By Ross Silver

As you can imagine, I receive a number of phone calls from investors, both professionals and amateurs, asking what my money is getting behind. I have never nor will ever answer the question because there is no positive outcome. If I gave out a stock pick and it worked, I have validated that I am not a moron. If the stock went down, I am a moron and the one responsible for financial ruin. Why do I mention this? The answer is simple. If someone is giving you a stock tip “for free” consider the source and the onus behind their generosity. 

The people I spend my days speaking with seek “powder keg” stocks. Powder keg stocks are primarily small and micro-cap companies with massive potential, but little, if any, substance. Powder keg stocks can change lives for the good or bad, mostly for the bad. I have made my career around powder keg stocks and let me tell you, attention to detail is paramount and so is trust. The most critical part of my diligence process when evaluating a powder keg stock is management. Management has a massive impact on the outcome of a powder keg stock. If I find a management team that is driven to succeed, has their own money in the company and makes a rational case as to why they can disrupt or augment the market they are competing in or will compete in; they have my attention. I write down or memorize every detail management provides, which is also in the public domain, and hold management accountable for any and all deliverables. By evaluating every detail management provides and comparing that to what is delivered, my trust is built or broken. 

Given the financial turmoil that COVID-19 has caused, many investors seem more excited about powder keg stocks than usual as they want to get back what they lost when the market turned and they sold at a loss. Many I speak with lost 25-50% of their investment capital when the markets ripped lower in February and March. Why do I mention this? According to the AAAII Investor Sentiment Survey, https://www.aaii.com/sentimentsurvey?, only 23.7% of retail investors are bullish. That is extremely low, and yet, may present opportunity when these retail investors come out of cash and into stocks as they get more bullish. One way to play a potential move from bearish to bullish from retail investors is to look for opportunities in the index that houses many powder keg stocks. The Russell 2000 is the “small/micro-cap” index and is a favorite of mine. If you follow my tweets you will see I have been playing the triple leveraged Russell 2000 Index ETF’s.

Have a great month and hopefully the “experts” overseeing our “safety” will open the country soon. I won’t bore you with another civil liberty essay; you can read last month’s newsletter for that. 

Companies to consider, by ticker: CEI, POAI, FRSX, GBLX, MYOV, PPCB, TRXC, ILAL & NVIV.