OTC Investing

I might recommend an IPO if it looked really fantastic and wasn’t just touted by the issuing brokerage firm. It would be something less risky than the usual fare, something that would appeal to most people so price escalation could be expected down the road—in the not too distant future.

After years of lousy penny stocks and browsing the pink sheets, I found a company that recycles kitchen faucets called Finest Faucets. It is small but had gone public the month before so publicity about it is available and it caught my attention. It is part of a group of companies actually that manufactures home appliances, but one owner is into conservation for some reason and favors recycling. It is a popular concept with many who do care about trash dumps and waste. (People buy stocks and mutual funds all the time for this reason.) It is not listed on the New York Stock Exchange but is publicly-traded. So why not?

These are some of the things I look for in my private investing or to recommend to others. It is fun to see growth in new areas and you get some real surprises. It is never boring, always dynamic and open-ended. You have to imagine, if it is about a product, who would want it, how many, and how often. In other words, what is the nature of the market and the typical consumer? How does the company attract them and keep them coming back? I spent some time checking out their web site at www.finestfaucets.com and thought it was a really imaginative and creative idea that they’ve bought to market.

How a company is run is as important as the items or services offered. If you can’t create a market, you can’t make a profit. In the world of investing, this is always what it is about. I thought about where the product in this case would be sold: online, in stores (chains would be great), by catalog, etc.? Expansion had to be in the business plan. When and how had to already be in the wind. Planning ahead is the way to grow. As a company reaps revenues, how much is for re-investment and product development? How much is for advertising and PR? What are the salaries and sales commissions?

With blue chip stocks and well-known companies, much of this research is done for you. Thus other people jump on the band wagon with you. With the more obscure companies and OTC stocks, you have a chance to get in early with fewer fellow investors. They do jack up the price, but you want to buy low before that happens. It is all about timing.

While recycled kitchen faucets mean as much to me as anything else, I simply find this a good practical product with a unique message for our green era. If there is a story to tell, the brokers can tout the stock with ease. People can retell the same story, and it goes on and on. The insider game is in play for those who like to be in on the ground floor.

If you can’t stomach risk, stay with the tried and true DOW. But if you want a great pastime, look at the OTC stocks and get ready for a roller coaster ride.