Time Is Running Out

  • Don’t bet big
  • When Telstra is riskier than a microcap
  • Understanding the risks

If you haven’t already registered for our ‘tiny stock’ investment summit, what are you waiting for?

More than 5,000 of your fellow Port Phillip Insider readers have put their name down for the FREE ‘tiny stock’ summit.

The first part of the three-part series went out to registrants today. But there’s still time. Register now, and you’ll still be able to watch part one, and then receive notification tomorrow and Sunday, when parts two and three become available.

Both Sam Volkering and I really enjoyed putting on and co-hosting the summit.

We’re both about as passionate as you can get when it comes to ‘tiny stocks’. In our view, there’s no better way for risk-hungry investors to have the best chance of clocking up terrific, speculative gains.

Anyway, if you’re as passionate about ‘tiny stocks’ as we are, check out our special summit. You can register for it online now. Go here.

Markets

Overnight, the Dow Jones Industrial Average closed up 174.22 points, or 0.85%.

The S&P 500 closed up 17.67 points, or 0.76%.

In Europe, the Euro Stoxx 50 index ended the day up 19.04 points, or 0.56%. Meanwhile, the FTSE 100 gained 0.06%, and Germany’s DAX index gained 0.09%.

In Asian markets, Japan’s Nikkei 225 index is up 133.81 points, or 0.73%. China’s CSI 300 is up 0.25%.

In Australia, the S&P/ASX 200 is up 34.8 points, or 0.6%.

On the commodities markets, West Texas Intermediate crude oil is US$50.77 per barrel. Brent crude is US$53.04 per barrel.

Gold is trading for US$1,280.55 (AU$1,700.83) per troy ounce. Silver is US$18 (AU$23.90) per troy ounce.

The Aussie dollar is worth 75.30 US cents.

Don’t bet big

Speaking of ‘tiny stocks’, the table below shows the top 10 biggest percentage movers on the ASX yesterday:



chart image

Source: CMC Markets Stockbroking
Click to enlarge


Look at those extraordinary gains.

But more than that, look at the price of each of the stocks. The biggest price for any of the stocks, even after a 33% gain, is still only 18 cents per share.

The smallest stock price in the table above is a tiny 0.2 cents.

In fact, nine out of the 10 stocks listed, have a share price of just six cents or less.

That’s the wonder of ‘tiny stocks’.

It’s the potential to make terrific gains, in short order, without having to risk huge amounts of cash.

Take the biggest mover as an example, Queensland Mining Corporation Ltd [ASX:QMN]. Just a $500 punt on that stock on Tuesday this week, could have resulted in a gain of $700 by yesterday’s close.

That’s thanks to a 140% gain.

Now consider an alternative investment. Let’s say you wanted to make a $700 gain, but you’re only willing to invest in or speculate on blue-chip stocks. We’ll use Telstra Corporation Ltd [ASX:TLS] as an example.

Yesterday, the Telstra share price gained 2.9%, or 12 cents per share. Remember, we’re after a $700 gain. In which case, how much would you have had to stake on Telstra to clock up a $700 gain?

To get the answer, you just need to divide 700 by 0.12. The result is 5,833. That’s the number of Telstra shares you would need to buy or own, in order to have recorded a $700 gain from yesterday’s Telstra price action.

As for the amount you would need to invest, well, prior to the gain, the Telstra share price was $4.13. Multiply that by 5,833, and you get the result telling you that you would have needed to buy $24,090-worth of Telstra stock.

Now compare the two. You’re after the same outcome, a $700 gain.

In the first scenario, speculating with ‘tiny stocks’ and hoping for a big gain, the amount put at risk is just $500. If you get the right outcome, you stand to make a great gain.

But what, as sometimes happens in the stock market, if you’re wrong, and the share price takes an almighty hit?

Well, if you’ve paid close attention these past few days, you’ll know that even if the stock price falls to zero, the most you could lose is the amount of money you invested. In this case, that’s $500.

Contrast that with the speculation on Telstra. Yesterday, such a trade would have performed well, gaining 12 cents per share.

But what if it doesn’t work out? That’s possible too. And unlike with the ‘tiny stock’ scenario highlighted above, the amount the investor has put on the line is much, much bigger. Just a 3% fall would see investors in that stock lose more than the amount the risk-hungry investors could have lost from the ‘tiny stock’ pick.

And if the worst happens, the blue-chip investor could lose $2,000, $5,000, or perhaps more, especially if a major market crash occurs.

You see my point?

‘Tiny stocks’ can be lucrative. But they can be risky too. That’s why we recommend only devoting a small part of a portfolio towards this sector. However, used the right way, with an element of conservatism in the amount invested, it’s actually possible to shift the risk in your favour.

‘Tiny stocks’ can allow you to get access to big multi-digit percentage gain opportunities, but without having to place huge, wealth-killing bets.

And make no mistake. While l’ve focused on the incredible gains speculators can make from this sector, let’s not underplay the risks.

Check out the table below. It’s also from yesterday’s market. But, instead of showing you the big gainers, here I’m showing you just how risky these stocks can be.



chart image

Source: CMC Markets Stockbroking
Click to enlarge


This should make the risks entirely clear.

One stock, Wavenet International Ltd [ASX:WAL], fell one whole cent yesterday. That may not seem like such a big move. But seeing as the stock was previously 1.5 cents per share, it resulted in a 66% fall in the share price.

And, to emphasis the risks further, you’ll note that just as the biggest gainers are ‘tiny stock’, so the market’s biggest losers are ‘tiny stocks’.

Make sure you understand that.

Look, we’d like as many folks to check out our special summit. But we also know that not everyone is suited to the kind of high risk speculation we highlight in the summit.

So, after all that, the only thing left to say is, why not check it out? Remember, it’s free. If you like the idea of big gains, and you fully understand the risks of speculating on ‘tiny stocks’, I strongly recommend you go here and register for the summit now.

With that, hopefully you’ll enjoy what you’ll see in the summit over the coming three days. I’m certain you’ll get a lot out of it. For all the details of what it’s all about, go here.

That’s all for today. We’ll check back with you on Monday.

Cheers,
Kris