Occasionally I recommend over-the-counter stocks. These are stocks that don't trade on exchanges but must be bought through your broker through a market maker.
Since there is no exchange, there is little transparency surrounding these securities.
Our two OTC (over the counter) stocks are Green Energy Resources (GRGR) and D1 Oils (DOOIF.PK).
Both of them have plenty of information available, unlike many OTC stocks.
D1 Oils is connected to the sizable British energy company that just formed a major partnership with British Petroleum to develop jatropha oil in Africa. D1 Oils trades on the London Stock Exchange in England.
Green Energy Resources is an American company with growing earnings and a history of paying dividends.
How Market Makers Can Screw OTC Stock Investors... Beware
Normally, I avoid OTC stocks. They're just a bad idea most of the time. Since volume is so scant with most of them, it's very easy for a market maker to manipulate the prices. In other words...
Say you tell you broker to buy 100 shares of OTC Company A. You see on Yahoo or www.pinksheets.com that the stock's trading at 10 cents.
So you figure you'll pick up a 1,000 shares for $100 bucks. You place your order. But the next day you see you've paid 20 cents a share!
Well, the market maker simply demanded 20 cents a share for your order. Your broker paid it. And you're toast, because the stock suddenly is trading back down at 10 cents.
That's why you MUST use limit orders if you're wild enough to venture into OTC territory. And if your broker buys shares beyond your limit price, go ballistic on him. I had to do it once, and the broker ate the difference between my limit price and the price he paid!
Why Do We Recommend OTC Stocks on the Blog?
The reason we recommended D1 Oils is simple. It is the ONLY pure jatropha stock in the world right now. This company is producing jatropha seed stock... jatropha strains... and is in the process of planing 1 million acres of jatropha. This last project is being done on several continents, including Africa. It's in parternship with BP.
And we feel that D1 Oils is in perfect position to soar, especially once people realize its importance in the emerging market for jatropha oils, which can be mixed directly with diesel.(Jatropha berries are the size of golf balls and ooze the stuff!)
In this case, I found several other plays on jatropha. But none of them was direct enough for my tastes. If you buy BP, you're not buying jatropha; you're buying crude oil. And I think that crude oil is about to correct downward fairly sharply starting in the next couple of weeks.
Why We Bought Green Energy Resources
As for Green Energy Resources, we think the company's on the right track with its wood chip biomass products. It's a true "BIG IDEA" company. And the idea is this: wood chips are destined to become a traded commodity, much like oil, gold, wheat, corn and soybeans.
If that's the case, this is THE company to own. It's proprietary wood-chip processing technology and vision... and push into Asia and Europe... all make it an interesting play.
Both companies have great potential, in fact. And once the rest of Wall Street catches on... and we see volume jumping... these companies could both pay off for us.
Tuesday, October 23, 2007
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