Are You Fishing For Stocks On the Bottom?
Just the other day I was talking with a friend about his summer plans. Fishing was at the top of his list. Now let me say this up front. I dont like fishing. Its slow and boring, and I just dont have the patience for it anymore. But it was a different story when I was a little kid.
Just thinking about fishing brought back a lot of great memories.
My family has a cabin up north. And within walking distance is a little fishing hole. I remember traipsing down there at 4 am with my brothers. We were armed to the teeth with fishing gear and rods and reels. And of course our big can of corn to bait the hooks.
Wed search for frogs and minnows and eventually drop our lines in the water and catch a catfish or two.
I dont fish like that anymore, but I do fish every day for stocks!
Much like the bottom feeding catfish we caught, I like to find bottom feeding stocks as well.
Whats a bottom feeding stock?
Im glad you asked. These are penny stocks trading at ridiculously low price levels. Im searching for companies that may have gotten caught up in a scandal or seen their stock pushed to ridiculously low levels for one reason or another.
Does it work?
You bet it does. Just look at one of my favorite stocks this year PRIMEDIA (PRM).
Think back to 2009. The entire market was in the dumps. The financials were in turmoil. And real estate was declared DEAD! It wasnt looking too good for anyone doing anything with houses, apartments, or real estate.
Thats when I stumbled across PRIMEDIA.
Their business is crazy simple. They publish those free magazines you find in the supermarkets. You know what Im talking about, the ones advertising real estate for sale, or the apartment guides for people looking for a place to live.
They give the magazines away for free and charge advertising fees for anyone wanting to sell their wares.
I knew the market wasnt dead, just hibernating.
Real estate agents needed to advertise properties. And apartment complexes needed to find new tenants. So despite the business taking a hit, it was far from dead.
I took a look at the stock and I couldnt believe what I saw. The shares were trading for less than a dollar and it even paid a dividend! The market was giving this company away at fire sale prices.
So I took action. I bought some stock. Then I bought some more.
Then I waited.
This is the key with bottom fishing for penny stocks. You must have patience. Youre not going to see things shift on a dime. Sometimes to see a stock recover, it can take weeks, months, or even a year or two.
In this case, the stock started drifting higher about a month later.
It bounced back and forth over the next few months. And by the end of the year, I was up over 100%. A few months after that, my gains reached over 200%. The stock market started recovering. The housing market didnt get any worse.
However, the apartment complex industry was catching fire. Occupancy rates started moving higher. And that pushed up rental rates. More apartment managers started advertising and the company witnessed a small improvement in their business.
Are they back to old levels? Not even close. They still have a long way to go.
However, the stock is now trading above $7.00 a share! Thats a 600% gain on the stock alone!
I clearly caught a whopper with that one!
So remember, the next time youre looking for something fun to do, put down the fishing pole and go fishing for stocks instead! Whatever you catch could put a whole lot of green in your pocket!
Until next time,
Brian Walker
Category: Investing in Penny Stocks, Penny Stock Tips
