For the past few months, the US markets have been taking a downward trajectory as the S&P 500 and NASDAQ both entered bear market territory. A bear market can be a stressful time for investors in any assets. It is a completely risk-off environment, and we have seen high growth investments like growth stocks and cryptocurrencies get slashed down to pre-COVID prices. Half way through 2022, and for many stocks it is as if the bull market of the previous two years never even happened.
OTC or Over the Counter stocks have a reputation of being volatile and dangerous to invest in. While this reputation does have some underlying truth to it, the overall view of penny stocks is much more negative than it should be. For starters, most of the volatile penny stocks investors think negatively about trade on the Pink Sheets exchange. This is the OTC exchange with the lowest regulations as companies really just need to pay a listing fee to get listed. Pink Sheet stocks are the ones usually associated with stock manipulation and pump and dump schemes.
Once you get to the higher exchanges like the OTCQX, not only are the regulations stricter, but most of these companies are looking to get uplisted to a major index like the NASDAQ. While they definitely do not have the same stability as a blue-chip stock, investors must always keep in mind that the bear market will end one day, and the risk-on sentiment will return. If you can buy the right OTC stocks on the right dip, you could be in for some massive gains when the market gets rolling again.
Does the Bear Market Affect OTC Stocks
Absolutely, if the NASDAQ and NYSE are dipping, then generally speaking the OTC markets are as well. Is this a bad thing? It depends on your mentality as an investor. For example, experienced investors know that there is great wealth to be made during bear markets. When sentiment is at its lowest, the market always has a knack of turning back bullish. It’s why Warren Buffett always says that we should ‘be greedy when others are fearful’.
So how do we capitalize on the bear market with OTC stocks? As investors we should always have a process in place. Whether it is the peak of the bull market or the absolute bottom of a correction like we are currently in, your investing strategy and process should never change. Here are three things to keep in mind for OTC stocks during a bear market.
Do Your Research
With any type of investment, you should always be doing your research. Never just blindly follow investment suggestions, especially if they are free and from social media. Always put in your due diligence because if you search hard enough, you can find all of the information you need online.
Any publicly traded company will have information for investors at its Investor Relations page. On top of that, following the company on social media and keeping up to date with investor presentations and earnings calls can provide a clear picture of where the company is now, as well as where it intends to go in the future. Researching the right OTCQX companies can lead to life-changing wealth if these stocks are uplisted to a major exchange. The beauty of OTC stocks is that they are rife with speculation, and when researched properly, speculation has a path to lead to future growth.
Do Not Be Afraid of Volatility
Volatility is a funny thing when it comes to the stock market. Investors love upward volatility but cannot handle when it is volatility to the downside. We’re here to say: embrace the volatility. We need to understand that OTC stocks will be volatile, especially during times of market uncertainty. Use this to your advantage rather than as a reason to not invest in certain stocks.
This ties into doing your own research. Nearly every major company has seen their stock tumble at some point this year. It doesn’t matter if you are Apple (NASDAQ:AAPL) or Tesla (NASDAQ:TSLA) or even a steady blue-chip like WalMart (NYSE:WMT), this macroeconomic environment has hit every company hard. If you find great companies that trade on the OTC markets, they have likely experienced volatility this year. But those same great companies will soar higher when the markets resume their upward path. Even though sentiment is at its lowest in years, it is no reason not to buy a stock that you think has been oversold and is trading lower than its intrinsic value is.
Pick Your Pink Sheet Stocks Carefully
In times of volatility and negative market sentiment, it should be recommended to really do your research on the Pink Sheet listings, even more than usual. Pump and dump schemes feast on investors who are looking for quick gains and there is no better market to find vulnerable investors than in a bear market. The low regulations and even lower barriers to entry for the Pink Sheets make these stocks some of the riskiest investments during a bear market. Don’t get us wrong, there are definitely some hidden gems available on the Pink Sheets (and we’ll discuss one later in this article), but always invest in this exchange with more caution than the OTCQX.
What are the Top 5 OTC Stocks?
- Nanalysis Scientific Corp (OTCQX:NSCIF)
- Grayscale Digital Large Cap Fund (OTCQX:GDLC)
- iQSTEL (OTCQX:IQST)
- Clean Vision Corp (OTCQB:CLNV)
- Black Bird Biotech (OTCPK:BBBT)
Nanalysis Scientific Corp is actually a Canadian company that trades on the TSXV exchange. It is based in Calgary, Alberta and was established in 2009. The company produces NMR or Nuclear Magnetic Resonance instruments which provide greater access to spectroscopy and desktop Magnetic Resonance Imagery machines. The stock was voted the top OTC stock on the OTCQX Top 50 list by OTC Markets Group.
Are you looking to add exposure to cryptocurrencies in your portfolio? Grayscale is a leading digital asset investment group that provides investors with the ability to invest in cryptos directly on the OTC markets. The company was made famous by its flagship Grayscale Bitcoin Trust fund, and has added subsequent assets for Ethereum, Solana, and more major crypto projects. With the Digital Large Cap Fund, investors get access to a diversified portfolio of cryptos which include Bitcoin, Bitcoin Cash, Ethereum, Cardano, Solana, Chainlink, Polkadot, Avalanche, Litecoin, and Uniswap.
iQSTEL is a highly diversified company that operates divisions of telecom services, Internet of Things technology, blockchain technology, fintech, and even electric vehicles. iQSTEL is one of those companies that trades on the OTCQX but is seeking a NASDAQ uplisting over the next couple of years. The company has been aggressive with acquisitions of smaller rivals in numerous sectors. iQSTEL has grown its revenues to meet its target goal of $90 million in annual revenues through a combination of mergers and acquisitions as well as organic growth.
Clean Vision Corp along with its subsidiary Clean Seas, has been busy this year in organizing local PCNs or Plastic Conversion Networks which use the process of pyrolysis to convert plastic waste into usable, renewable fuel sources. Thus far, Clean Seas has managed to sign agreements with Sri Lanka, Morocco, and Puerto Rico, while establishing a pilot plant in Hyderabad, India.
Sure, we said to stay away from the Pink Sheets but doing your research into companies can also be beneficial. Black Bird Biotech has the potential to explode over the next decade and here’s why. The company specializes in creating organic pesticides made from natural ingredients. There is a major push right now around the world to move away from toxic pesticides, with markets in Europe, Africa, and North America all halting the use of some pesticides within the past month. Black Bird Biotech’s MiteXStream has the chance to capture a major market share, and if it does, we could see the stock skyrocket. Keep your positions small in Pink stocks, but know when to take a calculated risk that could provide a major reward in the future.
Are OTC Stocks Worth Investing in?
There is no sentiment more negative than bear market sentiment. Stocks have continuously fallen lower over the past six months of trading, and unless the macroeconomic environment and sky-high inflation improves, we could be in a sideways trading period for quite some time. OTC stocks, particularly those that trade on the OTCQX or OTCQB exchanges are no different from stocks that trade on the NASDAQ or NYSE. It is likely that these companies simply did not meet the strict listing requirements of these major exchanges.
If you do your due diligence and research these companies, then trust your research. The market environment is negative right now and there could be some more downside later this year. But if you find the right OTC stocks and are able to be greedy when others are fearful, you could be setting yourself up for some high returns once the markets return to a bullish sentiment.
$AAPL $TSLA $NSCIF $GDLC $IQST $CLNV $BBBT