What is in Santa Claus' stock portfolio this year? Nintendo and Apple probably

The Holiday season looks like it might be rough for retailers given that the average American family will probably be spending a week's paycheck for gas just to get to Wallmart. So what will Santa Claus be busy lugging on his carbon emission free sled? One of the CNET editor's top holiday gift picks, the Nintendo Wii.

The first thing that all investors should consider before buying stock in Nintendo (OTC:NTDOY), Japan's interactive game manufacturer, is that it trades as an ADR and is quoted as a pink sheet over the counter stock. Unlike other pink sheet stocks this stock is much more stable than the average penny stock. Another thing that investors should take notice of is that through all the market turmoil in the last year, this stock has more than doubled. Starting at about $32 per share at the beginning of 2007, it has risen to as high as $78 and has like many other stocks dropped almost 20 percent in the last couple of weeks with the market correction. Unlike some toy manufacturers whose stocks have suffered losses this year due to product recalls as a result of well publicized Chinese lead paint stories, Nintendo's got game, literally.

This meteoric performance for Nintendo stock began with the launch of their Wii product and sales have been booming as evidenced by retailer reports of shortages of the game console. Sound like an Apple story? Sure does, and speaking of Apple expect them to struggle keeping products on the shelf as gadget hungry consumers gobble of their technological marvels after the Thanksgiving weekend also.

These market corrections are a trader's paradise and an investor's opportunity. Just when it seems like there is nothing but bad news and extended bearishness, the market surprises and comes roaring back. I have seen this happen many times in the past and the end of year seasonal upside phenomenon will probably not disappoint again.

This market will probably stabilize over the course of the next couple of weeks paving the way for a Santa Claus rally at the end of the year. Of course if the average investor or the market gets naughty, then they both can expect to get Iceland's early versions of Santa Claus and a big fat potato to claim as your year end gift deduction or tax loss, whatever the case may be.

I have increased holdings over the last few days with the correction and have reduced my short positions. I currently have a position in Apple but not in Nintendo as of this post. If the market has more weakness over the next couple of days, I will be adding to my select retail positions as well as initiating a position in Nintendo.

I do not own the Nintendo Wii.

Risks and Characteristics of Penny Stock Investing

Equity investments known as “Penny Stocks” are one of the riskiest investments that investors can participate in. Penny stocks are basically any stock that trade outside of the major stock exchanges and trade at prices generally less than $10.00 per share. Investors should be aware that it is possible to lose their entire investment into a penny stock for any number of reasons.

The SEC characterizes a penny stock as a low price speculative security and may or may not trade on a securitized exchange. Many stocks may also be difficult to get updated price information however there are listing services such as the OTCBB and Pink Sheet listing services which today’s average investor can find online. These investments are forms of public financing that generally small startup companies use to grow and expand their business. The regulation of these types of securities is less stringent in terms of financial reporting requirements and minimum capitalization levels.

Factors for investors to consider about penny stocks include a lack of liquidity (ability to sell the shares quickly or at fair prices); relaxed accounting standards, notification of ownership of shares or material changes of fundamental conditions which regulatory bodies design normally to protect shareholders from fraud.

There is the possibility that a Penny Stock investment can reward investors handsomely because the underlying company performs well by responsibly using the investment capital to grow. There are many case examples of large multi-national publicly traded companies who originally began as a Penny Stock, however investors should be aware that this doesn’t happen often and in more cases than not, the exact opposite happens and the stock loses value to eventually trade worthless as the company goes out of business.


Fraudulent practices are more inherent in these types of equity investments. One common scheme known as “pump and dump” refers to instances where a company is publicly touted as a “hot” stock because of favorable financial conditions or a new “hot” selling product or service. This exaggerated hype, causes demand by investors who buy the stock in high volume, which drives the price of the stock higher all while the individuals behind the scheme are selling their shares at this higher price so that when the excitement of the news is over or possibly even untrue the stock price falls drastically and investors lose their money.

Anytime an Investor hears news, research or important information about a company or stock, they have to consider the credibility of the source of that information or what motivations that source may have to release that information.

Other fraudulent schemes which are more common today appear on the Internet, the fax machine or telephone solicitations from individuals to convince investors to invest their money into these low priced instruments with the hopes of large financial rewards that never materialize.

As is the case for any investment vehicle, Investors should take many steps before investing in a penny stock.

The average to novice investor should always talk to a professional financial adviser to determine the suitability with respect to risks associated with the investment and if that investor is prepared to possibly lose their entire investment.

Investors should always investigate the company itself to determine the viability of their product or service, management’s track record, as well as their profitability and financial strength. The marketability and competition for their product or service agent should also fall within the investor’s radar to determine if the investment can hold its value.

www.pinksheets.com
http://www.otcbb.com