Why You Should Prefer Micro Cap Companies to Penny Stocks

We did not just come to plant earth.  We are fully aware that for the most part, micro cap companies and penny stocks are the same; but they are not.  The term "penny stock" and the term "micro cap company" may be the same for the lay investor or even the institutional investor, but the connote two entirely different sentiments in today's investing world.

The legal definition of a "penny stock" is one trading under $5...the law makes no mention of market cap size, which is a mistake, since some stocks trading under $5 can have multi-billion dollar market caps.  But we are not here to teach you the laws, rules, or regulations on penny stocks and micro caps (although we do on some other posts), we are here to explain, Why You Should Prefer Micro Cap Companies to Penny Stocks:

In short, the novice investor looking to invest in penny stocks, is looking for a cheap play.  The attraction
here is that the volatility in the micro cap/penny stock market will lead to big gains.  This is correct.  A stock priced at $0.0001 has a great chance of double in price by gaining a fraction of a penny.  If the stock goes to 1 cent, you made a killing.  As most professional financial advisers will tell you (besides that the penny stock market is the riskiest investment you can make), is that price is only one element of what you should be looking at.  The same stock trading at $0.0001 may have no business plan, or may have only one executive running the show, or no funding lined up.  This is a pure speculation play, and not on the company, but betting on other investors will come into the stock and drive the price up.

The same bet or speculation trade can be placed on companies by looking at the market cap.  If a company has a market cap of $1,000,000 it has a better shot of doubling than a company with a market cap of $1,000,000,000; no matter whether the trading price is at $0.01 or $50.00 (Penny Stock and Micro Cap Companies can double in size with a single investor joining and making a capital investment, or the company making a profitable run that increases the balance sheet favorably).

But neither of the two paragraphs below should be the sole basis of your analysis.  The reason "Why You Should Prefer Micro Cap Companies to Penny Stocks" is because they are companies, and not just stocks.  To often the novice gets wrapped up in the fast-trade life and appeal of extraordinary gains.  This is possible and likely with solid small companies with a business plan, proper executives, and funding in place.  The penny stock trader who wants large gains in his or her portfolio will invest in companies, and not stocks.

The MicroCapCompany.com  

"Can a fancy name, or domain name, upon acquisition, directly increase the market cap of a company 1000x the trading value?"

It seems like anybody with an idea or small website can go public over the counter now a days....wait...they can, they have always been able to do so.  The stock markets and over the counter markets in particular have seen there fair share of Tech bubbles but is another one on the horizon?  Some fancy stock tickers with no earnings and a cute name continue to trade volume even when the company seems to be in shambles.  The same fancy domain names made a windfall in capital invested during our last tech run.  Could the "premium domains" be undervalued?

With "Premium Domains" selling for 1000x the face value of which one can purchase it on Godaddy.com , while it is unregistered, we here at MicroCapCompany.com are posing the question "Can a fancy name, or domain name, upon acquisition, directly increase the market cap of a company 1000x the trading value?"

Now let's get real, the only way a to increase the stock price 1000x the current trading price is for someone (demand) to put a purchase order in at 1000x the price.  But why would someone do that?

Penny Stock Companies & Micro Cap Stocks alike (as they exists today) are diverse companies; some are start-ups, some are established business, some are shell companies or vehicles, some are small companies with alot of shareholders, some are a mixture of these examples and more.  The answer is: Yes, a fancy name or domain name (in the tech world) could send a stock price through the roof.

A fancy name, tradename, domain, all fall under Intellectual Property if done right.  Claiming these trademarks or names/brands via the USPTO can be extremely lucrative.  Trademarks when registered outline your rights not only to use the marks or names, but to charge for others to use them.  Can we say revenue??  Of course this is if they are marketed correctly and there is a demand.  Now as far as the tech world, and Premium Domains, it's a little bit of a different story.

The right domain name for a website is the difference between putting your business on Main Street or in the middle of no where.  As far as SEO, and ranking on search engines, a domain name says allot   To put it simply, is someone searching "Tag Sale" more often than "Mary-Joes Tag Sale"??  If so, that domain, once established into a website, with all things being equal, generally rank higher in search; attracting more visitors.  All the pictures of Premium Domain names in this article are for sale via PushYourRank.com (an WEB blog owned by our parent company) as BRANDS!  With the right team and development plan, the eye can see the added value in the names.  This concept is not novel, many domain and website flippers commonly brand domains and target certain sectors for sale.  If a over the counter technology company where to purchase a site like TagSale.CO™ for $2,000 or say even $15,000 and it was currently trading at a $1,000,000 market cap, depending on the share price the domain purchase itself could double the size of the company.  The non-liquid nature of many penny stocks and micro cap companies allows for just one buyer to swing the price of stock up 100% and more!  It will only take one buyer in the market place to read a press release and get excited, maybe because he works from home and owns his own online store or e-commerce platform.  Today it is easier than ever to set-up a website model that generates cash quickly....can you withstand the test of time and investment is a barrier to entry for most in the tech world.  But for a micro cap company that has let's say $100,000 to invest in an Internet model, it's a pay day.

We want to know what you think about how Intellectual Property increases values or decreases values.  Please weigh in and join the conversation by leaving comments or your thoughts below.

The MicroCapCompany.com Team

Micro Cap Companies & Micro Cap Stocks in Review

Here at MicroCapCompany.com we look forward to everything about small cap companies, micro cap companies, and micro cap stocks.  Here is a little review to keep you updated on what is happening in Micro Cap Land:


Sidoti & Company, LLC Seventh Micro-Cap Conference June 7, 2013 at The Grand Hyatt Hotel New York-Sidoti & Co., LLC is delighted to invite you to our seventh Semi-Annual Micro-Cap Conference on June 7, 2013. This semi-annual event has become the most important get-together on Wall Street for investors and managements of companies with small market caps. No leading firm other than Sidoti has dedicated 20 research analysts and an entirely separate institutional sales-team to micro-caps, and we are proud that we have gained credibility for this sector of the market. Read more on the Sidoti Micro Cap Conference


Micro Caps Can Be Especially Risky In The Russell 2000-The Russell 2000 is scheduled to be reconstituted this summer. The process entails ranking companies by market capitalization on May 31, and publication of preliminary additions and deletions on June 14. A new membership list is to be made available on July 1. While inclusion is typically a status-conferring boon, problems stemming from removal need discussion. This article focuses on three relevant companies. Read entire article on Seeking Alpha


Royce Micro-Cap Trust (NYSE: RMT) as of March 31, 2013-The only micro cap closed end fund reports.  See story on MarketWatch


The Coming Boom In MicroCap Agriculture Stocks-I talk to a lot of professional investors on a daily basis on MicroCapClub, and more and more investors are expecting a bull market of epic proportion in agriculture stocks over the next decade. The key difference between a potential bull market in agriculture versus, let's say technology, is the scarcity of microcap agriculture companies. There are tons of microcap technology companies, but very few microcap agriculture companies. A couple of Ag-food analysts I've spoken to are scouring the Earth trying to find the next big thing in Ag. The Agriculture-Food industry is dominated by a few large multinational behemoths. In this article, I'll highlight some trends in food and mention a few potential microcap benefactors for the coming agriculture boom. See full story on Seeking Alpha


Micro cap invests in high-growth tech companies-The startup mania in tech that took hold of the United States as a slow economic recovery set in following the crash of 2008 has been mirrored north of the border. In Canada, just like in Menlo Park and in dorm rooms up and down the Eastern seaboard, there are thousands of startups who want to be the next Instagram or Twitter. Much of the reason for the sheer number of companies is that they are simply cheaper to start. And with customer facing social networks giving instant feedback, it takes much less time for founders to figure out if they have a winner on their hands or egg on their face. Over the next several years, this wave of tech will underscore how different the world of venture capital is Canada. Here, without big time VC’s to nurture them, startups are often forced to leave the nest early and seek public money by going public on the TSX Venture Exchange. Read more at StockHouse

Read us next time here on...

MicroCapCompany.com

Would you like to advertise or promote on our site?