The Portfolio Approach.
In a general investing sense you would be diversified, so why not do the same in penny stocks. It’s a great way to spread your risk across different industries, stages of companies, and timeframes.

All of the same rules for picking larger companies still apply to picking the smaller market cap ones too. There are a few more things to consider when you’re dealing with riskier decisions though, but a key investing tennet is diversification through portfolio building and as such it’s worth considering.

Need to learn more? Read about picking profitable penny stocks

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Margin account investing is a great way to really amp up the earnings of your portfolio without actually having to put more of your own money in.  You can borrow up to 70% of the value of an investing in a stock which means you only need to put up 30 cents on the dollar.  Of course there is added risk that naturally comes along with added reward but if you’re interest is piqued read the following on Margin Accounts.

What Is A Margin Account?

Margin accounts are setup to allow clients to buy and sell stocks on credit and requires them to pay part of the full transaction price.  The brokerage firm the client uses lends the remaining capital to the client and charges interest on the loan to the client.  The client is expecting to make much more money than the interest charged out on it, and therefore a little interest is not a deterrent for the added service the firm provides.

The word margin itself refers to the amount of money that the client herself has to put up.  The remaining amount is the loan provided by the brokerage firm.  There are two types of margin positions that can be taken by an investor; long margin positions and short margin positions.

Margin Positions

A long margin position is when the investor buys a stock using only a portion of their own money and borrowing the remaining amount from the broker.  There are specific levels of money that a brokerage firm is willing to loan out which is based on the selling price of the security.  Each quarter there is a document produced that lists the stock eligible for reduced margin.  These are generally stocks that have less risk and very liquid as such, they require you to only put up 30% of the total investment.  The following is a list of those percentages:

Taking a short position in a stock is selling a position in a stock that you don’t currently own.  This type of transaction is executed on the belief that the price of a stock is going to fall.  The terms of margin are the opposite when taking a short margin position because you are actually lending money to the brokerage firm because you technically sold a stock to them and they are paying you the proceeds.  To cover the risk in this situation though the client must put up more than the total value of the short sale.  The following is a list of the maximum loan values for short positions:

Margin Call

When the margined stock is purchased the account must maintain sufficient funds to cover the position value. The brokerage firm lends you money but you are also provided with the stock so the full value of the investment is contained within your portfolio.  However if the price of the stock goes down your investment total will be less than the loan amount.  In this case a margin call will be triggered.

Example Of A Margin Call

In the example shown above you would need to fund the account with an additional $70.30 immediately or have the position liquidated automatically by the brokerage firm.  That’s not something you want to have happen so it’s important to keep a good amount of money in your margin account and try not to come too close to the limits.

Using other peoples’ money to invest can lead to a rapid increase in profits but comes at an increased risk.  When using leverage always take care ensuring that your account won’t come anywhere near a margin call.  That type of situation could result in significant losses as the use of leverage amplifies the loss.  Although many penny stocks don’t use margin, there are still some junior companies that would be eligible in the sub $5 range that could be traded in a margin account.

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The corollary, if you will, to the adage is known as the Halloween indicator. Basically, the period between November and April have generally been outperforming compared with the rest of the year. While several studies had been conducted on determine whether this trend is something worthy of exploitation, they are largely inconclusive from the investors perspective, unless you choose to believe or disbelieve certain elements.

These types of waves are generally more from an overall market perspective whereas individual stock picking, especially with small cap companies is less reliant on seasonal patterns and more to do with the possibilities that exist within the company itself. My kind of investing.

It was also that way with the blog in a sense. As the author of the blog, I took some time off this summer from blogging to get married. I’m happy to report that all went well and we’re now happily married and had a lot of fun on the honeymoon as well. But we’re back in business now here at the Canadian Penny Stocks blog and happy to be so.

Looking forward to sharing more info and stocks with you all this fall. Continued success!

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Investopedia has an article on The Dark Side of Bulk Buying which is not necessarily about investing but it’s about where you money goes if you’re not investing it.

Adam Hewison explains why diversification doesn’t work in today’s stock market environment. It’s a compelling case considering the performance of indexes the past few years.

Here is a Bloomberg article discussing IMF credibility based on an audit. There’s politics at work at the IMF no doubt. “The policy conclusions from International Monetary Fund research don’t always follow the underlying analysis, thereby potentially harming the institution’s reputation, according to an internal audit.” Read on…

Maybe some day Financial Advisors will be more than salespeople. Rob Carrick talks about it in an interesting article: Financial advice business needs to grow up.

The Sino-Forest story is fascinating in that mysterious kind of way. Of course for investors it’s been more of a horror show. The Blunt Bean counter has a suggestion for those paying the price on unvetted media coverage.

Technorati Tags: canadian stocks, finance, news

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If you’re already on the road to penny stock success and you’re just checking out the Canadian Penny Stocks blog for some penny stock ideas, that’s great and we’re going to continue to build on the successes of the past and keep bringing the free goods here.

But if you want more, check out the course. It covers a lot more material in detail than this blog. The course covers things like:
- When to sell profit, when to sell losses
- Researching Management
- Researching Cycles
- Managing Your Profits and Losses
- How to handle penny stock promoters
- Are penny stock newsletters worth it?
- Understanding volumes in Penny stocks
- When to use limit orders and market orders
- How I find penny stocks

The material is what you need for learning more about investing in penny stocks. The community you’ll join will further your successes and finally, the launch price really can’t be beat.

If you haven’t already, take a minute and CLICK HERE to check it out.

Technorati Tags: canadian penny stocks, Investing

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The technology industry has been a mighty force for 30 years now and if you look at the worlds richest people you’ll find that almost 50% of the 25 richest people made their fortunes in tech. Smaller technology companies are starting to find success with coming to market earlier than before and opening up the investing opportunities to open market. This is signficant because it can allow for small cap investors to profit on these tech companies before they reach the explosive growth phase.

The Two Profitable Tech Arenas
Technology has grown so much over the past while and really can be broken down into much smaller constituent parts. Hardware and software and the two clear delineations but it can go even deeper on both sides.

Hardware can be an interesting way to invest, however it can take a long time to bring the product to market and you have to deal with a lot of supply chain issues, product recalls, and distribution. Any one of these issues can cripple a small company and make it even tougher for us investors to make money. We’re not too interested in hardware tech companies today.

Software is the way to go. But what software?
Software is such a ubiqutous thing these days as it runs our lives. Think email, web browser, even Google and Facebook are nothing without the software that runs them. In 2011 there are two big themes in technology and more specifically software. Apps and Social Media.

There are huge upsides in the Apps and Social media growing markets. Part 2 we’ll talk more about both of them and why small companies are positioned to do well in 2011.

Technorati Tags: technology stocks

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4. It’s cold out.
Canada is cold in the winter. Most of our time is spent indoors trying to occupy our time near the fireplaces and television sets. But while you’re couped up inside this February how about making one of your activities stock market research. 30 minutes at a time would be all you need to commit. Try researching the investments you already own, the ones you might want to own, and the competitors of both.

Why not beat the cold with profits…then use those profits to fly somewhere a little warmer.

3. Christmas bills are over. Save your extra for stocks
January can be a lean month for many Canadians. The Christmas shopping rush is over and those last minute presents can put you over the edge financially sometimes. So January is catch up month where you try your hardest to catch up on those bills. Hopefully after January has passed you’re back on track.

Now February is the month of financial renewal! Start slicing off a little piece of that pay cheque and put it towards investing. Especially if you’re interested in penny stocks, a little bit can go a long way.

2. Beat the spring fever.
There are often times spring rallies in the stock markets. This has traditionally been the case, with some *very* notable exceptions (like the March lows of 2008!). But getting ahead of the rally curve by investing in February will allow you to participate in the most rally that you can. Of course, you’ll still need to consider the fundamentals before investing on such a thing.

1. RRSP is the season.
The end of February is your last chance to contribute into RRSPs for the last income year. If you haven’t been a regular contributor to RRSPs throughout the year then you will likely have contribution room in your RRSPs. It’s a great way to reduce your taxable income and if you’re lucky then you’ll be getting a nice cheque from the government in the form of a tax return.

February is also a great time to start a regular investing plan to put away some money into RRSPs in a monthly or bi-weekly way. Then you’ll spread out the investing over the year and take advantage of dollar cost averaging.

There’s still a lot of February left to take action, so go on and take that first step today.

Technorati Tags: canadian stocks, Investing

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Trade

What parity boils down to for all of the Canadian penny stocks is trade. In many cases companies are either manufacturing goods in Canada and exporting them out of the country or mining them outside the country and selling them in Canada (or exporting again).

For companies that are solely focus on manufacturing and selling within Canada the impact will certainly be lessened. These companies will be affected by overall macroeconomic trends and the impacts parity creates therein, however they won’t be as immediately impacted as other companies. In fact, if these companies are sourcing their raw goods from a country that is pegged to the US currency then they might be in a good position to be winners in dollar parity.

The companies that are usually more common at penny stock levels are ones that are mineral exploration companies or research based companies. The exploration based companies can benefit from the fact that their funds that have been raised through public offerings of stock can go further towards the big find, however producer who may be exporting to the US.

It’s certainly a buyer beware and taking parity into consideration as part of your due diligence is worth considering, especially in today’s fragile recovering economy. Any misstep and the parity could swing even further in Canada’s favour. If you know the right stocks that will benefit from this you may be in a good position to profit.

Technorati Tags: canadian dollar, canadian penny stocks, Investing

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Symbol – Open – Close – %+/-

SSS.V – $0.065 – $0.135 – 107.7%
CMM.V – $0.45 – $0.445 – -1.2%
MAA.TO – $0.315 – $.235 – -25%
MPE.V – $0.14 – $0.12 – -14%
SSU – $0.05 – $0.35 – 600%
ATK – $0.09 – $0.07 – -22%
BEL – $0.20 – $0.29 – 45%
SHH – $0.10 – $0.09 –  -10%
CUE – $0.075 – $0.18 – 140%
GGC.TO – $0.48 – $0.97 – 102% (now SLX.TO)
PTA.V – $0.41 – $0.61 – 48.8%
EBY.V – $0.045 – $0.045
AYX.TO – $1.21 – $0.93 – -23%
BKT.V – $0.125 – $0.23 – 84%
GFS.V – $6.90 – $9.19 – 33%

Total Return since October 19^th is 71%.  If this doesn’t prove the power of penny stock investing I’m not sure what would.  The list from October is completely reflected here and hasn’t changed from the time of original posting.  The advancers and decliners are there and in our case the number of winners (8) outnumbers the losers (7). But even if that wasn’t the case, there were 4 stocks that reached over 100% in the past three months.  The poorest performing winner was 33%.  The worst laggard was MAA down 25%.

Did you pick up on SHH?  This one stock alone could have almost carried all of the losers on its back with a huge 600% return.  That could have made for some nice Christmas presents.  Maybe not every quarter will have a performance like this one, but it’s certainly worth considering adding penny stocks to the mix when these are real returns on a set of stocks.

The final part of the year in review series will be the look forward to 2011; what to expect and where penny stocks may play a part in the investing landscape.  Until then, happy investing.

Technorati Tags: canadian penny stocks, Investing, penny stock picks

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The short answer is Yes! That’s the easy answer however, the reader’s question went further because his online broker said that penny stocks weren’t registered and he wouldn’t be able to buy penny stocks with a TFSA. This is where some explanation is required to understand the differences between penny stocks, because they’re not all created equal.

Canadian penny stocks trade on either the Toronto Stock Exchange or the Venture Exchange, with the vast majority residing on the Venture Exchange. In order to be listed on the venture exchange a company must meet certain filing requirements in order to stay in good standing. Being listed on “the big board” (TSX), companies have heightened filing requirements and must meet other price related requirements as well.

But in either case you should be able to buy and sell any and all stocks on either of these exchanges using a TFSA. I can speak to this as I’ve done so using a TFSA at Questrade.

What the reader’s broker is referring to when they say the stocks aren’t registered are likely Pink Sheet stocks. Pink sheets and OTC (over-the-counter) stocks are companies trading in the United States but aren’t listed on the major exchanges. They are traded over the counter and don’t have the filing requirements that stocks listed on an exchange have.

There are a lot more scams in this area and you really need to watch yourself here. There are ways to make good money in this way however it is the high risk of high risk investing. This part is true, you can’t trade these types on stocks in a registered account.

Technorati Tags: Investing, penny stocks, questrade, tfsa

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