Secrets of the InsidersUnderstanding Penny Stocks by Peter Leeds

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Extreme Research

Warning! This is most definitely not for everyone, nor is it necessary in order to benefit from all the concepts and methodologies presented in this web site.

There are always those investors who are willing to go beyond the call of duty, to make the greatest profits. I encourage this, and actually have engaged in it when an opportunity presents itself. I call the concept "Extreme Research," and it can help you have more powerful and insightful knowledge than 99% of the traders out there.

It also requires getting involved in these penny stocks and companies to a degree you never expected that you would.

If you knew that the CEO of a penny stock company was an alcoholic and that the back wall of his company's factory was collapsing in on itself, how much would that information be worth to you?

Better yet, when you called the Workplace Safety Board, and knew that would cause the factory to be shut down, you are getting involved to a degree beyond which most investors could even consider going.

In this example, you are not breaking the law, nor are you doing anything more than extreme due diligence. The fact that you may have saved some of the employees' lives is just the gravy.

So how do you make money from this penny stock in this example? Well, you are not investing in the company that is about to be shut down. You are investing in its competitor.

The phone call to the workplace safety board represents the crossing of the line between participant and influencer. Your actions may affect the price of the penny stock (or many penny stocks), so you have some influence.

We do not suggest that you become involved in Extreme Research for every single investment that you may make, and in many cases it is not possible, or would have no effect. However, if you happen to know that a company you want to invest in has a head office within 30 minutes of your aunt's place, go check it out next time you visit her. Call ahead and see if you can meet with the investor relations contact there, or even just pick up some of the penny stock company's financial statements.

You would be amazed at how often you will no longer invest in a penny stock you had been gung-ho about, just because you see the office.

(A great example of this can be seen in the movie, Boiler Room, when the main character and stock promoter goes to the Med-Patent office. Nothing there but an old sign and an empty building unit).

Extreme Research Examples

  • You know the security guard from a penny stock company, and he saw several executives from Microsoft stop by after hours. Could be a huge deal in the works, or a takeover target. Either way, there could be a nice pop in the stock. (Especially once you let word get out!)
  • You know the company you work for is heading south fast, more because of poor management and bone-headed decisions than due to sales. Stock in a competitor's company may serve you well, once your employer finishes its 'death dance.'
  • Visit the head office of a penny stock company you are interested in. Do they run things efficiently? Do the employees have good morale?
  • Buy the product or service of three competing companies, and compare. Is the best one also the least expensive and most easily accessible?

If you happen to know someone who works at a penny stock company, take an interest in what they are saying. In most cases it is best to avoid letting on that you are interested in buying the penny stock, but instead act interested in what they do for work. Find out how employee morale is, what does their company lack, who are their competitors, who is sleeping with the boss...

Most of this, or perhaps all of it will be useless. However, when you get that one piece of information that could turn the trading tables in your favor you will know it.

What if your contact complains about managers from a competitor coming around the office, and she does not think they should have any place there because of trade secrets. You would read between the lines, and be able to predict that the competitor may have managers jumping ship and looking to relocate. Or perhaps the two penny stock companies may merge or there may be a buy-out, which explains why company A is allowing company B's managers to snoop around. Whether it eventually happens or not, when it comes to penny stocks even the breaking of such a rumor can send the shares skyward.

There is no format or methodology to Extreme Research. It depends upon your situation and level of ambition. I will say one thing, though. It works. Just don't do anything against laws or ethics. Extreme Research in penny stocks can be done without putting yourself or your morals at risk.