Agriterra(LON:AGTA)hasbeentickingupsinceImentioneditacoupleofmonthsago。

ButtodayIwanttotakeanotherlookatAgriterra。

BecauseIthinkwecanexpectagooddealofvolatilityinthemonthsahead。

Andnowseemsagoodtime?

totakealittlecloserlookatpennyshares。

I’dliketooutlinethreereasonswhyyoushouldadjustyourinvestmentstyletopennyshares。

Becausebytakingthesesteps,youcouldmakesomeveryhandyreturnsinthemonthsahead。

Somethinghasnearlyalwaysgonewrong

Rarelydoesacompanycometothestockmarketwithapennyprice-tag。

If‘TheLatestThingPLC’cametothemarketat1pitwouldlookalotmoreflimsythanif?

itcameinat£1。

Butofcoursethat’sillusory?

Onemillionsharestradingatapound?

areworthexactlythesameas100millionsharestradingatapenny。

InfactwhenIinvestinpre-listcompanies(thatisbusinessesthathopefullywillonedaymakeittothemainmarket)they’renearlyalwayspennystocks。

Initialinvestorshopetogetinatpenniesandthenfloatthebusinessinthepounds。

Pennystockscanalsocauseconfusion?

Thestocksareoftenquotedwithmanydecimalplacesandthedealsizecanstretchtohundredsandthousandsofshares。

Sowhydopennysharesexist?

Well,themostlikelyreasonisthatthestockhassufferedaseriousfallfromgrace。

Andthat’sexactlywhat’shappenedinthecaseofAGTA。

OperatingasanoilexploreritwasknownasWhiteNileandlostinvestorstensofmillionsofpounds。

Ofcoursethiscanbeveryoff-putting。

Manyinvestorswon’tconsiderthesesortsofcompanies。

Buttheyaremissingoutonsomegreatopportunities?

AndIthinkAGTAisoneofthem。

Buildyourpositionsinstages

Theimportantthingistokeepacloseeyeonthecompany。

I’llcertainlybekeepingacloseeyeonAgri’smanagement。

I’mexpectinganendtoitsprofligatespendingandIwanttoseeprofitscominginby2013atthe?

latestandcashflowtoturnpositive。

Yes,youneedtobeforgivingwhenitcomestopennystocks–butforgivenessonlygoessofar。

Youmustkeepabeadyeyeonthefigures。

Especiallywhenthemarketsaresovolatile。

Personally,Idon’thaveabigproblemwithvolatilitywhenitcomestostocks。

ButIknowthatothersdo。

Whenitcomestothesesortsofstocks,you’llhavetohaveastrongstomach。

There’snodoubtthatthemarketmakersplaysillybeggarswiththepriceinthehopethatfearorgreed(orboth)willtemptinvestorsintomakingthewrongmove。

Badlyplacedstop-lossorderswillalmostalwayslockinalosswhenitcomestovolatilestocks。

Butyoucanusevolatilitytoyouradvantage。

Iliketobuildmypennystockpositionsinstages–ie,whenthepricedips。

Youneverknowwhenyou’llbeofferedagreatprice–soyouwaituntilthedaywhenthemarketmakersdroptheprice。

Icertainlywouldn’twanttobuyjustafterthepricehasexperiencedabigupmove。

Takelastweek,noticehowthepriceburstfromitsrecent2。

5p–3ptradingrangeandintothe5parea。

Thoughitcanbetemptingtojumponthebandwagon,it’snearlyalwaysworthholdingoffandwaitingforthedip。

Inthiscase,Iwouldn’twanttopaymorethan4pforthestock。

Placea‘limitorder’withyourbrokerat4pandyouwon’thavetostaygluedtoyourmonitorwaitingforthedrop。

Ofcourse,there’sachanceyoumaymisstheboatbutbetterthatthanoverpaying,iswhatIsay。