Here at the Canadian penny stocks blog we’re always interested in seeing how stocks mentioned on the blog have performed. While there have been many stocks that didn’t perform well, and others performing exceptionally well (over 2000% now) it’s always great to look back and see some of the changes in prices.

There is a well known term for those against the mutual fund industry known as survivorship bias. It basically means that when mutual funds like to show their performance against their peers, the results don’t tell the whole story because they don’t take into account the funds that were started up, floundered and failed. They don’t get counted in the overall average so there is a performance bias to those who have stuck around for better or worse.

Naturally there will be some survivorship bias when looking at penny stocks, because in reality business is a tough game and not everyone can make the cut. Small cap companies are constantly under threat of running out of money. Often times they don’t have revenue and resort to offering more stock to raise more money but it’s a game they can only play for so long until no one is interested in owning such a diluted company.

Companies who continue to operate with support from investors are expected to produce results. When they do produce positive results the stock price will generally reflect that and see a quick rise in share price. Short term investors in penny stocks will try to time these events and take a buy low sell high approach and rinse/repeat through company cycles. Other investors will take the buy and hold approach and seek out the much larger long term returns but run the risk of losing more (or all) the invested money.

The other common occurrence in penny stock investing is acquisition. There are many junior mining and exploration companies that are listed on the Venture exchange that are in search for minerals of all shapes and sizes, however the companies are not all created equal. Many of these companies have the goal to be acquired by a producer. For both parties involved it is beneficial. The explorer profits from the takeover and can start a new company and do it again, while the producer does not need to explore, but can simply purchase a proven property and ramp up production and profits into the future.

So when we’re looking back at the performance of stocks like ATC.V, ELR.TO, and OGC.TO we see the tremendous growth potential but also have to keep in mind the survivorship bias that not all penny stocks featured on the blog are still around to make those staggering profits and comparing the two is just not always possible.

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