OTCBB Information and Statistics

The OTC Journal strives to provide our members with interesting insight on the dynamic nature of the OTC Bulletin Board, its listed Companies and its activities.

The OTC BB can be a fantastic opportunity to uncover companies not yet discovered by main stream Wall Street. However, there are certain strategies and windows of opportunity one should consider when looking to invest in Bulletin Board listed Securities. The Editors of the OTC Journal hope you find the following information both useful and valuable in your efforts to create maximum returns on your investments with OTC BB Stocks.

Why Do WE Focus on the OTC Bulletin Board?

The primary focus of the OTC Journal is to provide our members with information on micro cap stocks that we believe have significant upside potential for investors. Microcap stocks are generally considered to be companies with market caps of less than $100 million. These stocks are not followed by Wall Street Money Managers or the main stream financial press, so you would have difficulty finding out about them yourself.

Most of the companies we feature trade on the OTC Bulletin Board. For those of you that are on not familiar with the four levels of the OTC, they are as follows:

     •NASDAQ NATIONAL MARKET (NMS)
     •NASDAQ SMALL CAP
     •OTC BULLETIN BOARD
     •OTC PINK SHEETS

In order for a stock to trade on the NMS it must meet certain minimums qualifications. The Small Cap requirements are a little lower. The minimum requirement for the Bulletin Board is that the company be fully reporting, and in the Pink Sheets companies can be non-reporting. Pink Sheet stocks are not electronically quoted so the market can be hard to follow.

The Bulletin Board has very little institutional participation, but it is growing. New regulations that were put into effect in the Spring of 1999 forced micro cap companies to become fully reporting or be delisted down to the Pink Sheets until they obtained full reporting status. In recent years the NASD has increased the minimum requirements for companies apply for a Small Cap listing. Today's Bulletin Board is becoming the equivalent of what the NASDAQ Small Cap used to be.

This brings us full circle back to the lack of volume and interest in stocks today. In our September 16, 1999 newsletter we observed that volume was so thin that they shouldn't even bother to open the market for micro cap stocks. We're right back there today. The NASDAQ averaged 1.8 billion shares per day in March. On May 5th, less than 1 billion shares traded for the lowest volume day of the year.

However, the drop in activity on the Bulletin Board is much more dramatic. Here is a chart of monthly activity on the Bulletin Board for the year:

OTC Bulletin Board Trading Activity

In March over 24 billion shares traded on the Bulletin Board. In April there were just under 8 billion shares traded. This volume is one third of where we were in March, suggesting that nearly all the short term players have been washed out of the market. This leaves plenty of upside for investors when the volume returns.

We find the OTC Bulletin Board a very attractive place for individual investors. Institutions generally don't trade here, so the playing field is more level for the individual. The companies tend to have smaller public floats and lower market capitalizations, allowing for more upside potential when a company achieves success. Smaller public floats lend themselves to greater volatility to both the upside and downside.

The stocks which trade on the OTC Bulletin Board are generally not marginable. This has two advantages to the individual investor- you cannot over leverage your account, and individual investors cannot short the stocks, which helps alleviate selling pressure.

In the past the OTC Bulletin Board had a well deserved reputation as a haven for scam artists. The recent changes in the qualification regulations and the stringent review process the SEC has placed on Companies in order to maintain their listings has helped clean this problem up considerably. Today, even the smallest of OTC Bulletin Board companies is subject to the exact same reporting requirements as Microsoft or General Motors.

We are beginning to see a much greater flow of institutional participation in the Bulletin Board. The explosive growth of the NASDAQ over the past several years has lent itself to excessive valuations in many unproven companies. March's dramatic sell of which took many high flyers down to 1/3 of their highs is proof that the market can get very overpriced. Entry levels for stocks can get too high.

Investors don't mind risks, but the risk has to have upside potential. Too many companies with $3 million in trailing sales and substantial losses are trading at $1/2 billion market caps. Institutional investors are uncovering companies with the same financial performance, but with $50 million market caps on the bulletin board. Oftentimes these companies are not as well financed as their NASDAQ counterparts, so institutions are providing capital at price levels that provide acceptable upside potential.

The following is a table which demonstrates year to year growth of volume on the OTC Bulletin Board:

Over the last five years volume on the OTC Bulletin Board has grown 10 fold. There was nearly a 300% increase from 1998 to 1999. Through the end of April of this year there have already been 77 billion shares traded on the OTC Bulletin Board. At our current pace the year would end up at 231 billion shares, another 285% increase above last year.

There are over 4,000 stocks trading on the Bulletin Board today. Proactive public companies without a Wall Street following care about creating interest in their stock. As they grow they might require another round of financing. The better their stock trades the less dilution existing shareholders will suffer. This is where we come in.

Through our current publications we now have over 330,000 members. The leverage of all these eyeballs, along with the recent market correction, has put us in a position to choose from some very exciting young companies for upcoming profiles. We currently have three new companies lined up for future profiles, and we hope to begin this new series with next Friday's release. We expect to have an outstanding year once we get past these market doldrums. You might want to have a look at our testimonial section which we just put up on our site. Go to our home page and click on the Testimonial Button or Click Here to go directly to the Testimonial Section.

In future profiles we will only feature companies that we believe are likely to obtain their full NASDAQ listing within six months of the release. Although there is no rational reason for it, making the jump from the OTC Bulletin Board to the NASDAQ seems to result in double in stock price.

Defensive Trading Strategies For This Market- Using the Gap

If you have the courage to put your money to work at a time when the rest of the world is paralyzed by fear, you will make the most money when the market turns up.

A good strategy to use in a market like this is to allocate a certain portion of your capital to a stock you want to own. Start out by only investing 1/4 of the total amount you are prepared to commit. That way you can add to the position if the stock trades lower and take advantage of other people's weakness. This only applies to investors that are prepared to hold for at least four to six months- if you view yourself as a trader you must follow the short term trend.

A very important rule in a market like this: never buy a stock at the market when it Gaps Open. A Gap occurs when a stock opens at a much higher price than it closed at the previous day. In a market like this, 90% of the time that stock will drop back down and fill the gap. Market Makers have been using gaps to line their pockets with money from investors for years.

When market makers have market orders for a stock at the open, they will often take the stock up, fill the market orders at the higher price by shorting it to investors, and then drive the price back down. Then when they have scared enough people into selling, they cover their short and walk away with a tidy trading profit.