Penny Stocks: Anatomy of a Trade (fka TOAST)

[Vendit]

In smaller regional firms, there are mainly three types of broker. The first is the new hybrid asset-gatherer who gives us the spin about using speculative stocks to improve our returns on our bond and mutual funds, but ends up selling us only the stocks on the recommended list because they don't know any better. They don't know that the some of the gems on the recommended list are stocks that the top management might own big cheap positions. We can do without these salesmen who don't know how the game is played. The second type is the broker who does deals, the so-called entrepreneurial broker, one who is very close to corporate insiders. This type of broker is helpful to us because if the insiders that he is close to have a track record of success, we will be amongst the first to know of a good deal. We only need to make sure that our broker follows our orders when we say the word "sell" if a stop loss is hit. The broker has potential conflicts of interest here but we believe that the trade-off is worth it. The third type is the information gatherer. This could be someone who has worked in the field, knows some geology, etc. This type of broker knows everybody on the street and he is our friend because without proper information, we cannot analyze the deal properly. We have our ear to the ground via our broker. It doesn't take long to test out one of these brokers.

We believe one broker cannot possibly serve all of our needs. For each market we need a broker who independently gathers accurate and timely information, obtains instant execution, and puts the interests of his clients above his own. We have no problem in paying this type of broker a decent commission if he works to make us money with his ideas.

Amen.

http://204.244.168.151/education/The_Brokers.cfm




Reid