett's returns during his partnership dates were far higher (I think it was in the 30%+) compared to with Berkshire Hathaway (20%+).



"Unless you have the financial might or the know how of Warren Buffet, quoting him as a example to justify your process is wrong. Can you sprint like an olympic champion? If not, whats the point of saying because the champ did it in 9 seconds flat, you can do it as well? "

The goal is not to become a billionaire but just make a few hundread thousand. If you go with Buffett's view, one can't be certain that they can or cannot be successful until they try it...

Originally posted in thread: 10861

The goal is not to become a billionaire but just make a few hundread thousand.

Hey Koala, at the rate of returns you get every year it'll take you 100 years just to get to the first 100k

Originally posted in thread: 10861

OH: "Hey Koala, at the rate of returns you get every year it'll take you 100 years just to get to the first 100k"

LOL maybe true... but at least it isn't 200 years. Then I would really have given up... but 100yrs ain't bad ;)

Originally posted in thread: 10861

and the Nasdaq (less than $5 per share is a penny stock). However, I agree most are risky and tend to do reverse splits to keep their listing.

OHOH, I haven't seen one in years that I wanted to invest in.

Originally posted in thread: 10861

The only one I owned was a stock named Lumera. Its still listed on Nasdaq. It was my first and last. I got out of the stock and even made a decent profit. But it was only because greater fools jumped in!

The company started with "we are the best mangement ever" slogan, buy the end of my holding period, they would make multiple press releases about the same crap. As years passed and success eluded and still eludes them, they kept burning through cash. The trouble was that even with clean financial info available, one couldnt rely on what was said in it. The strategy kept changing day after day.

What increased my confidence in the stock was the fact that both cisco and intel owned big chunks of it. Later I realized, a 24 Mil. investment for cisco isnt even an ass wart. For me, it was the largest position.

Then came the lucky press release and the stock jumped from 1.80$ to close to 10$!!!! Sold all the way up and out :) but it was an investment I learnt a lot from.