Value Microcaps PICKSIX LOTTO CHAMPION

[lentinman]

KIK FINAL MEMORIAL: Taken from Ibox.

PICK SIX LOTTO THIRTEEN (PSL13):
http://investorshub.advfn.com/boards/board.aspx?board_id=15971

September 8th, 2009 to December 11th, 2009
55 Participants -- Gainers: 47, Losers: 8
Average gain: +31%


WINNER - KNOWLEDGE IS KING: http://investorshub.advfn.com/boards/profile.asp?user=49614
Top 10 Posters

   1`Knowlege     129.32% 
   2 CliffVB       80.77% 
   3 Researcher59  75.58% 
   4 ABH3VT        72.31% 
   6 Swampboots    67.27% 
   7 Valuemind     66.58% 
   8 Mike056       65.04% 
   9 Stevenrisk    64.55% 
  10 Northenlight  56.15%

Top 10 Stocks

   1 HPJ          460.27% 
   2 ROIAK        318.75% 
   3 AYSI.OB      312.73% 
   4 TSTC         232.26% 
   5 TRTN.OB      157.27% 
   6 ASRG.OB      155.96% 
   7 TELT.OB      150.00% 
   8 CHME.OB      104.27% 
   9 GRUS.OB      102.34% 
  10 APWR          90.22%

KNOWLEDGE IS KING COMMENTARY


I'm honored to once again wear the PSL crown and have the opportunity to write a few lines for the "Champion Board". I really enjoyed some of the background information that abh3vt shared with us in his Champions commentary and I thought my fellow VMCers might enjoy a look at my own past.

I Didn't Know What I Didn't Know

The year was 1984 and, upon graduation from the State University of NY @ Albany, I was incredibly fortunate to land a job at a tiny Long Island company known as The Unlisted Market Guide (really). At the time, the Guide published two-sided research reports on microcap companies that its subscribers could then keep in loose-leaf binders. The Guide was a free-wheeling operation with low revenues and high ambitions; in short it was a dream job for a kid out of college looking to learn about the stock market.

After "training", which essentially consisted of giving me a computer password, I became an analyst and was assigned a number of companies to cover. My daily responsibities included writing the reports, and updating numerous items of fundamental data on the Guide's vast database. To this day I still use that database (which has changed owners at least 3 times since I worked there) on a daily basis; I access it through Track Data.

Through the format of the Guide's fundamental database, and the company's strict adherance to objectivity (no ratings were given in our reports, just the facts), I quickly came to appreciate the value of fundamental research. The President of the Guide encouraged all of us to be on the lookout for intriguing stock market ideas. In fact, shortly after I joined the company, the "Bulldog Investment Club" was formed among several employees to actually invest in some of the stocks that looked particularly attractive.

The Hook is Set

Anyways, to make a long story shorter, I was adding new companies to the database one day. Believe or not we got SEC filings on microfiche back then and, on this particular day, the filings for Library Bureau, Inc. were in my viewfinder. Turns out that this manufacturer of furniture for the library market had trailing 12-month EPS of $.12 at that time and sported a book value of $.50. Imagine my surprise when I checked the stock quote (by calling up three market makers) and found it was "a teeny at an eighth". Yep, the bid was one-sixteenth and the ask was one-eighth (hard to imagine fractional quotes isn't it?).

Now we all know what I would do if I encountered that kind of pricing now, but in 1984 I was still learning things so I showed LBUR to my boss at the Guide and asked if he thought it looked good. He sized up the info I showed him and then told me (I'll never forget these words), "Son, I'll give you 30 minutes to buy as much stock as you want and then it's mine." As you might imagine, a newly-minted college grad doesn't have much $$ to put into the stock market, but I saw my way to purchasing 2500 shares at an eighth ($.125).

I alerted my boss that my buying spree had concluded. He said I could thank him in a couple hours. I wasn't witness to the calls, but in the next hour or so he apparently alerted a couple of his friends who liked to dabble in undervalued stocks. These friends must have had a bit of buying power because, sure enough, after a couple hours the stock was quoted $7/8 @ $1. I giddily sold my 2500 and thought what a great life it must be to buy things for an eighth and sell them for seven-eighths in the same day!

Talk about setting the hook for my future. After my intraday seven-bagger the path to riches was clear to me. And I basically haven't stopped looking for low P/E stocks since 1984. However I can still count the number of intraday seven-baggers I've had over that period on two fingers!

Looking Back

My first PSL commentary (12/20/06) gave a good summary of my approach to microcap investing. I wrote that, in terms of concrete strategy, I'm a low P/E freak first and foremost. I don't care if the company makes caskets or gaskets, bread or thread, spyware or eyewear ... if its trading at a P/E of less than 7, I'm digging into it -- and most likely buying at least a few shares. That's why I currently hold over 50 different stocks. Don't confuse that number with a fondness for diversification, it's not. I'm simply a collector of (in my view) cheap stocks.

It is from that Double AA and Triple AAA collection of cheap stocks that I draw for my major league portfolio. Like any good manager, I like my players to have some seasoning/experience in the "minors" before I allocate significant investment dollars and bring them up to the big club. I watch my nifty-fifty for continued sales/earnings improvement, increased trading volume, upward trending price action, acquisitions, divestitures, etc. When a particular stock starts putting together some impressive power numbers based on these qualifications, I'll up my commitment.

PSL13

While I take alot of pride in the fact that I garnered my first "All 6 Units Positive" listing, my success in PSL13 turned primarily on "The Trade". On 10/8, I managed to freeze both ACLO (up 138%) and ASRG (up 105%), and set about searching for a stock that I could use the proceeds from those two freezes to implement a Titanic double-down. It took another month but, on 11/9, The Trade was made and I "bought" SECX @ $1.29.

Due to a discrepancy between iHub and Yahoo volume data, the SECX buy raised eyebrows and required a ruling by SSK. The Trade was cleared and SECX began to rise almost immediately. A scant eight days later I was able to freeze SECX up 93% and the multiplier effect of the Titanic double-down sealed my victory in PSL13.

As for the stocks I originally picked in the contest, I continue to own ACLO, WKBT, ASRG (a minor position now), and NZYM (a fairly large position). I also continue to add to: a large SECX position (and have a standing bid @ $2 right now) and a large SMID position.

Looking Ahead

My list of possibilities for PSL14 numbers over 30, so I'm obviously not having a hard time generating investment ideas here at the end of a great 2009. Unfortunately I'm sure many of those 30 will run afoul of the $5000-volume-per-day average rule. Hopefully I can settle on 6 names that will prove interesting, and profitable, to my fellow VMCers. Merry Christmas and Happy New Year!


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PSL1 CHAMPION'S BOARD SUMMARY: http://www.investorshub.com/boards/read_msg.asp?message_id=11054704
PSL2 CHAMPION'S BOARD SUMMARY: http://www.investorshub.com/boards/read_msg.asp?message_id=13102250
PSL3 CHAMPION'S BOARD SUMMARY: http://www.investorshub.com/boards/read_msg.asp?message_id=15707449
PSL4 CHAMPION'S BOARD SUMMARY: http://www.investorshub.com/boards/read_msg.asp?message_id=19222015
PSL5 CHAMPION'S BOARD SUMMARY: http://investorshub.advfn.com/boards/read_msg.asp?message_id=22596832
PSL6 CHAMPION'S BOARD SUMMARY: http://investorshub.advfn.com/boards/read_msg.asp?message_id=25347294
PSL7 CHAMPION'S BOARD SUMMARY: http://investorshub.advfn.com/boards/read_msg.asp?message_id=28826790
PSL8 CHAMPION'S BOARD SUMMARY: http://investorshub.advfn.com/boards/read_msg.aspx?message_id=31870165
PSL9 CHAMPION'S BOARD SUMMARY: http://investorshub.advfn.com/boards/read_msg.aspx?message_id=34310724
PSL10 CHAMPION'S BOARD SUMMARY: http://investorshub.advfn.com/boards/read_msg.aspx?message_id=37678130
PSL11 CHAMPION'S BOARD SUMMARY: http://investorshub.advfn.com/boards/read_msg.aspx?message_id=41293175
PSL12 CHAMPION'S BOARD SUMMARY: http://investorshub.advfn.com/boards/read_msg.aspx?message_id=44849392