“Let no corrupting talk come out of your mouths, but only such as is good for building up, as fits the occasion, that it may give grace to those who hear”.

Ephesians 4:29

Love not hate people… we are all allowed our opinion as long as it does not offend…

Just finished going through some financials of some other venture companies. You guys think Metanor is bad. I am sure that everyone here knows that most micro, venture or small cap companies rely on the charities of the market. Also, about sixty per cent of them will face bankruptcy in the first few years (MTO was at this point in and around the tragic accident) 30 to 40% won’t make it and the balance will have to either go back to the market or partner with other seniors or juniors. 

There are so many companies for sale out there with no income and little future.  Currently, many are for sale for 50-75% off. No doubt for good reason, but do you remember the anxiety during 2008/09? The world was going to end… but as always periods of maximum anxiety and pessimism are more often than not good times to hold or buy… not sell. The best and latest example is RIM.

MTO is at a critical juncture… we have to admit that reaching this point was quite an adventure for this management considering the errors in judgement(s) and rocky road it’s been. Silver tongue gestures aside…  Don’t forget it can be much worse. The next few weeks will be quite interesting indeed.    

Here’s something that I found that I am sure we can all appreciate.  

“Micro-caps can provide significant diversification to your portfolio. This asset class typically has very low correlations with other U.S. equity classes (as low as 0.60 versus the S&P 500 for the period 1972-2006), as well as low correlations with international equity and fixed-income securities. However, micro-caps carry higher risks than many other asset classes.

Analyzing Micro Caps
Micro-cap companies don't generate fat investment banking fees for Wall Street firms, so they rarely enjoy regular research coverage by analysts. As a result, it can take more time and effort to analyze a small company than a large one, and fewer published reports means an investor must do more original research. The result, however, is that micro-cap stocks often don't trade at their full values, creating a price inefficiency from which savvy investors can benefit.

When it comes to analyzing a micro-cap company, the approach is the same as for a larger company; only what you emphasize in this analysis will differ. Like any potential investment, you might start out by assessing the current stock price against its 52-week high/low trading range. You might glance at valuation ratios, such as the price/earnings multiple or price/book multiple, to see if the stock looks cheap or expensive. You'll probably review the company's financial statements to learn how much net profit is being earned on revenues, how high debt levels are compared to the company's capital base and whether the company is generating cash or burning it.

Not Making Money?
 

What you may discover is that many micro-cap companies aren't making money yet. Earnings are probably negative, so the traditional stock valuation ratios won't make sense. You may also notice a sizable deficit in shareholders' equity, where a positive number ought to be. Don't be too alarmed! These may be signs that the company is in its early stages of fast-paced growth.

With a micro-cap company, how you spend your research time gets turned upside-down. Unlike with large cap companies, for which historical financial performance is a window to the future, non-financial information holds much more value when looking at a micro-cap stock. You should spend 80% of your effort understanding the company's business strategy and business model, ensuring the management team (may-be we will see some changes here) is the right one to pull it off, making certain the industry in which the company operates is sizable and growing, and judging how or whether it is better than its competitors. You should spend only 20% of your time looking at current financial results.

For a small, expanding company,
financial statements are out-of-date the minute they're filed. Be sure, however, that the company does file financial reports with the SEC, and that it does so on time. When an OTCBB company doesn't file timely reports, it is given a short grace period by the regulators but is then removed from the exchange. Delayed filings, as well as unusual auditing issues, are major red flags.

 

Gaining Micro-Cap Exposure
How can you invest in micro-cap equities if you don't have the time or skill to do the necessary due diligence? Consider investing in exchange traded funds that track a micro-cap index, such as the Russell Micro-Cap Index. Also, you might want to check out some free research ideas from independent, fee-based research firms. These firms issue stock reports on many interesting micro-cap companies that just might be right for your portfolio.

The Bottom Line


Remember when investing that bigger is not always better. Investing in micro-cap companies can bring in great returns, though they do come with significant risks. As always, do your research and you should be able to reap rewards from winners in this market.”

 

Read more/from: http://www.investopedia.com/articles/stocks/07/micro_cap.asp#ixzz2FQL8z3B1

 

P.S. My posting frequency will reduce with the amount of in-congenial and inane jabber on this site!

GWH