I have been so busy I haven't had time to speak about a resource in the room that maybe overlooked. Vampires penny plays. Most penny stocks are big piles of crap. Because they are penny stocks for a reason. I mean things don’t get cheap because they have value, at least not that cheap. But, if you can trade them, well that’s an entirely different story. Most people think options are gambling also. And they are. For most people. If you have ever seen the movie Wolf of Wall Street and its predecessor, Boilder Room, that's a Penny firm.
First, what makes a Penny Stock deserve the name? The term goes back to the late 80s and early 90s when scam firms brought scam companies public for no other reason than to fleece people out of their money. They were cheap so people felt like BSDs buying 100,000 shares. Of a $.005 stock. What most investors didn't know was that if you bought a Penny Stock for $01, $.008 was the commission. I know this because the first firm I worked at was a Penny Stock firm. I didn't know that until my first day. I showed up and asked the manager what to do. A manger that was 23 and straight out of Goodfellas. Anyway, he threw a phone book at me and told me to get on the phone. I asked him what I should say. He said I don't care make something up but get rid of some of this piece of shit stock the firm owns. I proceeded the get on the phone and recommend Proctor and Gamble. Because my Dad worked there. The firm depicted in Boiler Room was First Jersey Securities. They bought my firm out. For one week. I digress.
I got into the business at the tail end of the PS craze. Lots of scams and losers. But, Vampire isn’t marrying these stocks – he's only dating them. And the fact that retail treats them like real lottery tickets is helpful. As a stock gains a following, they support and buy more. And when it starts dropping, they support and buy more. And when it goes to zero they stop posting on wall street bets.
Today, PS trade on the "Pink Sheets" because back in the day, you could not get real time quotes on them - they were listed on pink sheets of paper. The only way you could trade them weas by appointment. This meant that you would call to buy or sell and the market maker had to match your trade - per share. No room for manipulation there. Today, any stock that is late doing their reporting to the SEC goes to the PS. Also, sometimes, rarely, companies that don't want to pay the exorbitant listing fee for a regular exchange listing will trade there. There used to be some high priced closely held stocks do this.
Some may think its counterintuitive to have penny stocks with the type of trades I do. I actually view what Vampire does as "options light". They are low priced, volatile and if they go in the right direction, you can have a large R. Of course it works in the other direction also. But here's the thing: Vampire actually understands the companies and their businesses. BUT, he goes much further. He understands the share structures, the order flows. Those two right there are why I invited him right off the bat to join me in building this community. The ONLY way to trade cheaper stocks is to understand how they trade.
His low-priced ideas are not to be a core part of anyone's portfolio. But they can be a smart allocation of capital if your risk tolerance allows it. One of the problems with low price stocks is that they are often low trading volume also. That makes entries a challenge because the last thing you want to do is for a whole bunch of people to get in and drive it up before you get a position. So these trade ideas have to be treated with some patience. I look to Vampire to let me know when it's safe to dive in so to speak. I do not want to be the reason the stock goes up because that means I am the only buyer. Not good.
But here's the huge advantage to the way Vampire trades them. First, before we go any further, he doesn't trade scam companies. I know because I have checked. These are real operating companies with real businesses. Here's some PS you might know:
Monster Beverage - traded for $.02 in 97
Apple - traded for a split adjusted $.10 when it went public in 1980
Advanced Micro was at $2 in 2015
Ford trade at $2 after 2008
Now these are outliers and rarities, but you never know. And that's what the advantage is. Retail LOVES PS. Because they are cheap. And they feed the greed present in all of us. So the advantage is IF you are able to get into one before retail does, they fuel the spike. I have seen Vampire do this time and again. Also, and he will have to explain, he sort of specialiazes in SPACs. SPACs are Special Purpose Vehicles, or as I knew them, Blind Pools. Money that is gathered without an operating business but with the purpose of buying an operating company, clean it up and try to grow it.
There is a time and a place for these trades and it is my fault I have not been more forceful in talking about them, all the while I am investing in them. These are not to be "played" around with. No investment is. These are vehicles to build wealth, if done correctly. Ask yourself, how many other people do you trade options with success? Well, the same can be said for PS.
I am not recommending these. I am not suggesting you do these. I am telling you based on my experience that if done correctly, they can be great winners. If they are done wrong, they are almost guaranteed losers. But do not think of them as an asset that cannot be traded with success. I am asset agnostic and will happily trade corn, oil, dollar - anything where I think there is a way to have competitve advantage.
As for performance, Vampire and I are figuring out a way for him to track his ideas. It will probably be another page on the site as well as a separate chat room. He is like me - he doesn't tolerate gambling or Yolo'ing. And he doesn't view these as playing Roulette. He has a defined process and execution and exit plan.
Bottomline, I encourage you to learn and understand them. Keep learning new assets and new ways to trade.