For many new investors, GOOG at 500 dollars is way too expensive to own. I know it is way too expensive for vox populi but does that mean that investing in stocks is only for accounts worth tens of thousands of dollars? Not necessarily.
Penny stocks? No way
There are always those stocks worth a lot less than GOOG, those classified as penny stocks. Actually, some investors classify any company worth less than 5 dollars a share as a penny stock. Seasoned investors will say that these companies are trading at such low prices because that is the exactly the value that the market thinks they are worth. Others might even argue that they are totally worthLESS.
What would John Templeton do?
Templeton was considered by many as a competent investor in his era. Well, actually, he was kind of a big deal. That is why what he did in 1939 with the Great Depression’s effects still widely felt has become the stuff of legend. A special kind of constitution is needed to be this kind of bargain hunter.
Modern reincarnations
When the S&P was wallowing in the devil’s favorite number on March 9, a lot of investors were hording their cash and leaving the stock market to die on its own. Some even locked in losses just to prevent further losses. All the “blood on the streets” would have been the sign that would have told Templeton to start buying. For me, that was around the time my tax refund came.
Sometimes it pays to be lucky
And so I bought some C and AIG and my brother told me to buy some AEG and almost bought some F too. To be honest, I bought them not because I thought that they would be great to have in my portfolio, I bought them in fact, because they were the only ones I could afford. After seeing them rise significantly over the ensuing months, I sold everything and managed to make some money. I bought low and sold high. Who would have thought that by sheer accident, I was doing exactly what Templeton would have done?
Bargains are around
You just have to look hard for them. But BEWARE of bargains too. Sometimes a pair of designer jeans at ROSS might only be 2 dollars because it does not have a second leg or it’s missing the zipper. Even John got it wrong sometimes. Four of the companies he invested in went bankrupt and he lost all the money he invested in them.
What are your favorite penny stocks that made you money? How did you come to pick them? Is it worth keeping them long term?
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