Sunday, September 10, 2006

Blood in the Streets Investing

Hey guys, Dan Holtzclaw here, aka the "Stock Doc". Just in case you don't know me, I am the author of the Best Selling Book "Penny Stocks: The Next American Gold Rush" and the newly released book titled "The Little Black Book of Microcap Investing" available at www.microcapbook.com I am new to the PennyMarkets Blog. My goal is to give you folks a different spin on microcap stocks. For my first blog, I want to talk about one of my favorite investing strategies...Blood in the Streets Investing.

For starters, what exactly is blood in the street investing? This investment strategy attempts to identify good stocks that, for one reason or another, have fallen out of favor with Wall Street. These stocks are typically in the doldrums and are usually approaching or setting 52 week lows. For investors with a little intestinal fortitude, these stocks offer opportunities for appreciable long term gains. These gains may not come overnight, but with time, a solid blood in the street stock can add a substantial boost to your portfolio.

As Warren Buffet once said, “…be greedy when others are fearful!” Well, nothing tends to strike fear in the heart of an investor more than a tanking stock. Blood in the street investing is not for everyone as it can be a very gut wrenching process. To buy a stock when everyone else is selling is difficult. You must also be willing to sacrifice some time. Unless you have a magic crystal ball, there is no telling when the stock in question is going to right its course. As it is impossible to predict the bottom for these stocks, I usually purchase them on a downtrend and they often continue south after I get in. That is okay because I am prepared for this. In fact, I expect it. Many times, if a stock continues to fall, I will do something else that many experts advise against...I will average down. (I will tell you more about averaging down in a future article). Now you must realize that I don’t do these things by the seat of my pants. I do this because I am confident in the stocks that I have invested in. I gain this confidence by setting my stock screener to find stocks that meet certain criteria. (I give these criteria in my book...if want to see exactly how I set up my Blood in the Streets Stock Screener, buy a copy!) After setting the parameters for my stock screener I then examine each stock individually. (If you want to know exactly what I look at when examining these stocks, buy the book!)

With blood in the streets investing, you cannot simply pick up a stock just because it is near its low. There must be other reasons for buying the stock. That is where my stock screener and other identifying factors come in. Sometimes good stocks fall in spite of strong fundamentals. If you can identify such stocks, you can acquire them at a significant discount.

Last month, I gave 5 blood in the street stock picks on my website www.stockdoconline.com
These stocks all met the specific blood in the streets criteria that I discuss in my book. Since putting out my picks last month, these 5 stocks have risen an average of 26.58%! One of the stocks rose an amazing 55%! You must remember that all of these stocks were AMEX and NASDAQ stocks. Gains such as these on the big boards are quite impressive. Let's see your mutual fund top that in one month!

Can you perform blood in the street investing with penny stocks? I would say "yes", but only under certain circumstances. Remember, you can't just rush out and buy any old stock just because it is near its 52 week low. The stock must satisfy other criteria. Right now, I have 3 OTCBB and Pink Sheet stocks in mind that satisfy these criteria. One of these stocks is RHWC (yes, I own shares in this stock). If you want the other 2, buy a copy of my book at www.microcapbook.com Type in the coupon code "Penny" when buying the book and I will give you a $3 discount plus the other 2 blood in the street picks.

Thanks and Good Luck with your trades!

Doc

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