OT: Listen up! There are literally hundreds of ways to invest and different venues people use to learn. I would bet that if you took a survey of people on IH you would find that most learned from the school of "hard knocks".
Every single person who has invested has made mistakes one time or another, some to the extent they wiped themselves out entirely. It is the nature of trading.
I have changed my trading style many times in my 40+ years of being involved in the markets. Sometimes I get frustrated when things aren't going my way and will sell out my entire portfolio, change my approach, and then in essence start over.
Probably the most important aspect of "learning" trading is to do good Due Diligence. The hard part about that approach is learning how to interpret SEC filings, understand the financial structure contained in those filings, and last but most importantly learn how to read through all the BS put out in press releases. If you keep in mind that the main reason for a company to release PR is to entice you to buy stock, then ask yourself why they are doing so.
Most public companies and likely more than 99% of pink sheet and OTC companies are set up for the benefit of management. IOW, if you as an investor make money that is much less important to the company than they themselves stealing your hard earned cash.
Take every news release you read, conference call you listen to, and positive posts on chat boards with a grain of salt.
When you view a press release, always look for things that are unstated in the release, rather than the obvious which is stated.
A simple example would be XYZ company telling you its earnings increased by a $1,000,000 year over year. What they likely won't say is that despite this earnings increase, they still lost $5,000,000 overall. More to the point though, the more news you read, the more mistakes you make in investing, the more you will learn what I am talking about.
I can state emphatically that you will rarely find a "slam dunk" type stock that can make you a huge amount of money unless you really work hard on your own to find undiscovered stocks and be one of the first, if not the first to buy in.
To do so takes an extraordinary amount of time and effort, a quick mind to comprehend what you just found, and a comprehensive understanding of SEC filings. Once you have mastered the above, you will become a better trader.
One last point you should understand is that "pigs get fat and hogs get slaughtered". IOW, rarely will you make the ultimate trade of buying at the very bottom and selling at the top. You must learn to take profits (if possible) as a stock rises and if a trade goes against you, not to be "married" to that stock, but to sell it and eat your losses before they consume your entire investment.
As part of your DD, it is important that you get in touch with management of the company you are investing in. After making numerous phone calls you will learn not only how to ask questions, or which questions to ask, but also how to decipher BS answers you get from the "real thing". If the CEO brushes off your tough questions or hedges on the answers it should be a big "red flag".
If you can't contact that person by phone try an email. If you get no response whatsoever, take your money and run.
Below is a email I wrote to a CEO yesterday from a company that I "found" some 3 years ago. I have flipped it once or twice during that time for profit margins of 500% (5 bagger) and 150% (1.5 bagger). This company was basically dormant for 6 years before producing a single SEC filing which I happened to catch. The filing in and of itself was very bland and stated virtually nothing of value for the investor. However, it did pique my curiosity and I did call management. The answers I got to my questions were not only astonishingly positive, but I also learned why the company had stopped its filings and the complete history of the company from the CEO. When I found out the share structure I decided that I would attempt to buy out as much of the float as possible without driving up the price beyond a certain level. When it reached that level, I quit buying and waited for others to discover the stock. At its peak, it increased by 1000% before falling back.
Here is the letter I sent and the CEO reply. Only the pertinent information is missing as this is "my" stock and I intend to profit from it in the future. Afterall, I "worked" on it for several years.
My inquiry:
Dear Mr. xxxx:
Thank you for taking the time to read this email. I have followed your company with interest for several years and have owned XYZ stock for several years.
Recently you announced that XYZ would be bringing SEC filings current. I understand that this is a long and complicated process but am wondering what type of time frame we are looking at.
I also realize that an exact date may be hard to establish at this time. However, I am wondering if it is possible for you to provide a rough estimate for their completion and publication.
Thank you for your time.
His reply:
Hi XXX:
Thank you for your interest. As you rightly pointed out that the process is long, complicated and expensive. The other factor is that the SEC upon review may have comments which may require additional work and iterations. Our goal is get this done this year and if we are lucky, perhaps the first half of 2008.
We are no doubt excited about XYZ and our future prospects and would like to offer a complete disclosure of the activities so that we can encourage broader participation in the company’s investor base.
Thank you again.
Best Regards,
Mr. ZZZ
So what do I know now that others don't. First off, I already know the float and outstanding shares from a previous phone call. I know why they didn't file for the past 8 years. I know a tremendous amount about their client base, products they produce, and the market for their product from years of DD. I know the company has tremendous credibility as the CEO has always been straight forward with me and went as far as providing me with the names of clients and verifiable contacts at the clients offices. I am also aware of the structure of insider holdings which are over 90% of the tiny outstanding. I also am aware that the company is still working on producing updated filings that IMO should be stellar.
In essence, I have a heads-up play on this stock that I doubt even one in 10,000,000 or more investors have ever heard of.
If the filings are even half as good as my expectations I expect it to skyrocket in a period of days as word gets out.
If the filings are not as expected, I have wasted 10 or 20 hours of my time on DD. Big deal. I have already been compensated well for my efforts.
The one thing you must remember is that I spend hours and hours pouring over SEC filings as they are published every day looking for that 1 in a million stock. Of course along the way I find others of interest and invest in them also although I am pretty much a loner by nature and rarely invest in other peoples picks unless I can find hidden value.
I also have a large portfolio of buyout stocks that are basically as close to a "slam dunk" as you can get, even if they aren't held for the entire duration. I find these using another method and only have to spend a couple of minutes a day working on 'em. They have payouts that average between 10% and 30% profit margins for long term holds of between a month and a year. They do a nice job of paying my bills.
Hope I haven't bored you with the above essay. Please remember that "luck" does play a role in making money in the markets, but DD will always trump "luck" when it comes to minimizing losses and maximizing gains.
Good Luck
AI
