Contributor Eric Tippelt reveals some stock investing tips that makes money for him consistently
Eric Tippelt | February 17, 2017 | SmallCapPower: With stock investing, finding a stock to buy at the right time is the key to consistently making money. You need to look at a lot of stocks to find one that is going up, or about to go up in the future. Headlines about companies that have gone up 200%-600% really catch your attention. But if they have already gone up that much, what chance do they have to go up that much again?? You want to buy a stock BEFORE it goes up 300%.
So where do you go to find the next rocket. That’s where the work comes in. Checking websites like SmallCapPower.com are a great resource. They constantly list and review stocks. They also offer some insight into what those companies are planning in the future, or what recent developments have happened. This is all information you need to find the next winning stock.
A few stocks that I have recently purchased were found this way. There is a big hype right now about Medical Marijuana growers. After reviewing a bunch of articles and finding a list of those that actually have sales (maybe not profit), I narrowed down the list to Aurora Cannabis Inc. (TSXV: ACB), Aphria Inc. (TSXV: APH), and Organigram Holdings Inc. (TSXV: OGI).
Still being a micro investor, the cost of the commissions is an expense I like to spread over more shares. That way the stock doesn’t have to go up as much to be profitable. So, I tend to buy at least 500 shares as a minimum. Because of that, stocks over $5.00 have to be really good to buy. All three of the stocks (at the time) met that criteria.
I liked ACB because they are actually selling product, and the share price was trending higher. ACB is also well within my budget. They are the largest market cap of the 3 so it can grow by acquiring other companies.
APH is the second largest market cap, so there is also the potential for growth through acquisition. They also actually have sales. It was, at the time, at the high end of my budget, but they are also about to move to the more respected TSX exchange. I have had stocks in the past where that has meant a jump in share price.
OGI is the smallest market cap of the 3. This could also be an advantage, as this might make it a candidate for buyout. The buyouts currently in the Medical Marijuana market are at a large premium to the market price. So potentially a great way to make a profit. It too was within my budget. I am currently ahead on each stock.
Like all my stocks I have a fixed exit point, both for a loss, and a profit. My loss limit is 10% less than purchase price, and my exit points are at 20% and 40% margin. If the stock hits the 20% point I watch it like a hawk, so if the trend is still up, I will hold it, but sell as soon as the trend is down. The 40% level means I have the stock ready to sell at the click of a button as soon as it turns south.
Does this mean I sometimes sell too soon? Yes. But not often. I strongly believe in the saying that “Bulls and Bears make money but Pigs get slaughtered.” Besides if you can actually make 40% a year on your holdings, you are doing fantastic. Risking large portions of my capital on a stock that might go up 300% is way too stressful.
Eric Tippelt is a full time professor of electrical automation at Loyalist College in Belleville. He has been studying money and finance since 2004 when he began his online trading activities. Eric writes about Micro Investing ($500.00 to $1,000), because there is very little information out there on how to invest at that level.