Adam O’Dell believes that stocks below $5 can be the most profitable in the stock market.
It’s a bold claim, so I’ve been testing it.
yesterday stock power dailyI tried to see why why it might be trueAnd they all come back to the SEC’s $5 Rule.
Large investors generally cannot trade stocks that trade for less than $5 per share. They may want to do so, but various rules may prohibit the purchase. That means an individual can jump into these stocks and expect rapid profits when the price hits him above $5.
Adam’s logic is sound. So I set out to find evidence. And I realized that the last three years have provided a great test his platform.
All Top 10 stocks in 2020 were below $5
Over the past three years, most stocks have seen significant gains. The S&P 500 has averaged 13% annual gains since April 2020. The tech-heavy Nasdaq 100 fared slightly better, averaging 14% per year.
Of course, some stocks fared better than average. During that time, we were surprised to see 15 stocks gain more than 900% year-on-year.
The number surprised me. First, let’s see what it means to reach 900% annualized in three years.
Let’s say stocks start at $5 a share. The next year he is $50. That’s a 900% profit.
The next year, after another 900% increase, the stock hits $500.
Year 3 shares close at $5,000. It’s his third year of 900% profit.
Cumulatively, the stock went from $5 to $5,000, an increase of 1,000%.
The size of the price movement is shocking. Equally shocking is the fact that 11 stocks have gained at least 1,000% in the last three years. The table below shows the number of shares.
Only one of the 11 has a price above $5 in April 2020. The remaining 10 of his meet Adam’s criteria of being under $5.
Two of them are memetic strains, GameStop Corp. (GME) and Avis Budget Group Inc. (CAR). No analyst could have predicted such a development. But they support the idea that tomorrow’s biggest winners, however profitable, may be trading below $5 today.
Breaks the $5 line
After explaining Why Big Traders Don’t Touch Stocks Below $5gave the example of Monster Beverage Corporation (MNST).
This is one of the biggest winners in stock market history. Again, the chart showed an interesting pattern.
A rapid rally began when the stock price crossed $5.
Large traders seemed to have been waiting for that price to become available, and their purchases spurred an almost immediate rally.
Aehr Test Systems (AEHR) is another example of the same pattern. The blue line in the chart below is $5. The initial breakout in July 2021 was followed by a rapid uptick.
After rising 100% in less than a month, the stock fell but remained above $5. The new breakout has pushed the stock up 433% in his less than three months.
The chart below shows Celldex Therapeutics, Inc. (CLDX). I have the exact same pattern. A near vertical move after breaking out of $5.
We could go on and on, but this pattern is consistently seen in big winners. Anything above $5 opens the door to institutional investors. Their buying causes a rapid rise.
Charts don’t lie. Adam is working on something big with his latest research. He found a way to identify blue chip stocks trading below $5 that could trigger this pattern.
Adam last week published the report It includes hundreds of stocks currently trading at less than $5 per share. Today, he has removed 171 stocks that are unlikely winners from the list. Those that remain are significantly less risky.
Tomorrow he will explain a little bit about how he decided to remove these shares.However, the latest version of Click here for the $5 stock watchlistso you can follow.
Then, the following Thursday, Adam narrowed the list even further to only the top stocks he believed had the potential to deliver market-shattering profits this year. And he shares those tickers for free.
Buying quality $5 stocks, many of which belong to the small-cap sector, is a sound strategy for investing in a bear market. A stock of this size that can survive a bear market will inevitably attract a lot of capital out of a lot of money if you can buy it.
So I would not recommend buying something like the Russell 2000 ETF (IWM) right now. Many of the stocks included in the index are of poor quality, which limits the number of high-quality stocks.
Instead, we encourage you to follow Adam as he highlights the best stocks in the sector. This is a smart way to find today’s small-cap stocks that could be tomorrow’s big winners.
nice to meet you, Michael Kerr Editor, one trade
I’m usually an optimistic guy.
Unless you catch me fighting traffic in Lima, Peru. In that case, I could be accused of being a murderer.
I assure you, no juror who has ever had the dread of driving in Lima will convict me of traffic law violations.
But the current attitude of Americans cannot be explained by Third World traffic jams. Most people will have trouble finding Lima on a map.
But they are more negative today than ever before in the history of the country – at least for this market.
The latest CNBC National Economic Survey found That’s a record 69% Percentage of people who have a negative outlook on the economy, both now and in the future. This is the highest percentage in the 17-year history of the survey.
Most of this has to do with inflation. As a young man under the age of 70 and an adult paying the bills, few people experienced the inflation of the 1970s. Not surprisingly, he said two-thirds of the Americans surveyed said they were falling behind because of inflation.
Here’s where it gets more interesting for us. only 24% We believed it was a good time to invest in equities – also at historical lows. This is even below the worst levels of the 2008 financial crisis.
Now, I’m not a fan of picking data. It is lazy and leads to bad decision making. But data from the American Association of Individual Investors (AAII) tells a similar story.
AAII Sentiment Survey
About 74% of AAII survey recipients were bearish or neutral, but only 26% were bullish. Last month it was even more extreme.
Nearly 80% were bearish or neutral. Historically, about 37.5% of respondents have always been bullish.
So yes, Americans these days are downright grumpy about this market.
That might make the water cooler debate depressing. But this is good news for us as investors.
When sentiment drops, it’s often a great entry point for investors looking to wager otherwise.
This is because crowds are generally wrong. I’m not saying that the crowd is “stupid”. Many individual investors are great people.just a reflection market dynamics.
please listen. If “everyone” is bearish, it’s safe to assume that you’re under-allocated to equities.
In plain English, it means “no one left to sell”. And trade has become one-sided.
This does not mean that a buyer will materialize instantly and boost the stock price. todayBut this suggests it’s a good time to start averaging out the blue chip stocks you’re itching to buy.
That’s why Adam O’Dell’s next presentation is so interesting. He shines a spotlight on a highly undervalued sector of the market, 200 shares list All trade for less than $5 per share.
And the best part?These investments can be up to 500% or more profit next year.
upon April 27thhe shares this list with some of his top recommendations. To reserve a spot at one of his free webinars, go here to sign up today!
nice to meet you,
Charles Sizemore Editor-in-chief, The Banyan Edge