If you’ve been watching the “top gainers” lists, you probably saw some unfamiliar ticker symbols pop up this week. One of them, a tiny Hong Kong brokerage firm called Top Financial Group (TOP), soared to $256 today. My IPO Edge subscribers were there two months ago under $4. You can do the math.
TOP is one of a handful of small, obscure companies that niche underwriters have taken to Wall Street in the past year or so. They’re basically at the level of maturity we would expect to see in a U.S. micro-cap stock traded over the counter and not on a major exchange: a few million shares priced around $5, supported with revenue in the $10 million range and a little profit.
They’re not bad companies but when they list alongside much larger and more mature global stocks, the narrow floats mean it doesn’t take a lot of money to move them a mighty long way. And that means that TOP and its peers really trade more like pure plays on “animal spirits” than real enterprises.
Feeling expansive, hopeful and good about the world? A few dollars here can change your life. Of course, they don’t always play out that way. Someone today could have paid $1000 for four TOP shares at the peak today hoping that the stratospheric gains would continue . . . and as I write this, those shares are already back down below $60 after hours, which turns into a harrowing 76% loss in a matter of hours.
But that wasn’t us. I’d been watching these stocks and experimenting with their accelerated trajectories for a few months now. We’d done okay. Sometimes we’d capture a 30-50% win in a few days. Sometimes we’d buy the peak and feel the pain.
TOP had gone public at $5, surged immediately to $25 and quickly got too hot to handle before melting down to $3.50. At that point, I had a feeling the underwriters knew what they were doing and the stock was probably worth $5, so I sent out the buy alert.
That was on Valentine’s Day. Ten weeks later, the stock was nudging around $7 and it became a question of how much gain we could grab before the market mood turned against us.
And then almost immediately, little TOP was back at $20. We moved fast to lock in that gain on a big piece of our stake. After all, we were in below $4 and had already made more in a matter of months than the S&P 500 can provide in as many decades.
Arguably that was a mistake keeping this trade out of perfect territory. Because then, after hours, TOP hit $70 . . . and then $230. Our “little” 400% win felt tiny. We’d left half our money on the table.
On the other hand, I knew the way these stocks perform. A lot of that overnight bid was probably illusory. This morning, we cashed out most of our remaining shares at market price and got out somewhere around $50-$70. Yes, the spread is that wide. It was a chaotic morning.
Add it all up and we’ve booked around 1000% on TOP so far. And I made sure we let a few shares ride, maybe 1/10 of a normal position. We don’t want to leave all the money on the table.
If I’d been a little more courageous, we would have held on and sold everything at $200 today for a true lottery-style win. But if we waited too long beyond that, we’d already be looking at a price below what many subscribers got at the open. It’s always a negotiation between greed, fear and common sense.
Too much greed would have pulled us into TOP at too high a price. Too much fear would have kept us out entirely, or tempted me to push the “sell” button after we’d earned a polite 10-20%. Common sense kept me calculating the risk against the potential returns as we liquidated each block of shares.
Right now the remaining 10% of our initial position can go all the way to zero and we’ve still locked in an overall gain of roughly 900% . . . $10,000 for every $1,000 we put into TOP in mid-February. Maybe it hangs out here around $50. Maybe it shoots up again. Maybe we settle for an exit closer to $20.
The point is that it no longer matters. We’ve already won. Everything else is literally the icing around our cake. And I plan to do it again.