© The Astrologers Fund, Inc. Last Updated:
Trading or investing in small cap stocks is speculative and high risk. These are often special situation stocks that have great potential, but are not yet (highly) profitable. Yet many aggressive investors have a permanent, if small, allocation to microcaps in their portfolio. The reason is simple: small stocks tend to deliver the highest returns over time, even in a down market. However, they also can give the greatest losses. Given small caps tend to be highly volatile, rising and falling by large amounts in short periods of time, these stocks are either traded more actively than other portfolio holdings or considered long term holds. After proper due diligence, decisions to buy and sell should be based primarily on your personal financial circumstances, investment objectives, risk tolerance and liquidity needs"It's not that people shouldn't buy something in the Pink Sheets because it is quoted there.
Buy it because it is a value and has potential and the market has not priced in that potential."
Cromwell Coulson, chairman of Pink Sheets
HW: We agree but advise extra care and caution in due diligence.
"I implore investors to be highly skeptical of any advice they receive from the Internet."
Ronald Long, administrator of the Philadelphia District of the SEC
HW: I implore investors to be highly skeptical of any advice they receive on or off the Internet!
5 WILL GET YOU 10, 10 WILL GET YOU 20
Aggressive speculators should be prepared for more mini-hysteria up until until MidJanuary 2004. This is yet another chance at making or losing a fortune. If you choose to play this game, study the rules and have your game plan down pat. Remember ONLY to use speculative capital-capital you can easily afford to lose, without materially affecting your life style.
"I’m not concerned about the return on my money as the return of my
money" quipped Will Rogers and too many newbie small cap investors woefully
agree. Want to find if if this game is for you? Try the following visualization
Put $1000 to $5000 in ten dollar bills and spread it on your lawn. Now set fire to it and let it burn completely. If you can handle this emotionally, use the same hypothetical money burned and put it into your MICROCAP trading account.....
In other words, if you don't understand that you can lose your total investment, don't start. Make sure you realize the promise of BIG profits can deliver BIG losses. Buying small caps are NOT like buying IBM or Microsoft.
Now read on if you still want to go ahead.
Two classic strategies will help reduce Micro cap risk.
Either do a significant amount of homework, or play the "basket" approach. Whether you do the first or not (recommended), the second strategy is even more highly recommended. Unlike microcap traders who can profit from quick promotional moves, microcap investors should be prepared to let their holdings run for a long time- use a two to five year horizon to allow enough time for undervalued equities to be discovered. Ideally, several of the stocks in your microcap basket will double or triple within that time.
Much of standard corporate astrology applies to Astrology and Microcaps.
However, there are two significant differences:
The first is that while microcaps respond PRECISELY to negative astrological
influences, they do not always respond to positive. Why is this?
First, Astrology shows potential - it is a necessary but not sufficient condition for business success. If a stock has a good horoscope potential, it may NOT also have sufficient financing or management depth to pull it off. Conversely, if the company operates on a shoe string and a promotion, negative news is almost always right.
Secondly, these stocks may be heavily promoted. I trade them primarily
as "non expiring options". Generally the rule of thumb is
when the stock doubles, take half profits (so you "can't lose:); when
the stock falls 50%, cut your losses.
Now these are not iron clad rules, but these must be disciplined decision time points.
Also note that many companies simply do not make it even with a good timing.
So does the use of astrology help? Yes, for us it is part of due diligence. Does it insure success? No But it certainly increases the risk/reward and probability of successful investing in microcaps.
There are many ways to make money in the market, and many markets to make money in. If you invest in emerging markets, I would suggest this alternative that can be just as profitable but avoids many of the economic, financial and political risks: specifically the Canadian TSX Venture Exchange and US Bulletin Board and Pink Sheets.
First, this type of investment is ONLY for high risk capital, i.e. money that one can afford to LOSE without affecting one's lifestyle. Second , know in advance that there is tremendous volatility in these markets. Third, as in emerging markets, you are far away from the source, and mostly likely will be among the LAST to know if there is bad news. In such a case, you would be very unlikely to get out with much profit if any, or all of your principal intact.
These stocks are generally bought either as hot stocks plays or as long term investments. We use the latter approach. We consider these stocks which trade from under $1 to $5 AS NON-EXPIRING OPTIONS. There are also many Internet newsletters which are listed on our web site. Remember, however, that Very careful fundamental analysis is REQUIRED. In addition to doing fundamental research on these companies, we do technical analysis where appropriate. Most important for us, however, is astrological analysis. We research the horoscopes of the incorporation of the company, the first listing time of its stock exchange, the President, and where in depth study is warranted, of the key personnel. Thus while 90% of PENNY STOCKS may lose money over time, we find astrology can improve these odds dramatically!.
We recommend buying a basket of 5-10 Penny stocks. For example, if you wish to commit $10,000, buy 5 units of $2,000 and spread your risk. Depending on our time and price horizons, we employ one of the following two trading rules as outlined in my book INVESTING BY THE STARS:
A) WHEN A STOCK DOUBLES OR TRIPLES: Sell 1/2 to 1/3 to cover the cost of your initial investment.
B) WHEN A STOCK LOSES 33%-50% we reassess the Fundamentals. 1) We sell
or 2) if we believe they are still solid, we may double up, or hold depending
on our original astrological forecast.
To be continued.
You may also wish to read our older microcap posts linked below. Please note most of the company specific material is outdated. Obviously, and I cannot too strongly advise, do fresh research before buying or selling any stocks mentioned in these several year old posts as management focus or business activity may have changed.
The Astrologers Fund Inc., its director, employees and its clients often
maintain positions in corporate client stocks. In addition, corporate
clients may be advertisers on our web site. We may buy or sell any
stocks mentioned without prior notice. While we usually do not
actively trade these stocks to avoid even the appearance of a conflict
of interest, and they are most often intermediate term holds for us,
it can be of benefit to us when others buy or sell AFUND client stocks.
SAFE HARBOR: Forward-looking statements involve known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results. Such risks and uncertainties include, but are not limited to, market conditions, competitive factors, the ability to successfully complete additional financings and other risks.
for efforts in research, presentation, and dissemination of information
on companies featured here can be found in our Disclaimer. Investments
in small cap companies are generally deemed to be highly speculative
and to involve substantial risk, making it appropriate for readers to
consult with professional investment advisors and to make independent
investigations before acting on information published by this newsletter.
Investments in small cap companies are generally considered high risk investments
which carry the risk of loss of part or total principal investment.
Always do your own research and check with your licensed financial advisor or broker before buying or selling on the recommendations of the Astrologers Fund, Inc.
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