Rocky Mountain High Brands (RMHB) - Sometimes it doesn't pay to be a cynic....

One thing I've learned over the years is that cynics are often right.  I've found those who prefer to see the glass as being half empty, that they're usually more intelligent than those who see nothing but rainbows and unicorns. 

Usually, but not always.  

Sometimes, particularly with penny stocks, it pays to see the upside potential, to look beyond past failures and to latch onto an idea or a concept.  When it comes to investments, penny stocks will often attract the rainbow and unicorn crowd, and sometimes they are the ones who are right.  

Do note, my qualification for determining right and wrong relates specifically to a stock's PPS.  If someone thinks a company is a bad investment and the PPS drops, then they were right.  If however they think a company is a bad investment and the PPS climbs, then they were wrong...and there can be times when the cynics are spectacularly wrong.

I first wrote about RMHB on October 11th after taking out a long position the day before.  Judging from what the PPS has done I made the right choice.  Here's a link to that blog posting:  

Hemp Infused Beverages - An intriguing idea for Cannabis players (RMHB)

And here's what the 1 month chart shows.  

Not a bad climb, from just over 3 cents when I took out my position, to up near 6 cents as of the most recent closing price.  In percentage terms its hard to argue with a climb of nearly 100% in a little more than 2 weeks of trading.  And I think there is the potential for even more upside, a lot more.

That's not to say its a slam dunk, there's no such thing as a sure fire winner.  It doesn't matter whether you're dealing with a dividend paying NYSE listed stock, a high flying Biotech on the Nasdaq, and not with an OTC listed penny stock, even if its fully reporting like RMHB.  In my view this is a stock that is only suitable for those using "risk capital", that is to say money that one can afford to lose.  

So why do I think RMHB has significant upside potential?  

Ultimately stocks trade on supply and demand.  There are always buyers and sellers, but if more people are buying than selling then the PPS will climb.  There are always manipulative games that can be played in my opinion, but basic market dynamics 101 will win out in the end. 

A month or two back one of my readers sent me an email suggesting I look into Cannabis stocks, and I did.  What I found were a lot of speculative stocks that had already climbed several hundred percent, sometimes 1,000 percent and more.  And the biggest percentage gainers fell into that category called penny stocks.  When I came across Rocky Mountain High Brands at Investors Hangout, (where I participate with the user ID growacet) I noticed that it hadn't yet made those type of gains.  And the prospect of Hemp Infused energy drinks was more than a little intriguing.

And the fact that they had just graduated from the non-reporting Pink Sheet Gray Market to the fully reporting OTCQB was a big plus for me.  I will not touch a non-reporting Pink Stock.  

I quickly saw the potential for Rocky Mountain to attract the attention of investors.  Their products are being distributed and can also be purchased at Amazon.  The company is working at creating brand awareness and already has a YouTube video available, 

How high could RMHB go?  I don't have an answer to that question, I'll be watching social media and keeping an eye on the trading for signs of irrational exuberance, but I don't see evidence of that yet. With that being said a market capitalization of $50 or even $100 million wouldn't shock me. Penny stocks trade on emotion a lot of the time and I think we could see days of 50 million and more in volume coming.  

Good luck.

Reshuffling the deck - The dangers of marrying a stock

Opportunities come up every day on the stock markets.  Right now I bet there is a 1 cent stock poised to go to a dime, a 10 cent stock primed to hit a buck and a $1 stock that will be trading for more than $10 before too long.

Of course unless you have a bottomless bag of money at your disposal, then you're going to have to sell some stocks to take advantage of opportunities that arise, and hopefully you'll be taking profits. That's something I've been doing of late with a number of the stocks that I've written about here at Avoid The Bag.  

As disclosed yesterday (Oct 24, 2016) I closed out my position in Lithium Americas (LAC.TO) for a nice capital gain.  I also decided to reduce my position in Eguana (EGT.V) by half, realizing a 100% profit on the shares I sold, having bought them at 15 cents.  Xenith Bankshares (XBKS) is another I reduced by about one third, having a cost basis of $1.60 means a return in excess of 40% on the shares I sold.  With all those capital gains I also booked a capital loss on LED Medical (LMD.V), a penny stock I thought was a good prospect to get some attention, but it didn't pan out, at least not yet.

In my younger days selling would have been harder, but I've learned some valuable lessons over the years, both from my late great Father, as well as from a most invaluable teacher called Experience.

Too often I find investors fall head over heels in love with their stocks, and all too often just one. Putting all your eggs, as well as all your money, in just one basket is not only incredibly risky, its also incredibly stupid in my opinion, but people do it all the time.  Why?  Because they've fallen in love. Its something that's happened to me before, and something I try to avoid now.  

I still like EGT and XBKS which is why I didn't sell out entirely.  I'm still holding some LMD.V as well in hopes it will start to attract the attention of investors.  The only stock I sold off completely is LAC, although I still think they have a chance to make a go of their Lithium Mine with SQM's backing.  

So what are the opportunities I saw?  One is in another stock that trades in what I'll call the "New Energy" space.  Ideal Power Inc. trades on the Nasdaq with the symbol IPWR. Beside recent developments and potential for stocks in the Energy Storage market, I love the way the chart looks.

I'll be doing a specific blog post on Ideal Power in the days to come.

Good luck to all three of my loyal blog dawgs, and I hope you're making money....not just on paper though, but with real capital gains that come from turning shares into money.

Cheers.

Closed out my position in Lithium Americas (LAC.TO)

I had already sold off a large part of my position, but had kept a decent sized position in case LAC took off.  Now seeing other opportunities I've sold off the remainder.  

Looking at the chart I see a pattern of lower highs and lower lows possibly emerging.  Thankfully my cost average was less than 50 cents CDN so I won the game, selling for more than what I paid.  And if LAC takes off and makes big gains from here, then I will simply have to cry into the money I made.

Best of luck to those still holding, I do think LAC may still end up a long term winner.  

When is averaging down a good idea?

To my faithful horde of followers, yes  all three of you, I have neglected this blog of late while watching my beloved Blue Jays advance in the playoffs.  Alas now that they've been eliminated by a better (and I must say classier) team in the Cleveland Indians, I will once again get back to sharing my thoughts and ideas on a more regular basis.  

One last note on baseball, I am still a big fan of the Blue Jays, but my regard for one Jose Bautista has fallen considerably.  His remark about the young Cleveland starter Merritt, who pitched 4+ brilliant innings to start game 5....Bautista's comment was totally lacking in class.  Jose said the young lefty would be shaking in his boots at the prospect of facing Toronto's vaunted line up. Cleveland took the high road after taking the ALCS, they didn't rejoice in making Joey Bats eat his words, instead they wisely said they don't pay attention to that kind of stuff.  

That's what winners do, they let their actions do the talking and its why I'll be rooting for the Tribe.

But now onto the topic at hand, about averaging down and whether or not its a good idea.  As with so many things in life, it depends.  For anyone who might be unfamiliar with the concept of averaging down, sometimes called "dollar cost averaging", its really pretty simple.  Say you buy 1,000 shares of a stock trading for $15, costing you $15,000 total.  That same stock then falls all the way to $10. So you invest another $15,000 at $10, but now you buy 1,500 shares.  Now you own 2,500 total shares and your average cost is $12.50....if the stock makes it back to that $15 price you first bought in at, then you're making money...at least on paper.  

The devil though, as often happens, is in the details.

If you're going to average down on a stock I would suggest you better be very confident in the prospects for the PPS to recover.  Is it a profitable company?  Are you receiving dividends?  That's not to say that averaging down a speculative investment isn't a good idea, its something I've done successfully in the past myself, but it is something that requires staying on top of things in my opinion.

Firstly, did you buy the stock at a time of heightened excitement, with lots of news and heavier than usual volumes trading?  If that is the case, then averaging down might not be a good idea.  If a stock is falling in spite of bullish news and increased trading volume, it could be an indication that while the retail herd may be excited and buying, that there are other players who are obviously selling the shares being bought.  And those sellers might just have a better gauge on the future direction than the retail herd.

From where I sit there is no "one size fits all" solution to determine when averaging down makes sense, no ABC checklist to follow.  But as a general rule I do think its best to try and gauge how the market is affecting the psychology of retail players.  I am a contrarian at heart, and that means running in the opposite direction away from the retail herd.  If volumes are high and the news seems good, but the PPS of a stock is heading south, then I will ignore the advice of those who advocate averaging down.  

Now, to bring this back to baseball and tie it in.  I am a fan of the game of baseball, I loved playing the game and I love watching it.  But I'm mostly a fan of the Blue Jays, its the team I grew up with.  I know the players and their histories, with other teams not nearly as much.  But while I'm a big Jays fan I'm not blind to the negatives, like that crack Bautista made about Merritt, the young Cleveland pitcher.  

Some people will fall in love with a company and its stock, and anyone who disagrees is an enemy. The same as with sports teams. But keeping perspective will allow you to keep a discerning eye when a company you love does something that perhaps you shouldn't like.  Maybe its paying to get noticed by hiring stock promoters, or maybe its putting out fluffy PRs which are filled with hyperbole and future looking promise but nothing of material importance in the here and now.

Enjoy the World Series folks, and whether its Cleveland or Chicago it will be nice to see a futility streak end.  

Hemp Infused Beverages - An intriguing idea for Cannabis players (RMHB)

Alright, full disclaimer right up front.  I took out a long position on RMHB on Monday October 10th 2016, so the opinions I am about to express are obviously biased, I eat my own cooking in other words.  

RMHB is a penny stock trading for less than one single American nickel.  I view stocks at this level to be the ultimate risk reward plays.  Get in early and there is potential for explosive gains, come late to the party after a huge jump and you might have a long wait, and quite possibly losses if you buy in at a peak that's brought on by irrational exuberance.

But at less than 4 cents as of Tuesday's close I don't think RMHB is anywhere near the point of "huge gains", but I can definitely see the potential for that to happen.

So what's the story here.

Rocky Mountain High Brands came on to my radar in the usual way, via some chatter on a message board at the site Investors-Hangout where I participate with the username "growacet".  I am an admitted social media junkie, and truth be told something of an attention whore.  I often see penny stocks being talked about bullishly on stock boards, and usually I'll check the chart and find they've already jumped 500 or 1,000 percent.  When that happens I move on, but RMHB is trading near its 52 week low.  

So what did I find so interesting about Rocky Mountain High Brands?  A picture is worth a thousand words, and a picture posted with a message sent my wheels spinning.

Energy and health drinks infused with Hemp?  WoW!!!  I'd never even considered that as being possible.  Time to do some research.  Is drinking something infused with hemp seed extract healthy? Turns out it is, which is hardly surprising given all the articles coming out about the health benefits of Cannabis.  Here's an article on such things as Omega 3 and Omega 6 benefits from Hemp Seed Extract:

https://authoritynutrition.com/6-health-benefits-of-hemp-seeds/

I'm not going to go in depth on explaining the relationship between Cannabis, Hemp and Marijuana, those sufficiently intrigued can do further research if they want.  Suffice to say they're all from the same family, however do note that the active ingredient in Marijuana that creates the "high" is called THC, and it is not present in this drink.  

Still reading?  Okay....regular readers of this pathetic and miserable little blog (all 3 of you) know my style.  I'm not gonna start pounding the table screaming GET IN NOW THIS IS GONNA EXPLODE!!! That's not my style, all stocks are risky and penny stocks are the riskiest.  They also have the potential to make the biggest % gains of course, its the old risk reward dynamic.  

Regulars also know I'm not big on fundamentals, I consider them as being already "baked into" the PPS.  And obviously with a stock trading for less than 5 cents, you're not going to see a robust balance sheet and a history of big profits.  Hemp infused drinks are something new however, so there isn't a 20 year history here.  

The chances for a $0.03 cent stock hitting $1.00 are slim, but they're better than the odds of a $3.00 stock going to $100.00...I've seen many OTC penny stocks go from pennies to dollars, I can only recall one stock trading in and around $3 going to $100+ without having to adjust for forward splits. 

The company's latest PR came out on October 11th 2016.  The most significant development from my perspective is RMHB moving off the Pink Sheeted Gray Market and onto the OTCQB.  I consider this hugely significant because there's no filing requirements on the pinks, while the OTCQB requires that SEC filings like 10Q's and 10K's be up to date.  There are traders and investors who won't touch the Pink Sheets and I'm one of them.  In Canada I draw the line at the Venture Exchange and in the US with the OTCQB.  I won't touch Pink or CSE stocks.  

http://finance.yahoo.com/news/rocky-mountain-high-brands-moves-130000972.html

Note that the company has a stated intention of moving off the OTC altogether and onto the AMEX exchange.  Yes I know its no longer called that but I'm old and will always refer to it as the AMEX. If you're reading this and thinking of RMHB as a possible long term play then I would advise you to expect a Reverse Split.  In my opinion if they're going to up-list the shares to a senior exchange, a share consolidation is an almost certainty to meet more stringent bid price requirements.  

I've identified a number of stocks on here over the past four months that have made some big jumps in a short period of time and I very much like the chances for RMHB to do the same.  If it does I will remind everyone of my favourite little bromide:  Nobody ever went broke taking profits.  

I'll leave you with the chart.  If the PPS gets over the 200 DMA I don't see it hitting resistance until the .06 to .07 cent area.  Assuming that happens then a 50/200 DMA Golden Cross would be in the cards and could signal a potential blue sky breakout.

Comments are welcome so long as they're respectful and without profanity, even bearish opinions are okay.  A market requires both buyers and sellers after all.  

Cheers and good luck.

Vuzix - Does history matter?

You'll often hear bulls advocating that a company's past performance has no relevance, citing the oft repeated line that "its all about the future".  And usually they'll be talking about a company that is in a hot sector, or one that is expected to be hot.  And typically the reason they recommend ignoring past performance is because the company they're bullish on has a bad history.  And this is doubly true when you're talking about OTC penny stocks.

But wait, Vuzix which trades under the symbol VUZI, it isn't an OTC penny stock, it trades on the Nasdaq and shares are currently trading for around $8 per.  This is true....but.

VUZI "was" an OTC penny stock until January of 2015 when it uplisted to the Nasdaq exchange. How does a penny stock get off the OTC market and onto the Nasdaq?  An investment by Intel helped the company meet the capitalization requirements of the exchange, and a 1:75 reverse split announced in February of 2013 helped them attain the minimum bid price requirement.  

VUZI ended 2012 trading around $0.05 cents per share.  On February 6th 2013, after the 1:75 share consolidation the PPS closed at $6.38 or about .08 adjusted for the consolidation.  

As of November 19th 2012 Vuzix had over 265 million shares issued and outstanding according to the company's SEC filings.  After the 1:75 share consolidation that number was reduced to a little over 3.5 million as reported in the firm's March 2013 10K.  

Was Vuzix's history of issuing shares about to come to an end?  

In October of 2013 they announced receiving funding from DARPA and the shipment of optical systems to the U.S. military.  

http://ir.vuzix.com/press-releases/detail/724/vuzix-develops-and-ships-next-generation-holographic

That's one thing that appears to be pretty much a constant with Vuzix, (that along with dilution of course), a seemingly unending supply of exciting and bullish sounding news that continues right to the present day.

Of course it seems the DARPA funding wasn't sufficient as the company revealed in its November 2013 10Q filing that outstanding shares had grown to over 9.5 million, more than doubling where they were after the recent reverse split.  

And so it continued.  By April 9th 2014 the number of shares had climbed to 10.2 million.  By November 2014 over 11.1 million, and over 15.8 million by March of 2015.  As of August 15 2016, as per the most recent 10Q filing the number was up to over 17.3 million.  We'll see if the dilution continues in the filings to come.

Since effecting the 1:75 reverse split, with every 75 shares of VUZI becoming 1 share post consolidation, VUZI has gone from about 3.5 million shares to over 17.3 million, almost a 500% increase.  Adjusting for the reverse split that equals roughly 1,035,000,000 pre consolidation shares....over 1 billion.

After almost 20 years, coming up on their 3rd decade of existence as a company....some seem to be expecting this leopard to change its spots.  Not me though, that's why I took out a position on the short side when VUZI was trading north of $9 at the start of September.

However I fully expect there to be promotional outfits touting an investment in Vuzix, and social media pumpers galore using any port in a storm to encourage buying and holding tight.  And I further expect them to all be saying that the past doesn't matter, but then its always thus with penny stocks...and while the 1:75 reverse split may have helped them get off the OTC I for one won't be shocked to see them back on the pink sheets in the future.  

(RVX.TO) Golden Cross - Will history repeat?

For those unfamiliar the term Golden Cross, (GC) refers to a technical event involving the 50 Day Moving Average, (DMA) crossing over the 200 DMA.  Here's what it says at Nasdaq.com:

"In the trading world, a Golden Cross occurs when the 50 day moving average rises above its 200 day average. This is typically a telltale sign of bullish sentiment for a stock...".

That is certainly what happened the last time RVX had a GC with the PPS exploding from less than $1 at the start of March 2015 to up around $1.80 by the middle of that same month.  Whether you're looking for short term momentum or long term appreciation, gains in excess of 80% are hard to ignore.  Here's a chart showing RVX's trading at that time.

Now of course RVX is not trading for less than $1 CDN.  The current Golden Cross happened with RVX trading at $2.05 CDN.  If it were to go on and make similar 80% gains in the coming weeks that would put the PPS up around $3.60 CDN.

Here's the current chart showing the Golden Cross which just occured:

Are there any anticipated catalysts that could reasonably be expected to lead to these type of gains? I believe there are.  Firstly the company is scheduled to do two investor presentations, one next week in NYC at the Yale Club and the second a week later in London.  There was a PR about it on Tuesday:

http://finance.yahoo.com/news/resverlogix-host-research-development-featuring-110000544.html

And beyond that the company's CEO has stated that the company will be announcing a second licensing/partnership deal "soon".  The first such deal was announced last year and was likely responsible at  least in part for the climbing share price in early 2015.  

American readers take note, Resverlogix trades on Canada's big board TSX and is fully reporting,  In the United States it trades on the OTCQX market.  Not all OTC stocks are created equal, the OTCQX includes many fully reporting companies that are listed on foreign exchanges.  

Full disclosure, I am a shareholder in RVX so my opinions should be considered as heavily biased, in fact I added to my position today (Tuesday Oct 3, 2016) and hold what I consider to be a substantial (for me) position.

Cheers and good luck