Micro Investing Part 3, Stock Investing: Finding a ‘Winning’ Stock to Buy

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Contributor Eric Tippelt provides a real-life example of how he chooses his stocks for stock investing

Eric Tippelt | April 19, 2017 | SmallCapPower: The hardest thing about stock investing is knowing which stock to buy, and when to buy and sell. If you ask 20 different people what stock to buy, you will get 20 different answers. Which stock, and when you buy, have a lot to do with the type of investor you are.

If you are the ‘Buy and Hold’ type, you are looking at a 3-10 year time frame. If you are an active investor, you are looking at the 3 to 24 month time fame. For example, if you are a ‘Buy and Hold’ type, you might be looking at startup electric car companies. If you are an Active Investor type, you might be considering the Medical Marijuana suppliers.

Related: Micro Investing Part 2 – Buying, Selling, Learning How to Research

Micro Investing: How I Survived and Then Thrived

I think it is only fair at this point to talk about the thousands of websites out there that make a point of recommending stocks that have gone up 100% or more. From what I have seen over the last decade, a stock that has already made a 100-300% jump in price is very unlikely to keep doing that. Especially if it was a fast rise (two months or less). The trick is to be buying that stock BEFORE it has its rise. In order to do that you have to do some work in the form of research. I will also strongly suggest that you do the research yourself!! The worst that can happen is you learn something.

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I use Small Cap Power.com to help find the prospects, Stockcharts.com, to see where they are likely headed, and Ink Insider to see what the people who run the company are doing. Then, is the company involved with something that is likely to grow. It seems like a lot of work, but if you want to make money consistently, and not depend on “Luck,” I haven’t found a better way, yet.

I will use a stock that I own as an example. PyroGenesis Canada Inc. (TSXV: PYR), I bought them back in April 2016. I bought them as a long-term hold. I found PyroGenesis off Small Cap Power. They have a patented plasma waste-to-energy system and plasma torch products. Their process also makes extremely fine powdered metals. With the advent of 3D printing for metals, there is a very large and increasing demand for powdered metals. What drew me to the Company was their plan to make and ship the powdered metal instead of concentrating on building the machines (much more profitable). Their system is also being tested for eliminating very harmful waste products with great success. First check box complete.

Then I went to Stockcharts.com and checked the charts. Chart courtesy of StockCharts.com

(www.stockcharts.com)

 

The shares were definitely on the low side, but had had a small jump up. Second Box checked.

Next I check the Insider buying on www.inkresearch.com through my online trading account.  There was no buying or selling so that was a neutral signal. Third box checked.

I checked one more thing. Was an increase of 20% in the stock price, below the 52-week high?  Yes, it was. Another positive sign. With three positive signals and no negative signals, it was time to buy. I bought in at $0.21 per share. With a reasonable price, a micro investor like me could buy enough to spread out the trade fees. As at time of writing PYR closed at $0.41 per share. That is a 95% increase. No I have not sold the shares. I think (hope??) by this time next year they will be in the $1.00 per share range. The recent rise is because they are testing their powders and the results are very positive. Sales are to start in earnest shortly.

Research might seem like a pain. Reading a Stock Chart might look intimidating. But like most things, once you know how, it is not so bad. There might be scores of different indicators, (RSI, Moving Averages, Exponential Moving Average, Bollinger bands, MACD, etc.) but like most things, you will find that there are only a handful that you will use regularly.

I have found that this research method has helped me stay profitable, no matter if I am buying ‘Blue Chip’ dividend stocks on the TSX, or the more volatile ‘Penny Stocks’ on the Venture Exchange.

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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.

To find out more about PyroGenesis Canada Inc., please visit the company’s Investor Hub.

Ubika Research/SmallCapPower has received compensation from PyroGenesis Canada to provide analyst research coverage. For full disclosure please visit here >>

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