Thursday, May 6, 2010

Short term goals VS long term goals

I was looking through the humorous and some times psychotic forum post for a lot of pinksheet companies, when it occurred to me that I would like to address a few things in my blog. The most important thing is that if you check the stock price of a pinksheet more than once per day, not only are you setting yourself up for irritation, but you are missing the point of the investment.

Most pinksheet companies are a long term bet. We are all betting that in the long term (1 to 2 years), The company's businesses will far outperform expectations and the PPS will closer reflect the companies real market cap and value. I mean, lets look at the facts:
1-In most cases, we know we are in for much more dilution.
2-In most cases, we know that updated financials are not happening tomorrow
3-Usually we know that the firm's business strategies are being put into place one at a time.

Now, knowing those things, we would be crazy to expect anything but a huge spike followed by low PPS for a good time after that. This in mind, If we invested in the company, we must feel that:
1-The companies business model(s) are sound and being effected properly
2-The Management team is experienced and talented
3-There is a track record of success in public markets
4-The company does generate revenue already
5-The company has some extreme advantages in model and personnel over competitors
6-The leader has the shareholders interest in mind (I truly do)
7-The factor holding the PPS down will eventually end (the debt conversions)

This tells us (or any informed investor) that we should expect HUGE things down the road. But, not now. A pinksheet play is usually a dual investment strategy. First is to get in early and take advantage of the huge spike. Second is more "long term". Now, in a long term investment, you accumulate as much as you can over the growth period to cash in on the long term win. I would never tell anyone to buy a pinksheet company unless you have that money to burn because of the risk factors, but If I was investing in a company that had the outline above, any day it dipped below my buy-in price, I would see as a sale, and I would accumulate more!

Again, let me re-iterate. I am NOT telling anyone to buy into dipping pinks. If you are considering a pinksheet investment, then you should consult a financial advisor to see if you can lose the investment (you must always assume a sub penny stock will be lost). I am just giving my opinion on strategy. When something you want goes on sale, you buy it. Economics 101 : buy low, sell high.

I hope this information is useful and i hope you all follow my advice.

Raymond Barton

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