Low Float — Time-Sensitive Strategy

TLDR of the Previous Article

Fed buying up assets creating liquidity, not enough people are borrowing, excess liquidity sloshing around. Bonds aren’t great because the yields are low (demand high because of the Fed buying, supply low). So all that excess cash goes into stocks. Pump baby pump.

So how do I make some money, eh??

In physics, momentum is defined as the mass in motion. The formula for it is given below:

p is momentum, m is mass, v is the velocity

RISKS (Well just the biggest one IMO)

For small stocks, there are lots of risks. Again don’t invest money you don’t expect to lose. It’s like Las Vegas but buttoned up in a suit and tie. Gambling at its finest, and like card counting we just have to learn the tricks of the trade.

LOW MARKET CAP

Another criterion when assessing a stock is that it has a relatively low market cap. Take Berkshire Hathway Class A shares. It has a relatively low float at 650k shares so initially, it might look like a good buy but be wary. If you look at the share price you’ll discover that each share trades at ~340k dollars!! That’s for ONE SHARE. The total market cap of Berkshire Hathway is around half a trillion dollars, you heard that right. So that means for you to double your money, Berkshire Hathway would have to reach a trillion dollars! Seemingly insane.

SHARE PRICE

A common saying goes that stock under 5 dollars isn’t very appealing to institutional investors (like JP Morgan Chase, Merill Lynch). And a stock over 5 dollars is more appealing to institutional investors. Now there are no hard legal restrictions and this may just be a myth among retail investors (probably you reading).

OKAY SO LOW MARKET CAP… LOW FLOAT…

If I had the time I’d make an excel spreadsheet or app to track these low float, low market cap upward momentum stocks. Right now I don’t but here are some tools to point you in the right direction.

  • Here’s a website with a list of low float stocks: https://www.lowfloat.com/all
  • Cross-reference the tickers with the market cap you get on yahoo finance: https://finance.yahoo.com/ (Market cap is based on industry, a sector so use your best judgment. See how much the company was valued in the past compared to what it is valued now, etc.)
  • At the opening bell, see if the stocks you have listed show up on the https://finance.yahoo.com/gainers/ list or above 10% – 15%. If so put some money into them and wait for momentum to kick in.

TIPS

  • Note that if the stock ran the previous day or a week before or something like that all bets are off.
  • Remember the stock will do up just as quickly as it might come down so sell often and quickly when you're in the green. Observe the price and watch it. Only you know your risk tolerance.

WHY DOES THIS WORK?

Well read up on liquidity and my previous thesis here: https://abhishekpratapa.medium.com/an-engineers-unfiltered-take-on-the-stock-market-34b668d3d381

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