Value Microcaps Motherboard

[Bobwins]

crk no magic here. I am an old banker so my comments are fairly conservative. I am probably not the guy to identify the next rocketship stock. I do have a lot of experience looking at financials and I put a lot of value in mgmt integrity and execution skills. I tend to hold stocks rather than trade so mgmt is crucial to medium/long term success.

I primarily use the reference sources I have listed in the Ibox. I rely heavily on Edgar and the SEC docs vs PR. SEC 10q and 10k list full financials as opposed to abbreviated versions published by yahoo or others. Details in capital structure are really important to microcaps. Gives you insight into upcoming events as well as mgmt integrity.

To find stocks, I am reviewing earnings reports as they are released. I use businesswire.com and PRnewswire.com to review each earnings report. Both have ways so you just see the earnings reports and not all announcements. If I see a big earnings jump, I check the stock out on Yahoo. Looking at price and current p/e ratio to see if its microcap candidate and has low enough p/e. If it appears to qualify, I review PR and go to last SEC doc on Edgar. All this has to happen quickly to catch a mover.

I used to screen all the time but don't much anymore due to the diligence and contributions from board posters. When I did screen, I just used the yahoo screener, usually asking for under $5, less than 10 p/e, less than 100 million in sales, less than $100 million market cap. I also like the industry listings on yahoo. If I find a company I like, I look in the same industry classification on yahoo and they list all other companies in the same industry. The listing shows increases in revs and eps. I look for fast growing companies and see if they are turning from losses to profits.

The more companies you review, the more you learn about capital structure and common issues with financials. Many young companies focus their PR on sales growth but you need profits to sustain growth and I like companies that focus early on profits. This results in me missing google, amazon, sirius, xm,etc. That's ok with me.

By focusing on profitable companies, we are allowing these companies to separate themselves from the thousands of companies that will never be profitable AND cheap. This narrows our focus and prevents us from becoming "tip" investors. These are investors who don't take the time to investigate their buys but rely on "tips" from friends, relatives or strangers. If you don't do your own DD, you will never be able to tell the wheat from the chaff.

As I said, most DD is simply hard work. Reading SEC docs is boring and timeconsuming but is the only way to safely invest in microcaps. They tell you in the document the risks of their industry, the upcoming developments that could have an adverse impact on their business. We are lookie-loos in most of these stocks. We don't know the industry trends and the company's niche within that industry. The 10k helps us become quick studies and form an opinion about whether this company is a winner or a also ran.

The other thing I do is constantly prune my portfolio. I review it every weekend to make sure I still believe that my stocks are making progress and are still the best ones for me to hold. Over time, I realize which companies are doing what they promised and which ones are having difficulties executing. I try to actively cull the losers and make sure that new stocks are at least equal to what I already own in potential and quality. Good luck crk. Bobwins