Sep 27

Microcap Millionaires $5K Real Money Portfolio Update 09/26/14

Microcap Millionaires $5K Real Money Portfolio

Stock Buy Date Sell Date Buy$ Sell$ Gain$ Gain%
??? 09/25/14 $1245 ($31) (2.45%)

A new Microcap Millionaires stock pick alerted this week on 09/24/14. This hits the stock picking sweet spot:

Legitimate company

Long term hold

- Indentifiable catalyst

Hence, the bigger position size.

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Sep 21

Microcap Millionaires $5K Real Money Portfolio Update 09/20/14

Microcap Millionaires $5K Real Money Portfolio Update 09/20/14

No new picks this week from the MM’er family. The portflio is flat, ready to pounce. Matt has hinted about an iPhone related pick next week, actually it’s a freebie for everyone! Paid subscriber or not:D Stay tuned…

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Sep 17

Microcap Millionaires $5K Real Money Portfolio Update 09/16/14

Microcap Millionaires $5K Real Money Portfolio Weekly Update

Stock Shares Buy Date Sell Date Buy   $ Sell $ Gain $ Gain %
CGA 170 09/05/14 09/15/14    $418 415 ($3) -.72%

CGA sell alert on Monday (09/15/14) Got stopped out of the China pick –> CGA. It’s sad seeing a $100 profit disappear. Argh.This was definitely one I should have banked on, went up as high as +60%

Note to self: take profits while you still can.

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Sep 13

Microcap Millionaires $5K Real Money Portfolio Weekly Update 09/12/14

Microcap Millionaires $5K Real Money Portfolio Weekly Update

Stock Shares Buy Date Sell Date Buy   $ Sell $ Gain $ Gain %
??? ??? 09/05/14     $418    $67 15.92%

 

This week the lone stock pick (Since start of September 2014) in the $5K Real Money Portfolio is up $67 or +15.92%. Keep ‘em China picks coming :D

No new picks

 

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Sep 12

Microcap Millionaires Stock Pick from 9/4/14

Last week 9/4/14, Microcap Millionaires alerted a new China pick half position. The last China pick JRJC zoomed about +40% in 2 days.

Following a guideline that I have been using to not get killed by fees (5% rule of thumb). This is what I would do assuming a scaling in twice

First buy + Second buy + Sell all = $10 + $10 + $10 = $30 in fees

$30/.05 = $600

Therefore a $300, $300 scale in would be sufficient.

I used $400, $400 just to make it easy for myself.

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Sep 12

Scaling In Vs. Averaging Down: Don’t Confuse These Strategies Or You Could Lose Money Twice As Fast

The Average Down That Could Finally Be Discussed

On September 12, 2012 AAPL introduced the iPhone 5. Shortly after, I bought AAPL at the then all time high share price of $100.01 (split adjusted). About two years and a roller coaster ride later, I can finally tell my tale. The current share price is at a split adjusted $101.43. At that time I didn’t want to speak about it or look at the stock price because it had a huge plunge to about $65 per share. I averaged down and ironically caught the bottom of that as well. I traded AAPL in between, but all in all I lost money on the trade. A manageable loss and no longer with a position, that’s why I could discuss it;) The point is, this could have been avoided if I had a preplanned scale in instead of averaging down.

Definition

Acording to Investopedia.com, averaging down is buying additional shares in a company at lower prices than you originally purchased.

Scaling in is to set a target price and then invest in increments as the stock falls below that price.

 

The Dangers of Double Down

When averaging down or “doubling down” on a stock, you risk a couple of things;

1) A huge amount of the portfolio in one stock. (When I was averaging down on AAPL, it ballooned from 10 to about 30% of the portfolio, a big lagging anchor).

2) Opportunity Cost of Capital and Time – The free cash could be used in more productive investments. An unrealized loss is still a loss. With time, one never knows when the stock will ever go back to even. In the case of AAPL, it took two years. In the case above, more capital than necessary was stuck in AAPL instead of maybe the hot 3D sector at that time.

 

Scaling In, Planning In

Since picking tops and bottoms are quite difficult, scaling in and out allows a trader to get at least the meat of the move. The benefits of scaling in are:

1) Pre planned portion of the portfolio. In my example above, I wasn’t planning for AAPL to account for a third of the portfolio. If I had scaled in, I would have had a better control of its percentage part of the portfolio.

2) Minimizing losses. If you are wrong once, you don’t have to be twice as wrong.

 

Scaling In Vs. Average Down Example

This strategy is most easily shown with an example. Consider if the $5K MM’er Real Money Portfolio bought shares of GLUU:

 

$5K Portfolio

Category Scaling In Averaging Down
Portfolio Size $5000 $5000
First Buy 100@$5 200@5
Second Buy 125@$4 250@4
Average Cost $4.44 $4.44
Unrealized Lost $100 $200
% of Portfolio 20% 40%

 

Although both scenarios are in a tough position, scaling is in a more manageable situation: unrealized $100, and 20% of the portfolio. Averaging down would have double the unrealized losses and the stock is taking up 40% of the portfolio, not knowing when if it will ever rise again. Don’t fall in love with a stock, companies and stocks are related, but not entirely playing by the same rules. Just ask current GTAT longs ;)

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Sep 12

The Ecommerce Juggernaut That Could Help You Profit Two Different Ways

Alibaba (BABA) IPO

There have only been a few IPO’s in recent years in which I had a strong feeling that the company would be a game changer. These companies were already established even before the IPO, and became even stronger after. Hint: check your wallet and your phone and you’d probably see them:) The companies I’m referring to are Visa (V), Mastercard (MA), and Facebook (FB). Sure FB flopped in the IPO, but it came roaring back from ~$18 to ~$77 (+300%). In the upcoming weeks, there is another established game changing company that is about to go public. This one is a juggernaut, it’s been described as Ebay and Amazon rolled into one. I’m talking about the Alibaba IPO later this month (Sept 2014)

 

Ecommerce Juggernaut

Alibaba is said to be like Ebay plus Amazon, but bigger. One could buy and sell on Alibaba just like other ecommerce platforms. There are two main sites that I have been exposed to: Alibaba.com and AliExpress.com. Alibaba is for larger quantity orders. Whereas AliExpress is for smaller quantities, maybe if you just wanted to try out the product. There are so many products to buy and sell, it could be overwhelming. Note how I have not given exact details, see “The Profitable Unknown.”

 

Real Life Experience: My First Alibaba Transaction

At this time, I can’t really talk about the exact product that I bought. The niche is quite competitive, thanks for understanding. I will try to give as much detail about it though. I was eyeing this product for a while.

Mobile Friendly Layout – There are actually US suppliers of this, but the Chinese suppliers also looked legit. Having confidence in the technology, I bought my first product from AliExpress.com on a cell phone.

Free Shipping - There are lots of suppliers offering free shipping, and others are not, this depends on the product. On the product that I bought it was free shipping. The shipping could be priced in, done through epacket, or buyer pays for shipping. Make sure to check the terms, buying a $20 item with $30 shipping is not fun @_@.

Delivery and Payment – The item came quicker than expected (about 10 calendar days). After receiving the item, I confirmed with AliExpress that I have receieved the item and it is as described. This confirmation before paying removes three common fears: being scammed (received legit item, then pay), product quality (it was more like a 7/10, hoping for a 9/10), and shipping logistics (product came at a reasonable time…I give ‘em a break since it is being shipped halfway around the world:)

 

The Profitable Unknown in Ecommerce and Investing in Alibaba

Uncertainty as an ecommerce platform makes Alibaba a profitable site to use. The fears mentioned above are still very real. The uncertainty makes the market inefficient, and thus profitable. For example, FB ads in the beginning were quite profitable, but as ad users became more efficient, it became less profitable. I don’t think we are at that point yet in which soooo many sellers have figured out Alibaba/importing. I have not yet found a foolproof way to source from Alibaba. For those that find real, high quality products, Alibaba will be a gold mine.

Uncertainty as a stock could make this a profitable investment as well. One such uncertainty is the slowing growth in China. But one must think like a contrarian to be profitable;) I usually do not buy IPO, and I won’t be buying BABA on its IPO. Will Alibaba live up to giant expectations? Let’s find out later this month!

 

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Sep 08

Why $2,340 is the Minimum Trading Capital I Would Start With

$2,340 is the Minimum Trading Capital To Start

I have seen people make tons of money with only $700 or $1000 or $1,500. But I believe $2,340 is the minimum trading capital you should start with to make it easy on yourself and trade like a Microcap Millionaire and here’s why:

 

Another trader I follow, Nick Radge, once said that the fees should never be more than 5% of your total trading capital. If fees are any bigger, you have mathematically dug yourself into a hole before even getting started. See the breakdown.

MM’er monthly fee: $97

Roundtrip trade (using ETrade): $10 + $10 = $20

Total: $117

Working backwards: Minimum Trading Capital = $117/.05 = $2,340

 

Fees could kill you if you have a small account. For example $117 fee / $1,000 account = 11.7%. This means as soon as you buy the stock you already have to dig yourself out of a -11.7% hole. On the other hand, $117 fee/ $10,000 account = 1.17%. This means as soon as you buy the stock, you only have to dig yourself out of a manageable -1.17%. MM’ers can definitely profit more than 1.17% per month :)

$2,340 allows you to survive from the start and be profitable.

 

 

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Sep 07

Why Small Cap Stocks Are Like Long Tail Keywords You Look For

Why Small Cap Stocks

I used to focus mostly on large cap stocks, think Apple (AAPL) or Visa (V). But then my eyes were opened to the tremendous advantages of small cap stocks. Here are 4 reasons I invest in small caps.

 

Huge Upside Potential (HUP)

Small caps have a tremendous growth runway compared to their large cap counter parts. Consider these two companies in the tech sector: Microsoft (MSFT) and Glu Mobile (GLUU). MSFT’s growth rate is about 2%, whereas GLUU‘s earnings growth rate is about 200% for the quarter. Are you really buying 2% more of Microsoft’s products these days? In general, the smaller the stock, the more opportunity for growth.

 

Stocks on the Move

Micro cap stocks tend to move a lot more due to news, events, or other catalyst. TKMR was up an obscene 45% in one day due to the FDA’s ebola drug rumor. That won’t be happening any time soon to the likes of JNJ.

 

Predictability

Since these stocks are more affected by catalysts, it’s easier to predict their movement. Also, since small caps usually have less products (two, one, none). For example GT Advanced Technologies (GTAT) is rumored to be Sapphire screen provider for the iPhone 6. For now, that is all people are anticipating. Compare that to trying to analyze IBM‘s cloud services, big data, software business, etc.

Low Competition “Long Tail”

Internet marketers love low competition long tail keywords. Small cap traders love low competition “long tail” as well. Since the stock market is a zero sum game, someone always has to win or lose. In mid cap and large cap stocks your competition are hedge fund managers with billions in resources, the brightest minds, MBA’s, PHD’s, machines. In micro caps your competition would usually be regular people, maybe 9 to 5ers looking to make a buck. I like my chances of being a big fish in a small pond :D The “long tail” portion of this is the research coverage. Some stocks are so small that not a lot know about them and there is no analyst coverage because it’s “not worth it.” Information arbitrage is your friend.

HUP, big moves, predictability, low competition, small caps is where it’s at.

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Jul 21

Small Caps Weekly Watchlist for 07/21/14

Small Caps Weekly Watchlist: SSRI, ARIA, RSH, NBIX, FNMA

Silver Standard Resources Inc. (SSRI)

Technical

SSRI seems to “bounce off the 20 day moving average.” In recent history, it went from about $6.50 to about $12.20 (+87%) December 2013- March 2014. Its showed a similar pattern again this past week.

Fundamental

Silver is moving again. Looking at this as a sympathy play. A high quality silver company that is also worth a look is SLW.

SSRI 20dma bounce_day_14.07.20

 

Ariad Pharmaceuticals Inc. (ARIA)

Technical

ARIA in oversold territory and hatred from traders is the reason its on my radar again. Chart has broken support, but looking primed for an oversold bounce.

Fundamental

Iclusig possibilities still exists. Approval? …But I’ve revenge traded (and lost) on this enough that I’m just a spectator. Something tells me that when enough traders (like myself) gives up on this, and the sentiment becomes so bad, the stock will finally shoot up.

ARIA Oversold bounce day_14.07.20

 

RadioShack Corp. (RSH)

Technical

RSH is near oversold RSI 38, and it has high short float of 28%. It looks to be consolidating and forming a base.

Fundamental

Oversold, high short float, if RSH has some decent earnings, it just may surprise to the upside. Looking intently because earnings release is tomorrow (07/21/14).

RSH Oversold Earnings day_14.07.20

Neurocrine Biosciences Inc. (NBIX)

Technical

Looking at NBIX purely from a technical point of view. With earnings release tomorrow, it could fill the gap down to $12ish or move up to $16ish. It just had a bullish engulfing candle on Friday.

NBIX Bullish Engulfing day_14.07.20

 

Federal National Mortgage Association (FNMA)

Technical

FNMA bounces off two moving averages: 150 day (30 week) and the 50 day (10 week). The “bounce” was around $4ish, but I’m playing it safe so I waited until FNMA had a new 20 day high. I’m done with picking bottoms, I’ll go for the new highs concept, that seems to work better for me.

Fundamental

This pick is actually from HereitFirst an up and coming (mostly) small caps/penny stocks website. I’ve been following them for a while now, Mitchell Fung (the main trader) is building up a solid track record. Definitely worth a look. The gist of  the article is that FNMA doesn’t owe the government that much anymore and the bail out is working out.

FNMA 30wk bounce_14.07.20

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