We’ve mentioned this before, but we can’t say it enough… if you’ve got a question or suggestion for this site, please send it in. We read them all, and respond to every legitimate one. We got this one recently specifically about penny stocks, and why we don’t look at more of them.

The reader writes…

Dear Editor, Just a quick question about the Penny Stock Analysis section on your site. I wondered why most of the stocks are above one dollar rather than penny and/or sub-penny levels as the section implies? I am always looks for start up companies with good products or services that I can invest in with the potential make a nice profit. It would be nice to get your take on up-coming companies who have a chance to go big rather than stable companies who are already turning a profit as in your Small Cap Stock Analysis, which already does this. Just a thought and thanks for your valuable info!

Thanks for the note and great question.

The short answer is, given the choice of making some high-odds money versus swinging for the fences on a few penny stocks that will probably not pay off, we’ll take the former. And, those have been our only two viable choices of late.

The long answer is a little more complex, but still worth discussing.

We’ve had this discussion internally recently….. the choice between focusing on stocks priced under $1.00 (or comparable small caps) versus the choice of trying to just buy low and sell high no matter what the share price. IN THE CURRENT ENVIRONMENT, we’ve been more of the mindset that making some money is more important than scouring through an ocean of true penny stocks just to find a very rare gem. (Not that they’re all ever collectively healthy, but in a normal environment, at least some penny stocks have a shot at producing returns)

Oh, don’t hear us wrong… most penny stocks are crap most of the time. Right now though, almost all of them are crap all the time. Since we face the exact same headaches you do (like manipulation, bad information, inconsistent volume, etc.) when it comes to finding good sub-$1.00 stocks, we’re not going to try and squeeze blood out of  a turnip.

Or, think of it like this….. we’d rather have a 70% shot at a 50% gain instead of a 15% shot at a 300% gain.

We’ll probably stick with the favorable risk/reward scenarios of higher-priced stocks for a while longer, but as the economy continues to strengthen, we expect to find more and more penny stocks worth a look.

Something else to bring up (though the reader didn’t specifically mention it)…. it should be something of a given that we’re not likely to issue a short-term, ’swing’, or day trade alert for any penny stock. We just have too big of a list to mail to, and we have to take a little too long to craft a message to do so.

We frequently talk about penny stock trade ’set ups’ in the community articles though, so you can find those kinds of ideas there. As for what we’ll be focusing on on the newsletter, it will probably be more of the longer-term (days, if not weeks) penny stock trade picks.

Bottom line? Be patient - they’re coming.

If you’re not signed up for the free Small Cap Network newsletter, then you’re not going to hear about any of the penny stock picks discussed above. Sign up today.

I stumbled across an interesting tool The Economist rigged up that shows - nation by nation - who proudly own the most debt. As it stands right now, the world owes a total of $35 trillion. Who owes the most and the least? Check out the map to see.

http://buttonwood.economist.com/content/gdc

I don’t know of any particular use this will have to us as investors, since the world is so co-dependent, one country’s massive debt will affect all markets. Still, it’s worth knowing who’s not getting crushed by a mountain of bills.

Have fun.

It’s hard to believe that CEL-SCI (CVM), which was only trading at $0.27 when we suggested it in January, has rallied more than 600%, and is currently priced around $1.85. THAT is the reason we focus on small and micro cap stocks… big winners are uncommon, but when you do latch onto one, wow!

That being said, I have two business items to take care of before we go any further.

1. Just for the sake of smart trading, I think it’s time to at least take partial profits on CEL-SCI, even if temporarily.
2. Just for the sake of disclosure, I want to make sure there’s no misunderstanding that this site has an indirect compensatory relationship with CEL-SCI.

First things first.

Not only have CVM shares rocketed past resistance around $0.80 recently, today’s peak of $2.10 also matches multi-year highs for the stock… not that it wasn’t deserved. The company’s swine flu technology (LEAPS) may indeed be a game-changer not just for the fight against H1N1, but also a game-changer for the company’s stature in the biotech community. (The U.S. government is interested, for cryin’ out loud.)

Still, a triple-digit rally is a tough thing to hold onto no matter what the cause. So, between the potential brush with long-term resistance and just the sheer size of the recent pop, it may be a smart move to take some profits on CEL-SCI here. (continued below)

Just to be clear, I’m a long-term bull on CEL-SCI. I would be even if we hadn’t picked it in January. I’m also interested in preserving gains though, and my defensive senses are just telling me to shrug of the swine flu euphoria and be smart.

If it’s the wrong move, you can always buy it back later. In fact, the company’s Multikine cancer treatment alone (I think) makes the per-share price worth more than $2.00. That’s a long-term proposition though.

That being said - and not that it matters at this point - you should know that in January, this site received shares from CEL-SCI to present the opportunity to our readers. Since then the entire format for this site has changed; we’re now ad-supported and sponsor-supported, and those shares were transferred to a sister site. So, we still have a vested indirect interest in CVM shares… albeit very indirect

So what? Well, there’s really no ’so what’ to it. We’re clearly not pumping the stock - we’re telling you to lock in profits while you can before a pullback. We’re not even ‘covering’ the stock anymore. We’re just answering any potential questions that may pop up from this follow up discussion. (Normally we’d just drop the coverage and topic altogether, but this is important enough to discuss.)

In any case, that’s what we see right now - simply a chance to lock in a near-term gain, if not for your whole trade, then at least part of it. Just something to think about.

By the way, if you missed out on the bulk of the CEL-SCI (CVM) gain because you didn’t get our initial recommendation, don’t miss out again - subscribe to our newsletter today.

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For those of you who are new to our stock-picking newsletter and trade recommendations, the reader’s question below about our Flotek Industries Inc. (FTK) and Quiksilver Inc. (ZQK) picks give us a reason to explain how this site works, and what our M.O. is. Let’s start with the question first thoough. The reader writes…

Thanks for the sensible insight in small stock opportunities. I did have two questions I wondered about:

1. Following your entry point recommendation, Quicksilver moved higher for a while. Then it retreated back to the entry point, and now seems to be back on an uptrend. During that pullback, earlier this month, would that still have been a good time to open up a position if I had missed the original recommendation or would the upward momentum opportunity have already passed?

2. I read that Flotek has multiple class action lawsuits in the works and I wondered how much this plays into your recommendation…aren’t these potential concerns and wouldn’t this negatively impact the stock’s upward progress?

Thanks for the questions. In the same order:

1. It depends. Yes, in this case the temporary pullback would have been a great second chance to get into Quicksilver. That may not always be the case though.

With most of our recommendations we’ll describe key support and resistance levels. As long as those hold up, the trade will probably be ok to enter even if it’s well after our initial recommendation. Just bear in mind the stock entries tend to yield the biggest reward if they’re  taken at the onset. The ’second wave’ entries are your call - we just suggest buying them on the way up, or where they’re clearly finding support. In other words, ZQK was still a good buy because it was headed upward at the time.

2. Every lawsuit, whether it’s potential, frivilous, or real, can have an impact on a stock’s value. In 99% of cases though, that risk is already priced into the stock’s value. Flotek was no exception. So, what we’re looking for going forward from our FTK pick was more news that would spur a continued breakout regardless of any lawsuit. We haven’t seen it yet, but it’s only been a few days.

Hope that helped at least a little. Note that while we try and be as transparent and complete with our stock recommendations, often, time and space constraints don’t let us go into this kind of detail. If there’s something like this on your mind about any of our other picks though, you’re always free to ask.

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As always, we invite questions and conversations about any particular stock you’ve been thinking about. That doesn’t mean we’ll always answer it (sometimes we can’t, and sometimes we just shouldn’t), but we will put it out there at least for others to sound off on. The latest entry into the mix is Raser Technologies (RZ); we got this question from a reader last week…

Is RZ a hot pic ? Some say yes. What contracts might they get , or does that matter ?

Is Raser a hot pick? Not right now. If anything, it’s cold. What contracts they might get matters, but what matters more is whether or not they get any.

As we (I) see it, Raser is close to being a one-trick pony. They’ve got a firm contract to build the bulk of a geothermal plant, and they’ve got the deal with Hummer to build electric auto motors. All well and good, but the failure to secure anything major other than those - paired with the failure to really turn either of these deals into a (net) cash machine yet - doesn’t exactly help the bullish case.

The fact is, the world’s not really falling in love with geothermal energy (not to mention it’s been determined to be a possible cause of earthquakes), and the world’s falling out of love with electric cars…. a field that’s seen a ridiculous amount of new competition flow in within the last three years.

So, no, Raser Technologies doen’t look all that great to me.

That’s just one man’s opinion though, and I’d be the first to say there are plenty of readers out there who have more perspective and knowledge than I do when it comes to RZ. So, I’m going to punt to them. If you’ve got something to say about Raser - good or bad - feel free to chime in below.

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Looks like I underestimated just how the market would respond to the EDAP TMS (EDAP) news of its HIFU business and expansion. The odd part is, the news actually came out yesterday morning, and the stock didn’t budge at all then. In any case, the bearish call/trade still stands, though the big pop this morning throws a wrench in where and how we draw our lines in the sand…. stops.

Truth be told, the move to the peak of $4.70 may actually have done us a favor - as long as it doesn’t persist. Odds are that most of you (judging from the point in time I hit ’send’) were starting to short EDAP between 9:40 and 9:50 am, at an average price of about $4.45. Since the delayed surge is also apt to be temporary, it’s actually helpful - we were able to get in at a higher price than we would have found yesterday.

The problem is, what about our stop level? I advocated using that key resistance line as a stop, and it was obliterated before the stock ever opened.

Well, I really don’t want to not use that line…. it’s an important line. The only adjustment I’m going to make is that the stop only applies if it looks like EDAP is going to close above it for any given day (which is something of a judgment call). After all, the close is the most important price of the day.

Bottom line? I’ve got a feeling the market’s not going to be as keen on EDAP later in the session when it comes time to take it home for the weekend. Stay tuned though.

If you missed the EDAP trade along with the Leap Wireless (LEAP) recommendation we’re talking about, it’s becuase you’re not signed up for our free newsletter. Subscribe today.