Don’t dismiss companies with penny stocks

Yes! Subpenny stocks – that is less than a penny per share – are alive and well right here in Las Vegas.

That means that at .001-cent per share, you could buy 1 million shares for $1,000. If the shares increased in value to .01-cent per share, you would make 10 times your money.

I am not pushing penny stocks. What I am saying is, if you uncover an interesting looking company, don’t turn your back on it because its stock is valued at a penny or less per share. There are 15 companies in the Las Vegas area that are trading under a penny per share and another seven or so trading between a penny and a dime per share. So opportunity is all around us.

Some of those penny stocks represent exploration companies that typically have losses until they actually find something of value – such as oil or uranium or gold.

For example, Can-Cal Resources Ltd. is a public company based in a residential neighborhood on Aqua Spray Avenue in Las Vegas. Its website says it is “engaged in the acquisition and exploration of precious metals and mineral properties.” The company has teamed with UNLV geologists to explore Cal-Can’s 3.8-square-mile tract near Wikieup, an Arizona town on the road from Las Vegas to Phoenix. The company also has land at Pisgah, in the Mojave Desert near Ludlow, Calif.

Both the CEO, G. Michael Hogan, and the board chairman, William J. Hogan, are Canadians. The website offers no clue on any familial connection, but that would be a subject for investor exploration. Each seems to bring an impressive background: the CEO is the former Canadian manager of strategic planning for Texaco and has 15 years with Assante Capital Management. The board chairman is the founder of FoodChek Corp., a Calgary firm that develops food safety pathogen testing.

The company’s 10k filing with the SEC notes: “For the year ended Dec. 31, 2013, the company recorded a net loss of $329,994 and had an accumulated deficit of $10,692,541 at that date. Our ultimate success will depend on our ability to generate profits from our properties.”

And that success would seem to turn on what — if anything of value — Can-Cal finds on and under all that desert land. So would the stock’s value.

Can-Cal is just one of the low-share-price mining sector firms located here.

Ireland Inc. is a Henderson company, also with Canadian principals, that is targeting land near Tonopah.

And Lithium Corp. is looking for lithium and graphite deposits that could play a role in the future of battery technology vital to the development of the electric car industry. It lists an address on Lingering Breeze Street in Las Vegas as its corporate home.

So, in evaluating companies like this, what should an investor be looking for? Start with finding out what the company does. Do they have revenue and make a profit? What is the background of the CEO? Does the company have any patents or own any real estate? Are they looking to merge or acquire another business? How many share are outstanding and how many shares do the insiders own?

Much of this is available online. Start with the company website and explore information available on sites like finance.yahoo.com and Hoovers.com.

You may see the stock has hardly been trading at all and the price has hardly moved. Seemingly, nobody is interested in the stock. Don’t let that deter you — yet. Remember, buy low, sell high. If the stock is heavily traded and the price is up, chances are you are too late. The tendency among investors is to say “look, everyone is buying; we better get aboard.” There is more profit potential in buying when no one else is, but only if we see real potential.

Another way investors can profit from penny and sub-penny stock is a maneuver most investors have never heard of called the ‘reverse merger.’ That’s when a private company that wishes to become a public company virtually overnight buys control of a public company, usually one with stock valued at a penny — or less. When that happens, it is not unusual for that penny stock to run up 500 to 1000 percent — increasing your investment five to 10-fold.

Yes, it is a long shot. But it happened right here in Las Vegas when Broadleaf Capital did such a transaction. It was trading at 3.5-cents per share in July and recently was trading at 33 cents per share under its new name, EnergyTEK Corp. (ENTK).

Caution. If you hear a company is a “shell company,” perhaps you should look elsewhere. A “shell company” is one that has no business. The SEC is clamping down on shell companies and even suspending trading in the stock in some cases.

On the other hand, a shell company may be looking for a deal. Visit the company and meet with the controlling stockholder. He, she or they may be glad you took an interest.

You can never be sure when you invest in stocks but diligent research can shift the odds in your favor.

John Glushko is a retired stockbroker, a private investor and author of books and articles on investing. He lives in Las Vegas. His column will appear occasionally.