Published: December 30, 2022 | Published By: Real Creative Agency
6 Secrets That Will Help You Find GREAT MicroCap Stocks FAST!
Investing in low-price stocks can be an UNBELIEVABLY FAST way to change your wealth.
So maybe you read about “the Next Google“, or there’s a message board discussing a tiny company that “has Amazon worried.”
Yes, they can be INCREDIBLY enticing to invest in, but if you follow these 6 SECRETS, you can help avoid investing in a pump-and-dump stock.
99% of the stocks you hear about WILL NOT meet these criteria, which will make finding a GREAT microcap stock EASIER & FASTER.
The 6 Low Price Stock Secrets:
- Is the company current with its filings?
- What is the company’s shareholder equity?
- How much cash on hand does it have?
- How much cash are they using each quarter?
- Do they have ANY revenue?
- What is the company’s TRUE market capitalization?
Every publicly traded company has to file its financial statements with the Securities & Exchange Commission (SEC). Companies CANNOT post misleading information, which investors rely on to get their research.
We use a site called BamSEC, which lists every company’s filing and is REALLY EASY to use.
Visit that site and enter the stock ticker to get started.
1. Is the company current with its financial filings?
In the top left-hand corner, you will see a column titled “Financials.”
Look for the latest filing, and it should be from the latest quarter. A company has 45 days to post its latest 10Q (quarterly filing), and 90 days to post its 10K (annual filing).
If the company is late with its filings, this is a red flag. Sometimes a company may need a few extra days, which will be noted.
But…if a company hasn’t posted any financials in years, or ever..STOP!
Do not look any further. This stock IS NOT a good investment.
2. What is its shareholder equity?
Shareholder equity is a QUICK WAY to tell what a company is worth on paper. It is the company’s total assets minus the total liabilities.
To find this figure, open the most recent 10Q or 10K and look for the section titled “Condensed Consolidated Balance Sheets” (or something similar).
Next, towards the bottom for “Total Liabilities and Stockholder’s Equity“
You want to look at the line just above that titled “Total stockholders equity.”
Is it a positive or negative number?
If the number is negative, STOP. This company has more debt than assets and is basically “broke.”
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How to tell if a penny stock is a scam.
There are some GREAT low-price stocks, but the majority are forced to use promotional services to attract new investors.
How can you tell if you’re being misled or if you may have really found the next 100X bagger?
Follow the 6 secrets, hit the CONTACT US button, and submit the symbol.
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3. How much cash do they have?
Cash is the lifeline for any company, especially a penny stock.
A big corporation can always borrow against its receivables or other assets, but a small company usually doesn’t have this luxury.
If a small company has a limited amount of cash, chances are it will need to sell shares (dilutive) to continue in business.
To find how much cash it has, in the Consolidated Balance Sheet, look for “cash.”..write this figure down because it plays a big factor in #4.
4. What is the company’s cash burn per quarter?
In other words, how long can this company stay in business with the cash they have on hand?
This is usually a GREAT way to tell if a company is doing a promotional campaign to get a higher share price to do financing (a warning sign).
To find this figure, in the “Consolidated Statement of Cash Flow” look for “Cash, beginning of period,” “Cash, end of the period,” and “Net decrease/increase in cash.”
What is the decrease in cash, and how much cash do they currently have?
Will this company be able to make it through one more quarter with its cash on hand?
Any company that has LESS THAN 12 MONTHS of cash available is considered VERY RISKY and should be avoided.
Look for the phrase “going concern” in the filing..that’s a warning sign.
What is a GREAT MicroCap Stock?
Investing in a great microcap stock at the right time can be life-changing.
A $10,000 investment can turn into $100,000 or $500,000. We know because some of our subscribers have done it.
Some general things you want to see in great microcap stock.
- Enough cash to last 12 months
- Positive shareholders equity
- Number of shares outstanding under or near 200 million
- Revenue that is growing rapidly each quarter
- Profit margins that exceed 50%
- Little to no research coverage
Our sweet spot is a company with the above qualifications that has a market capitalization of UNDER $50M, or a nanocap.
5. Does the company generate revenue?
Is this company a story stock or are they a REAL company?
REAL companies generate real revenue, not minimal figures like $15k.
If the company has NO revenue, they are still trying to find a customer or a pharmaceutical (which we don’t touch).
We have found it better TO WAIT investing in a company until they’re generating revenue…this has saved our bacon NUMEROUS TIMES.
Pay a higher price knowing they can generate revenue.
Also, note the percentage growth from the same quarter last year and from the previous quarter. If the company is showing 35% plus quarter-over-quarter revenue growth, this is one to consider.
6. What is the REAL market capitalization?
Market capitalization is what the company is valued at according to the stock market.
It is simply the number of shares outstanding multiplied by the share price.
CAUTION: the market cap figure you see on Yahoo Finance or Finviz is USUALLY NOT accurate.
In some cases, the TRUE market cap can be double with penny stocks and could impact your upside potential.
To find the TRUE FIGURE:
Under “Consolidated Statement of Operations,” look at the bottom for “Weighted average number of common shares outstanding“, ‘Basic“, and “Diluted“.
Most financial services use the Basic number to determine a company’s market cap, but you SHOULD USE the Diluted figure.
You may think you’re investing in a stock with a $10M valuation based on Yahoo Finance figures but the diluted share figure could give the company a valuation of $50M.
Want to be alerted when we find a GREAT MICROCAP STOCK?
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