National Dart Throwing Competition!

Close your eyes, get a good feel, dart in hand, take aim, and throw...

the art of picking penny stocks in a market frenzy.

These are glorious days for the retail investor, as everyone rushes in to reap a decent profit from the penny stocks. My darts are flung at small unnoticeable counters Nucleus and SSH corp, both of which are trading at low volumes but have a reasonable chance of improved earnings.

I've been trying hard to find affordable stocks for myself, less than 30 cents a share, and making decent profits. Taking a closer look into penny stocks, I just can't find a reason why these counters can move so rapidly without any real fundamental growth. My challenge to myself and indeed to everyone else is to choose at least a profitable stock, well-managed, overlooked, but has potential to turn the corner.

Nucleus - a recent run up has ended with the share sliding back down now consolidating at around 14 to 13.5 cents, with directors recently purchasing shares at 14.5 / 15 cents. This alerted me to a chance to sniff around for a bargain. Net loss for this electronics components distributor was fully diluted at (USD1.50) cents per share, which turned me off, initially. However, I came to realise that this was a result of an impairment loss on goodwill amounting to USD5.7mio. The company however is facing testing times with inventory pile ups. Also very dependent on the performance of the semiconductor industry. (source FY2006 YE annual report)

Company looking to diversify into more profitable income streams and products with better margins, and if we exclude the one-off impairment loss, Nucleus would have ended up with a decent profit. The company is also confident that consumer electronics and demand in the industry will pick up.

At a NAV of 10.39 USD cents per share, the share is currently trading below NAV, at 13.5 cents (SGD, yes it does get confusing for me as well).

Hoping to be well positioned for improved business climate for Nucleus, and looking to enter in more positions at 13.5 cents and 14 cents. Accumulate but STOP LOSS at 12.5 cents, as you never know the bottom may just fall over under you!

SSH - Good company, strong fundamentals, feels like it's largely overlooked. How do I tell? Just a hunch, but when markets are these goods and your trading volume is thin, it makes a lot of sense eh? Well in not so efficient markets like asian ones, I'm quite comfortable taking on this position.

Range bound at 26 cents to 27.5 cents, looking to trade it at 26 cents to ride any upward move from there, sell off at resistence, and make a decent 1/1.5 cents before the lead up to earnings (2nd half of FY07)

Long term wise, I'm looking to range trade buying in and if there are signs of breaking off from resistence, looking to hold longer towards the earnings release, because I feel there's some good news brewing in this company.

UOB Kay Hian in it's research report published in mid Jan, predicts stronger 2nd half performance, with continued growth in profitability. This company is stable, profitable, and growing, I can't resist the temptation of treating it as the darling of my portfolio.

By the way the report is available on SGX, and target price was at 36 cents. That's a decent upside in my opinion and a less risky proposition.

Have fun and make merry on your investment profits!