Value Microcaps Motherboard

[John Bates]

Hank, When you say one of your bank stocks made 34% which "if you margin it is 68%" I'm not sure how that works in the real world, at least Ameritrade's one. In my margin account, stocks are put in either a "margin" or "cash" section depending upon their marginablility. Ameritrade takes care of this for us, and we never see the lists separated. "Margin" isn't actually used, of course, until the available free cash is gone. At that point, I could buy any stock, marginable or not, although the effect of a purchase on buying power differs as buying a cash stock will result in cash being borrowed from the margin acct to the cash acct. and, in effect, reduce buying power by twice the rate. Of course all that we do is push the Buy button.

My point is, the term "if you margin it" seems odd to me. If an account with 20 stocks has used margin to say a 150% level, the bank stock is part (probably not all) of the buying power that allowed 50% more purchases, but does that mean its performance is magnified by 1.5? It helped contribute to your buying power, but that could just as well mean allowing you to hold onto OTC-BB stuff that you otherwise would have had to sell.

The only way it makes sense to me is a situation where an investor who only has enough money for just the bank stock (and no other marginable stocks) then buys "twice as much".
I don't know though, the process is so simple with Ameritrade, and with other brokers the term "if you margin it" may make more sense.