I talk to a lot of investors, funds, traders on a daily basis and it is very easy to get too negative. Just like how falling in love with a stock can have serious implications on your pocket book, so can being too negative. Over pessimistic mindsets are often unconstructive. Even in a bad tape there are still those stocks that outperform the markets. The key is finding them before anyone else. I use several parameters depending on what industry I’m looking at. Here are some very random 🙂 but useful “themes” with some micro cap examples:
- Invest in Growth Companies that are insulated by possible negative Macro forces: Example, a company like Patient Safety (PSTX) who announced this past week an agreement to distribute its Safety Sponge in 130+ hospitals. It doesn’t matter if US GDP growth goes from +1.2% to -3.2% in 2012, PSTX will more than double its revenue base as these 130+ new hospitals are outfitted over the next 12-18 months.
- Invest in companies that don’t have financing risk: Example, a company like Sangamo BioSciences (SGMO) at $4.35 with almost $2.00 per share in cash with numerous catalysts on the horizon.
- Invest in China without Investing in China: Example, a US based company, TechPrecision (TPCS), has just opened its China Subsidiary this quarter. The company has signed up four Tier 1 customers in the last 9 months, and is trading at 7x this years analyst est, and 4x next years.
- Invest in the Right Resource, in the Right Country, at the Right Time: Example, a very undiscovered company like Verde Potash (NPK.v). Brazil imports 90% of its potash and is expected to be the biggest user of Potash by 2020. NPK is a Brazilian company with Brazilian management that has backing by the Brazilian government. The company’s thermo potash resource is so large it is thought that it could be big enough to supply all of Brazils needs over the next 30 years. Bankable feasibility to be completed in H1 2012 (CapEx $200m) to produce 1.1 mtpy. Anticipated production 2014.
- Invest in Dividends: Examples, Telular Corp (WRLS) with a 7% dividend yield, expected to earn 28c this year and 40c next (or) TESSCO Technologies (TESS) with a 4.5% dividend yield expected to earn 1.80 this year and close to 2.00 EPS next year.
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