Categories

Investing Observation & Opinion

Tools

  • Economy & Politics
  • Investing
  • Personal Finance
  • Related Posts


    Legal Tender Renders Planning Impossible
    It’s Time For The BRICS To Counter US Destabilization Efforts
    Goldman Goes Schizo On Gold: Boosts Price Target To $1200 Even As It Is “Selling It With Conviction”
    High-Yield Bonds “Extremely Overvalued” For Longest Period Ever
    The Paradox Of The Argentine Debt Drama
    Guess Which Bank Wins First Prize For Bad Ideas
    Some Money Market Funds Will Have To Be Honest With You
    How To Tell If Your 401(k) Stinks
    Buy Catastrophe
    Caterpillar Posts Higher Second-quarter Profit; Sales Fall
    Earnings, Overseas Data Lift Stock Futures
    3M Profit Rises 6 Percent, Sales Up Across Businesses
    European Stocks Rise On Euro Zone Data; Sanctions Hit Russia
    American Airlines Declares First Dividend Since 1980 As Profit Rises
    Ford Profit Beats Expectations, Sets Record For North America


    A Stock Below $5 You Can Hold ‘Forever’

    It really shouldn’t matter a lick what price a stock is trading at. There is no fundamental difference between a stock with 1 million shares trading at $50 and a stock with 10 million shares trading at $5.

    Then again, there are people whose interest is piqued when they see a low price tag. It’s one of the reasons why many companies will split their stock. The lower price tag will sometimes entice more buying.

    When you consider the rule of large numbers, the phenomenon of lower-priced stocks rising faster than their higher-priced brethren does make a little sense. After all, for a stock trading at $5 to gain 50 percent, it has to rise only $2.50. But for a $100 stock, the same move takes $50.

    Investors aren’t always rational, and that $2.50 move seems a lot smaller than a $50 rise — even though they are the exact same in percentage terms.

    With this in mind, I wanted to share one of my growth stocks to buy and hold forever that’s trading for less than $5.

    But first, know that I look for a very specific kind of company. By allocating just 20 percent of your portfolio to the "Next Big Thing," you increase your chances of making a lot of money in the stock market.

    And I’ll be honest, there’s really no secret formula to finding game-changing stocks. The bulk of it comes down to a lot of research and making bold calls on where a company or technology will be a year, five years or a decade down the line.

    The thing is that no matter how much research goes into an idea, there is never any guarantee it will be a winner. If anyone — even Warren Buffett — says he can guarantee you a certain profit in the market, you should run away… fast.

    I know not every idea can be a huge success. That’s OK. But that doesn’t stop me from looking for the handful of potential winners that could soar hundreds or thousands of percent like Netflix (NFLX) or Apple (AAPL) did.

    And where have I found some of the highest-scoring winners? Oddly enough, it’s been in stocks with low price tags.

    A Tollbooth Operator For The Underground Energy Revolution

    As prices at the pump start to inch higher — and that’s happening — there’s little doubt the Nation will again begin to look at alternative fuels. There was some hope that electric vehicles like the Chevy Volt would help. The trouble is, no one’s buying these cars, despite heavy government incentives. So with electric vehicles out, the real question is: What’s in?

    That means answering one question: How can we get cheaper gasoline?

    The answer is biofuel.

    The Federal government has been interested in how it can wean the Nation off petroleum, which the United States must import. Of course, the shale boom is helping out with this problem, but that’s just part of the equation.

    The best solution for an alternative, so far, has been ethanol. The pure alcohol is derived from the starch in corn that can be blended with gas, reducing the amount of petroleum the country needs to use.

    Now, Federal support of corn-based ethanol has waned. But another type of ethanol, made from a different part of corn or another plant entirely, is still very much in play.

    A key step toward the meaningful use of biofuels dates back to the George W. Bush era, when a bill passed that codified a Federal biofuel production quota into law. It calls for a range of biofuel — not only corn-based ethanol, but also sugar-based fuel that the Feds call "advanced biofuel." This is code for cellulosic ethanol, which comes from a type of sugar that’s found in all plant life.

    This sugar is hard to get to. For much of recorded history, only animals—notably, cows — have been able to get energy from this type of sugar, which is locked tightly in the cell walls of plants.

    But now, using specially designed enzymes, producers can "tease" out the sugar, ferment it into ethanol and make biofuel from agricultural waste like wheat straw or corn stovers, from special grasses or even from scrap wood and paper.

    The companies in this space have been much maligned. For years, cellulosic ethanol and the idea of growing our fuel has been dismissed as pie-in-the-sky dreaming. But the science has caught up, lawmakers have embraced it and now a lot of major oil companies are bowing to the inevitable future of biofuel.

    Luckily for us, there are plenty of game-changing companies in the space, and a few have prices less than $5 per share. My favorite is Dyadic International (DYAI).

    Dyadic is a leader in the special proteins that refiners introduce to get the sugar-to-ethanol process going. The company makes the enzymes that tease out the sugar contained in all plant life; without its products, all you have is a pile of worthless mulch.

    Dyadic’s business model is simple, but elegant. It doesn’t grow plants. It doesn’t build $300 million refineries. It simply sells the enzymes to the cellulosic ethanol producers and receives a royalty for each gallon produced. Dyadic is a tollbridge operator. And every gallon of cellulosic ethanol that leaves its customers’ factories has to pay the toll.

    That’s also why I call it one of the best growth stocks to hold forever. Forever is a long time. But I’m confident that as time passes, Dyadic’s products will develop and new markets will emerge; and this little company will collect a royalty on more things than we can count.

    Of course, with a stock that focuses on an unproven technology like biofuels, there are a lot of risks involved that could lead to a fall in share price.

    But by following my 20 percent rule with stocks like Dyadic, you will limit that risk and potentially move the needle on your portfolio.

    — Andy Obermueller

    [Note — If you're looking for some of the best game-changers for the coming year, look no further. I recently put together my top predictions for 2014... All of these ideas have the potential to lead you to triple-digit winners. In fact, my past predictions have led to returns of 200 percent, 310 percent — and more. And this year's predictions could be the best yet. Click here to read all about my 11 Shocking Predictions for 2014.]

    Andy Obermueller is the Chief Investment Strategist for Game-Changing Stocks. He spent ten years as a financial journalist, working for some of the nation's largest newspapers. At the business desk of The Star-Ledger, his market acumen helped guide the financial news read by more than a million people each day. After watching business from the outside for ten years, Obermueller got an inside look as a commercial lender with Wells Fargo's Business Banking Group, where he worked prior to joining StreetAuthority.

    | All posts from Andy Obermueller

    Discuss this Story:

    Comment Policy: We encourage open discussion. Comments including racist statements, profanity, name calling or spam will be removed at our discretion. We use filters for spam protection. If your comment does not appear it is likely because it violates the policy.

    GM’s Profit Falls On Recall Costs, Victims’ Compensation Fund
    Boeing Reaches Plane Parts Deal With Iran
    China Probes Food Businesses; Hong Kong Bans Imports In Meat Safety Scare
    Euro Zone Business On Solid Footing In July But Firms Cut Prices
    Asia Stocks Supported As China’s Factories Revive
    Bitcoin Reached Next Stage In Money Evolution, Smart Contracts Replace Wall Street Bank Functions – NOW!
    Whi(t)ney Tilson Does It Again
    NY Fed Slams Deutsche Bank, Accuses It Of ‘Significant Operational Risk’
    Actually Apple’s Net Cash Hasn’t Grown In Two Years
    1 In 25 New Yorkers Is A Millionaire
    Indian E-commerce Startup Flipkart Just Reportedly Raised $1 Billion In Funding
    An Epic Battle In Streaming Music Is About To Begin, And Only A Few Will Survive
    Free Ride Ending For Money-Market Funds
    Even KFC’s Chicken Isn’t Safe From China 
    Stock Futures Tick Up On Earnings, World Conflicts Eyed
    PepsiCo Raises Profit Forecast As North America Snack Sales Rise
    GSK Cuts Outlook As Weak Lung Drug Sales And Strong Pound Hit
    Five Held In China Food Scandal Probe, Including Head Of Shanghai Husi Food
    NY Fed Found Serious Problems At Deutsche Bank’s U.S. Arms
    Wall Street Rejects Ackman’s Herbalife ‘Death Blow’
    Europe Edges Up On Earnings, Risk Aversion Remains
    Watch What Markets Don’t Do As World Politics Turn Nasty
    U.S. SEC Poised To Adopt Reforms For Money Market Funds
    Microsoft Sees End To Nokia Losses, Shares Rise After Hours
    With Sales Sputtering, Apple’s IPad Looks To IBM Alliance
    Apple Revenue Lags Street’s View Despite Strong China Growth
    Gold Dumped (Pre-CPI) And Pumped (Post-CPI)
    Stocks Desperate To Put Ukraine In Rearview Mirror But More Russian Sanctions Loom
    What To Do When Jobs Are Growing Faster Than The Economy?
    JPMorgan Begins To Provide Consumer Help Under $13 Billion Settlement
    Read more from Investing...

    Liberty Investor Digest

    Get today's most important
    financial headlines all in
    one place by email!



    Sources


    close[X]

    Sign Up For Liberty Investor Digest™!

    Get Liberty Investor Digest FREE By Email!

    Input your name and email address in the fields below and get today's most important financial headlines sent straight to you inbox!

    Privacy PolicyYou can opt-out at any time. We protect your information like a mother hen. We will not sell or rent your email address to anyone for any reason.