Dear Reader,
I just met with a legend in the resource business.
He told me about a company that I now believe could be the next target of the Trump administration for a big investment.
This could be HUGE.
When the government took a stake in Trilogy Metals, it jumped 388% in just 8 days.
And this next company is even smaller, with more upside.
This little-known company controls one of the most important minerals we have... an element crucial to America’s future economy.
I’ve personally bought 10,000 shares of the stock.
There are several big catalysts hitting all at once.
The Trump administration may take a stake in the company as soon as the next few days.
Tesla just signed an agreement with them to supply 75,000 metric tons of this resource over six years.
And the greatest resource investor of all-time – a billionaire founder of 12 different resource companies – also just got involved in a $41 million investment in this company.
But please hurry. The government could make its move any day now.
Yours for peace, prosperity, and liberty, AEIOU,
Dr. Mark Skousen
Macroeconomic Strategist, The Oxford Club
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Bonus content from Stocks & Income:
Hello.
Penny stocks. Love them or hate them, they have always existed and likely always will.
They've also been the source of significant losses for many investors and carry substantial risks including total loss of capital, extreme volatility, liquidity issues, and susceptibility to manipulation.
They're something financial advisors typically recommend staying away from unless you have an extremely high tolerance for risk (a sentiment we would agree with).
But can there be a place for penny stocks in a sophisticated investor's portfolio?
We think there can be, though only with proper risk management and realistic expectations.
Today, we're covering:
🪙 What's the role of a penny stock?
📃 Educational examples of penny stocks (both successes and failures)
😬 When NOT to touch a penny stock
Important: This content is for educational and informational purposes only. It is not financial advice, investment advice, or a recommendation to buy or sell any securities. Always consult with a licensed financial advisor and conduct thorough due diligence before making any investment decisions.
Let's get started.
Why Would You Ever Consider a Penny Stock?
The primary reason investors consider these stocks is their potential for outsized gains relative to established companies.
A company with a $50 million market cap theoretically has more room to grow 10x than a $50 billion company. However, it also has a significantly higher probability of declining to zero.
Critical: These are extremely high-risk, speculative investments. Most financial advisors would recommend never allocating a large portion of your portfolio to penny stocks.
However, if you have:
A strong focus on growth potential
High risk tolerance
Proper diversification elsewhere
Money you can afford to lose entirely
There may be an argument for allocating a very small portion of your portfolio to carefully selected penny stocks.
Suggested allocation guidelines (for educational purposes only):
1% or less per individual penny stock
5% maximum total portfolio allocation to microcaps/penny stocks for most risk-tolerant investors
Perhaps up to 10% for extremely aggressive investors who fully understand and accept the risks
Why such small allocations? Because investing in early-stage companies is where parabolic gains can occur, but it's also where total losses are common. The key is proper position sizing and finding companies with credible narratives and sound fundamentals.
Remember: None of this is financial advice. Always do your own research and consult with licensed professionals.
How to Evaluate Penny Stocks
There are countless penny stocks with poor financials, weak management teams, and little competitive advantage.
We recommend avoiding these entirely.
The stocks that may warrant consideration are microcap companies with:
Strong or improving financials (positive cash flow, manageable debt, revenue growth)
Experienced, credible management teams with track records
Compelling, realistic narratives backed by tangible catalysts
The Narrative Component
Biotech example: A biotech company near bankruptcy but awaiting FDA approval for a proven treatment represents a binary outcome scenario. Either the company fails (stock goes to zero) or approval comes through (potential significant upside).
Important caveat: Even FDA approval doesn't guarantee success. Companies can still fail post-approval due to commercialization challenges, competition, or financial mismanagement (see Dendreon case study below).
Mining example: Early-stage gold or silver companies with promising geological testing results but no production yet. Extremely high risk, but potential for significant returns if mining proves successful. Your investment could also become worthless if reserves prove uneconomical.
This is why proper position sizing is critical.
Worst case: You lose the entire 1% invested in that position. Possible outcome: Or that 1% position could grow to represent 5% or more of your portfolio value.
Technical Analysis Considerations
Chart analysis can be helpful but is less reliable for penny stocks than for established companies. A 99%+ decline since IPO five years ago is usually a red flag. However, sometimes unusual chart patterns don't tell the complete story.
We recommend evaluating:
Long-term price history and market cap trends
Recent financial performance and guidance
Current narrative developments and catalysts
Management commentary and actions
Again: This is not financial advice. Always conduct thorough independent research.
What Stocks Should You Avoid?
For us personally, if a penny stock has:
Poor or deteriorating financials
Inexperienced or questionable management
No recent positive developments or clear catalysts
History of dilution or reverse splits
We are not interested, and we recommend you avoid them too.
These don't represent calculated risks—they more closely resemble sending money into a void with minimal probability of success.
To illustrate these principles, let's examine two real-world case studies.
Case Study #1: The Dream - Monster Beverage (MNST)
Disclaimer: This is a historical example for educational purposes only. Past performance does not guarantee future results. This is not a recommendation to buy MNST or any other security.
In the early 2000s, Monster (the energy drink company) traded between $0.05-$0.09 per share. The company was then called "Hansen Natural" and was struggling significantly.
Everything changed when it launched Monster Energy not just as a product, but as a lifestyle brand. By 2012, the company had renamed itself Monster Beverage.
The returns:
By 2012: Stock reached approximately $12.00 (roughly 240x from $0.05)
Today: Stock trades around $83.76 (approximately 1,675x from $0.05)
Key success factors:
Strong brand positioning
Effective marketing strategy
Growing market for energy drinks
Solid execution by management
Case Study #2: The Nightmare - Dendreon (DNDN)
Disclaimer: This is a historical example for educational purposes only. This illustrates the risks of penny stock investing and is not a recommendation regarding any security.
Dendreon was a biotech company trading around $1-$2 in the early 2000s, developing "Provenge," an immunotherapy treatment for prostate cancer.
Initial success: As the drug progressed through trials, the stock surged to peaks near $57. Seemingly life-changing gains for early investors.
The collapse: Even after FDA approval, everything fell apart:
Each dose required custom manufacturing from the patient's own white blood cells
Treatment was expensive and logistically complex
Faced immediate competition from more convenient alternatives
Company carried $620 million in debt
Unable to achieve profitability despite FDA approval
Result: The company eventually filed for bankruptcy, and the stock tanked.
Critical lesson: Many penny stocks never achieve the "takeoff" that Dendreon briefly experienced. Most simply fail without ever gaining traction. Even apparent success (FDA approval) doesn't guarantee survival.
Bottom Line
Should you invest in penny stocks? Only you can answer that question after careful consideration of your:
Risk tolerance
Financial situation
Investment goals
Time horizon
Overall portfolio composition
Key principles if you do proceed:
Never allocate more than you can afford to lose completely
Maintain small position sizes (typically 1% or less per stock)
Conduct rigorous due diligence on financials, management, and catalysts
Understand that total loss is a real possibility for every position
Consult with licensed financial professionals
Recognize that potential gains come with commensurate risks
Final reminder: This article is for educational and informational purposes only. It is not financial advice, investment advice, or a recommendation to buy or sell any securities. Always do your own research and consult with a licensed financial advisor before making any investment decisions. Past performance does not guarantee future results.
Do you have any penny stock stories or questions? Let us know!
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🫡 See You Next Week
That’s all for today’s special edition. We hope you got value from it. Reply and let us know if you did.
Until next week,
— Brandon & Blake
The information provided in Stocks & Income is for informational and educational purposes only and should not be construed as financial advice, investment advice, or a recommendation to buy or sell any securities. Stocks & Income is not a registered investment advisor, broker-dealer, or licensed financial planner. Always do your own research and consult with a licensed financial advisor before making any investment decisions. We may hold positions in or receive compensation from the companies or products mentioned. Disclosures will be made where applicable. Past performance is not indicative of future results. All investing involves risk, including the loss of principal.
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