Blog : TFs Reveal the Best Stocks

by Peter Leeds on March 19th, 2012

Transhipment Fees Reveal the Best of the Best Penny Stocks

You may have heard me speak about transhipment fees (TF) before, and specifically how they relate to finding the best of the best in penny stocks.

When you get into a taxi, they'll charge you $1.25 or $2.50 at best (depending if you're in Idaho or Manhattan) before they drive a single foot.  That's a transhipment fee.  The cost of getting a ride BEFORE you start moving.  Once the car drives, you only then start paying for distance driven.

From the passenger's perspective, the further they go the less of an impact those fees will have.  On a short drive, you get hammered by TFs.

What does this have to do with finding the best penny stocks and the best penny stock picks?  TFs are a consideration that even the best investors don't always understand, and they're a necessary aspect of analysis to truly find the best of the best in penny stocks.

If you are a penny stock company paying transhipment fees, you will be just like the taxi passenger.  You'll be much less impacted by TFs the further you go (or the more you buy, or the greater your purchase order).

This is not unlike broker commissions for your trades in penny stocks.  If you buy $100 worth of penny stocks, a $9.99 commission is killer, compared to the same commission on a $40,000 purchase.

Who is paying TFs?  Penny stocks using transportation and logistics services, for example.  What's best is when they hit economies of scale, so their distance covered (or size of their purchase order) shrinks the transhipment fees to a negligible percentage of the cost.  

Who is charging TFs?  Logistics penny stocks, shipping penny stocks, freight penny stocks, airline penny stocks...  What's best is when they have clients who need to use their services frequently and often for short hauls and small purchase orders.

The best of the best penny stocks are like taxi passengers who need a lift clear across town.  As they drive, the percentage impact of the TFs keeps shrinking.

You don't want penny stocks that are like club hopping teenagers who take six rides short distances in a single night, very often passing out in the back seat before vomiting on their best pants.

Because of TFs, when I have many stops to make in a single day, I hire a driver.  In larger cities like Manhattan or Berlin it's best, because the total cost is usually less or comparable to taxis.  (Not so with smaller cities.)  Added bonus - the best is that you can leave your things in the car between stops rather than take them with you.

I'm not trying to convince you to take a car service (believe me, no affiliate deals here)!  I'm just suggesting to keep the impact of TFs in mind when looking for the best of the best penny stocks.  Since penny stocks are small, and their revenues generally just as small, TFs can quickly take a big percentage bite out of their bottom line.  

Think of the best penny stocks you're interested in.  Are they affected by transhipment fees?  Are those TFs stable, or subject to price fluctuations?   Are they charging or paying TFs, or both?

This is one of many considerations when searching for the best of the best penny stocks.  When you uncover penny stocks that are either benefiting from TFs (and frequent "short haul" customers), or are managing their TFs paid out (economies of scale), then there may be an opportunity there for investors in penny stocks.  When it comes to finding the best of the best penny stocks, always give TFs some consideration.