Hello readers! I’m back with a general discussion post after a turbulent few days of trading. Today I’ll be touching on the following:
- General Thoughts on the Market
- My Microcap Analysis Guide
- General Blog Update
General Thoughts on the Market
For those of you with boring desk jobs, you’ve probably been tuned in keenly to the wild market we’ve had over the last few days. I don’t have some soothsayer, Nostradamus level predictions or perfect explanation for what’s been going on. But let me posit a few things…
First, you have to remember that the market, such as the S&P 500, is just a collection of, well, 500 companies weighted based on their market caps. Investors are constantly forecasting everything imaginable to try to understand where they think these companies will be in a week, a month, a year, ten years, etc.
So, quite literally constantly, the best and the brightest minds in the finance world are honing models which have hundreds, if not thousands, of inputs and sensitivity factors. Some, obviously, will be more important than others. At any given time then, all of your favorite stocks are pricing in events that are purely based on speculation and probabilities.
Let’s give an example. Think about unemployment figures. Many people fall into this syndrome of thinking that Wall Street just sits on their hands, sees that unemployment goes up 1.0% (for example) and then they go crazy selling everything. This, of course, is not true. Wall Street could have predicted and priced in a 1.2% increase, so they see a 1.0% increase and actually decide to buy more on bad news.
Why am I saying this?
In times of market volatility like this, it generally means that there is a market-wide feeling that many key model sensitivities: inflation, unemployment, GDP, etc., were incorrect and are much more uncertain than they were before. This causes a loss of “consensus” amongst the market, which tends to increase risk. Increased risk means a higher discount rate, a higher discount rate means a lower share price today.
It also means that traders have diverging opinions on where the market is headed. This causes wild swings like the other day where the markets were down 5.0% in the morning, and up again in the afternoon.
In the end, what can you do? To be honest, as a long-term investor like myself, you should just keep doing whatever you’re doing. When you hold quality companies and/or growth companies which have legitimate risk weighted chances of success, you should just keep buying more. Panic selling and trying to time the market almost never works. Stick with it, keep up your research on companies you truly believe in, and don’t stop buying. You’ll thank yourself in 20 years.
AITX – Low Beta?!
While the last few days have been wild in the overall market, AITX bucked basically every trend in the OTC and not only stayed a steady green for the last two days, it actually traded with low volume/volatility. Generally, when the broader market moves one percent up or down, the OTC tends to over correct. OTC companies carry much more risk than your general blue chips, so as the market moves, the OTC tends to move the same direction but much more drastically.
AITX has held strong though! Why is that?
If I could tell you that for certain, I wouldn’t be giving this out for free. But a few hypotheses…
First, AITX has just gone through a more turbulent cycle over the last few weeks based on news, leading up to the 10Q, etc. All of that additional volume has signaled to me that market is comfortable with where AITX is sitting in terms of a price.
Also, the OTC may move, as a whole, much more drastically than the market. But that doesn’t mean every company in the OTC does. AITX could just be an anomaly right now.
Finally, and this could rile up Stocktwits, but AITX isn’t exactly the typical OTC company. There’s so many scams, pump and dumps, whatever on the OTC. Yes, AITX is a very risky company, but it’s very disclosure heavy, fully SEC reporting, and actually has real operations/products. All else equal, we would expect the company to have fewer volatile swings than your average OTC company.
So, in the end, who knows for certain why it’s held strong with low volume. But it has. Just stick to your guns, know your entry price, monitor news, and that’s all you can do.
ALPP – Buy the Dip?
Real short one today on ALPP. While AITX didn’t move with the market, ALPP certainly did move with the NASDAQ. I personally think ALPP is in over correction territory at this point. We’ve had no negative indication from the business that these external market factors are negatively affecting the company.
If ALPP is down just because of general market sentiment, but everything else with the company is the same and you were willing to buy it at $2, $1.75, whatever, isn’t this a great buying opportunity? I bought more late last week, and I’ll be looking to buy more this week assuming this price activity continues.
One side point of clarity. I was flipping through the ALPP Discord page and saw the verified profiles of how many shares people on there own. Let me dispel one notion right now, my long position is nowhere NEAR the amount of most people on there. Remember, I only allocate about 10% of my entire portfolio to microcaps, and I’m invested in more than just ALPP. So while I do like the entry point for ALPP right now, I didn’t bet the house on it 😊.
My Microcap Analysis Guide
For those of you that don’t know, I’m in the process of writing a step-by-step guide to analyzing penny stocks and microcaps. You can find that guide (in progress) here. I am super excited for the potential of this guide. I get a lot of questions about companies in general, what to look for, etc. I also feel like a lot of the active investors on the OTC overlook a ton of factors when analyzing any company.
Given that, I felt it would be helpful to my readers for me to lay out my guide on how I break down a company and analyze whether or not I should invest in it. I highly recommend you read my introduction article here going through the guide, its purpose, etc.
But in general, the guide should give you the basic tools to start identifying companies with real potential, and to exclude all of the god-awful companies inundating the OTC. It’s not going to find you winners every time, but I’m hoping it can tilt the odds in your favor.
Quick Blog Update
General quick blog update! COVID put a big damper on my writing over the last week or so, so I’m in a bit of catch-up mode when it comes to articles. Right now I’m trying to focus on the guide I mentioned above, but I’m planning to sprinkle in more ALPP and AITX content.
I also have some article ideas about some other companies that I want to “guest” write about. I have one on $CYBL I really want to write, and also $SIRC. But more to come there as I do not follow those two quite as closely as ALPP and AITX.
Anyways, thanks for reading today! If you haven’t yet, consider signing up for email alerts on the side bar. That way you don’t have to stalk my Twitter to see if I’ve posted.
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Have a great rest of the week, and talk to you soon!
DISCLAIMER – AT THE TIME OF WRITING THIS ARTICLE I HAVE A LONG POSITION IN AITX and ALPP. THIS ARTICLE IS NOT FINANCIAL ADVICE AND IS INTENDED ONLY FOR EDUCATIONAL PURPOSES. I AM NOT A FINANCIAL ADVISOR. AT THE TIME OF WRITING THIS ARTICLE, PERSONS AFFILIATED WITH THE COMPANY ANALYZED ABOVE MAY BE PROVIDING MONETARY COMPENSATION AS MONTHLY PATRONS THROUGH MY PATREON. THIS COMPENSATION IS NOT PROVIDED IN RETURN FOR ANY SERVICE, WRITING ABOUT A PARTICULAR TOPIC, AND/OR FAVORABLE OR UNFAVORABLE OPINIONS. MY PATREON SUPPORTERS HAVE NO INFLUENCE ON THE CONTENT OF MY ARTICLES.