Penny dreadful stocks - do they ever come good?

[d101]

Do penny dreadful stocks ever come good - or given that most of these companies seem to have had 10+ years of declining annual value do they mostly continue in this vein until going bust?

 

[tech/a]

Do penny dreadful stocks ever come good - or given that most of these companies seem to have had 10+ years of declining annual value do they mostly continue in this vein until going bust?

10 yrs of declining value isn't likely come good.
But sow pennies can perform that well-that they can change lives.

Peptec
Davnet
Medusa mining
Fortesque.

And the grand daddy of them all
Posioden

Many are no longer listed Gavin been taken over and some have returned to
Obscurity.

 

[skyQuake]

10 yrs of declining value isn't likely come good.
But sow pennies can perform that well-that they can change lives.

Peptec
Davnet
Medusa mining
Fortesque.

And the grand daddy of them all
Posioden

Many are no longer listed Gavin been taken over and some have returned to
Obscurity.

+1

In general, have a look at the mkt cap and shares on issue. eg LKO, that thing has been doing cap raising after cap raising after cap raising, its got 7.4 BILLION shares on issue. To climb to $1 it'll be twice as big as Bank of Queensland!

 

[Bonk]

Playing with money you are prepared to lose is ok with me . Careful selection is the way. Penny stocks come good yes if you have a winner. I am playing SPS CTR QPN currently . Good luck.

PS: Check how I go after Xmas

 

[skc]

10 yrs of declining value isn't likely come good.
But sow pennies can perform that well-that they can change lives.

Peptec
Davnet
Medusa mining
Fortesque.

And the grand daddy of them all
Posioden

Many are no longer listed Gavin been taken over and some have returned to
Obscurity.

Yes but it's really really difficult to ride the whole wave.

It's not difficult to stumble across a penny stock that hits the motherload and turns into a $b company. But how many people can have the composure to hold, and not sell it at 2x, 5x or 10x return and hold on to 100x or more?

I'd guess except founders, senior executives and true true insiders, very few will hold (regardless of technical or fundamental analysis) for that long, especially when the $ sum will become pretty large and outsized (relative to initial outlay and likely overall portfolio/asset base) even at 20-bagger level.

SIR was the latest example that went from $10m to $1B in less than 2 years (it is now ~$600m). But I'd like to know if anyone became a multi-millionaire by riding it all the way...

 

[burglar]

Do penny dreadful stocks ever come good ...

I hope some come good, because I hold a few of these:

FCN, MUX, AXE, FMS, EXM, HNR, RDM, PNN

If only I had moved my stoploss up to Breakeven!

 

[VSntchr]

Yes but it's really really difficult to ride the whole wave.

It's not difficult to stumble across a penny stock that hits the motherload and turns into a $b company. But how many people can have the composure to hold, and not sell it at 2x, 5x or 10x return and hold on to 100x or more?

I'd guess except founders, senior executives and true true insiders, very few will hold (regardless of technical or fundamental analysis) for that long, especially when the $ sum will become pretty large and outsized (relative to initial outlay and likely overall portfolio/asset base) even at 20-bagger level.
SIR was the latest example that went from $10m to $1B in less than 2 years (it is now ~$600m). But I'd like to know if anyone became a multi-millionaire by riding it all the way...

Excellent post and once again you have managed to succinctly denote the thoughts that often flow through my head when thinking about topics such as this. I guess it becomes a situation of portfolio risk management vs investment conviction.
Another concept to the decision involves how the price moves relative to fundamentals - i.e. if it begins to surge above valuations before the news/events/results come, an investor is far more likely to sell out than a case where the price more closely tracks, or even lags, the news and events.

There is a few of the penny dreadfuls that have been on the move the past few months..only in the 2-5x range at the moment..will be interesting to see how far they go!

 

[burglar]

... And the grand daddy of them all
Posioden ...

So what if you bought them at 5c, would you still be holding at $21.00?

And if you held, how would you pay your wagers on the golf course?


(A dilemma I hope to have!) :

 

[skc]

Another concept to the decision involves how the price moves relative to fundamentals - i.e. if it begins to surge above valuations before the news/events/results come, an investor is far more likely to sell out than a case where the price more closely tracks, or even lags, the news and events.

I believe they are more likely to trade ahead of fundamental on a probability weighted basis.

E.g. 10% of hitting massive oil reservoir which will bring share price to $10, the market will probably price it at $2.50 depending on the hype. By the time they found oil, the share is probably at $15 with punters hoping for more while ignoring all other potential operational issues.

 

[Craton]

@d101 Yes and no.

Some small caps will stay listed on the ASX and become a backdoor, quick and cheap entry for private companies to go public. Others will slowly go bust, others will trade within a range and on it goes.

Be nice eh if every punt on a penny dreadful did come good, we'd all be billionaires by now!

 

[G Gekko]

I would suggest looking at each stock for their fundamentals. There's no use buying stock that you might hope to just get 'lucky' on. Unless you have money to just throw away...

 

[notting]

Not a thing I would be looking for.

However, AGI is living miracle.

The most conservative fundamental investors, I know, still have this at the top of their buy lists after it has spent years in the penny dreadful jail and is now up from 8c to $3.60!!

I lost confidence in it when they tried to offload it to the Russians at 60c.
It seemed even management had lost hope at that point.

It fell back to 8c during the GFC and has just gone off since then.

Unbelievable.

Despite it's performance, it has been quite tricky to trade on the way up due to having been very good at shaking out shorter term traders.

 

[springhill]

Absolutely, they do.

There are a few things you can look for to lessen the chances of failure.

Don't touch anything with a sh!tload of shares on issue, they have cap raised over and over and over for no reward. When new management comes in and a reconstruction is in order, they can become quite lucrative. As long as you aren't the schmuck who has held during all the dilutions.

Market cap : cash ratio. Look for value with a 1:1 or 2:1 ratio. A micro cap will need a minimum of $4-5m in the bank to be able to establish any sort of positive news flow on a project. Anything under that and you are looking at cap raising and dilution in as soon as a year.

Projects. If they don't have a decent one, or are in the market for one, expect stagnation or erosion of the share price as the market looks to more promising opportunities.

Market conditions. If the market is extremely bearish, your micro cap can have all the cash and assets in the world, and the share price will go nowhere except down. Look for a market with some appetite for risk.

Management. Past performance can be a good indication of future projection, especially if directors have a constant history of failure!

Options. Know how many and when they are at maturity. Depending on company activity or recent share price movement, be aware of dilution and sell downs.