Since three weeks Nokia (NOK) rallied from its multiyear lows and almost doubled in price. Could this be the start of a broader comeback?
The long-term chart shows even more clearly how big troubles for Nokia are. Since its intermediate high in 2007 the maker of cell phones is down by more than a factor of ten. For the alltime high that would be a factor twenty. Currently NOK is a penny stock that closed today just below three dollars.
Problems of this company are clear and have a name and that is Apple and its iPhone and to a lesser extent Google and the Android clones. Seen from the product angle this story seems to be hopeless.
Don’t put too much expectation in Microsoft, the new partnership and OS vendor for Nokia’s new smart phones, here! MS comes late to the party and has not the advantage of existing application software that it had when it pressed Windows into the market.
Nokia’s new Lumia phone with Windows on it made some impression, but mostly because of its ultracheap kamikaze price compared to its features and hardware production costs. Nokia operates currently with negative margins. So, this situation is not sustainable and the new Windows smart phone venture has still to take off.
And yet, there is in principle potential. The first company to mention here as an analogy is no other than reborn growth legend Apple itself. Their story also seemed to be hopeless, ten years ago. Michael Dell once recommended Steve Jobs to shut down the shop. Times have changed…
Inadvertently we arrived at the master strategy for buying penny stocks:
- Look for fallen angels that have lots of price potential and show signs of revitalization in the chart,
- have a sound money management in place,
- and just buy the stock without further timing attempts.
This is sort of penny stock Zen. Sounds primitive? Maybe, but the trick here is that the market is always more knowledgeable than you. No one wants to admit that, especially not the small private investor who tries hard to outrival their big brothers in large funds. But reality is different from our beliefs and wishes. There is always someone out there who knows more and the small guy is usually the least informed. Of course, he feels otherwise…
Fortunately for the small investor there is also someone who is willing to tell you the secrets, and that is Mr. Market himself. Just listen to him and you may have a chance with the penny stock investing system above.
If the chart shows that something is going on, then there is something going on. And if it shows price potential, then there is price potential. Really helping is the math here. A maximal loss of hundred percent is outweighed by possible gains many times larger than that.
To be honest, it is not always so super simple. In the case of NOK we could also interpret the current upturn as a dead cat’s bounce. After that the spiraling death dance may continue.
A better chart situation would be a larger bottom and not a sharp trend turning point. The large bottom would indicate a zone of disinterest and a relative appropriate valuation of the stock, not distorted by trend frenzy. Then, new signs of life in the chart would mean possibly expanding potential…
And here is our recommendation to find exactly such situations. This small cap hunter is someone who screens the market regularly for fallen angels and comes up with real monster trades at times. Just try the service. He offers something like a free trial period with free stock picks at the beginning and after that his ideas are worth the small subscription fee.