Investing Tips From Adrian Day

When assessing mining stocks to purchase most experts will say to look at management, look at the project, and look at the company’s cash position (among other things) to see whether the company is worth investment. 
But when it comes time to buy, there’s much more to consider. Investors would be wise to pay attention to spikes and dips when looking at volatile share prices and thinly traded stocks.
Adrian Day of Adrian Day Asset Management took some time to share a few of his thoughts on the mechanics of investing, and on what investors should consider when getting into smaller companies.
Listen to the full interview below, or read the transcript, to hear what he had to say:

Interview Transcript
INN: Hi, I’m Teresa Matich with the Investing News Network, and here with me today is Adrian Day, founder and CEO of Adrian Day Asset Management.  Adrian, thank you for joining me.
AD: Well, thank you for having me.
INN: So, I watched your talk here at the Sprott conference here earlier and one of the things that stood out to me was—you’re recommending stocks, but it’s not as simple as just buying a stock. There are other things that investors need to look out for in terms of mechanics. So can you tell us about some of those things?
AD: Well sure. And you know, one of the things that I find very, very sad is when people are right on the market, so they buy a gold stock when gold is going up, and let’s say they even buy a stock that goes up, and yet somehow they manage to lose money or not do as well as they should. So there are various things people need to do.
One thing I believe very much, particularly with thinly traded stocks, is people should always use limit orders. Now if you’re aggressive and actually really want to buy a stock, you can always put the limit a penny or two above the market, but always use a limit. Because with these thinly traded stocks, when people use market orders, they can shoot up 10 or 15 percent just because you’re buying, and then they fall back right after you finish buying. When you look at some of the stocks, let’s say some of the stocks here at this conference, good quality companies, companies that I like and I’m buying. But if they only trade 30,000 shares a day, and a stock is 10 cents, it doesn’t take a genius to figure out that if you’re buying $10,000 worth, you’re going to have an effect on the stock price. So that’s one thing.
The other thing I think particularly for US people is to avoid using the OTC market. The OTC market has extremely wide bid-ask spreads and is notorious for moving those bids and asks as soon as someone comes in to buy or sell. So I always look for buying on the most liquid market. If it’s Toronto, I use Toronto. If it’s New York, I use New York.