NoName, Big Gains: Dan Schum’s Journey Through the Lonely World of Microcap Investing [GeoWire Weekly No. 157]

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Highlights The last time we spoke with Dan Schum of NoNameStocks.com was in 2020. We had the opportunity to pick up where we left off during our latest Investor Insights session last week. We gained more insights into Dan’s stock-picking process, his focus on illiquid microcaps, and the challenges associated with investing in this genre of stocks. Around 10 stocks were discussed, many of which are covered within GeoInvesting’s coverage universe.

Maj Soueidan’s October 9, 2024, conversation with Dan Schum, founder of NoNameStocks.com, provided a deep dive into the world of microcap and OTC stock investing. This is the second time Dan has been a guest on our Podcast, his first appearance being in 2020. Dan used to have a presence on X under the @nonamestocks handle, but left the platform in 2023. So, we wanted to see what Dan has been up to in the world of the OTC and dark stocks.  This was a great conversation, where we covered about 10 stocks, many of which are in our own coverage universe. If you used to follow Dan and are wondering how he feels about some of the stocks he used to talk about on X, this is a must-listen Investor Insights Skull Session.

Once again, Dan mentioned his mentor, an experienced OTC stock investor with decades of experience, who influenced his focus on tiny OTC stocks. The mentor’s deep knowledge of companies and industries has shaped Dan’s approach to investing, particularly in understanding companies that fly under the radar.

About Dan Schum

Dan Schum is an engineer by profession and an investor by passion. He began investing over ten years ago, initially starting with larger stocks but gradually transitioning to smaller, illiquid, and OTC stocks. His website, NoNameStocks.com, documents his journey and research on these small companies, many of which are lesser-known and under-the-radar “dark stocks.” These companies often do not report to the SEC but continue trading, which presents unique opportunities for patient and diligent investors. Dan’s investment philosophy is centered around finding undervalued stocks that other investors overlook, particularly those with low liquidity.

Key Topics Discussed:

Dan’s Background: Dan gave a brief introduction about himself, mentioning his engineering background, his start in stock investing after being laid off from a job, and his transition from larger stocks to OTC stocks.

Stock Research Process: Dan emphasized that he researches stocks during his free time and is particularly interested in small, illiquid companies. His blog has allowed him to build a network of like-minded investors, providing a flow of ideas through discussions and email exchanges.

Diversified Portfolio: Dan holds around 50-60 stocks at any given time, believing that diversification is crucial when dealing with small, illiquid stocks. He finds it difficult to feel confident enough in any single stock to make concentrated bets.

OTC Market Challenges: Dan talked about the challenges that SEC Rule 15c2-11 (“Rule 211”), requiring OTC companies to meet minimum disclosure standards, posed to OTC stocks, particularly making many companies inaccessible to regular investors. He shared how this change affected his portfolio, where a significant portion of his holdings were in dark stocks. As an aside, we were very tuned in to this period of time in anticipation of the ultimate commencement of Rull 211, which also affected some of the stocks we covered.

• “OTC Dark Stocks & Rule 211 Update“ (September 24, 2021)
  This PodClip by Maj Soueidan discusses the SEC Rule 211 amendment, its effects on OTC markets, and the evolving challenges for dark stocks.
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• “SEC Dark Stock Rule – What’s Going On and How Will It Benefit You?“ (August 1, 2021)
  This article examines the opportunities and risks associated with Rule 211, emphasizing how it could impact liquidity for dark stocks and create a silver lining for savvy investors.
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• “Series on Dark Stocks Continues As September 28 Deadline Looms for Rule 15c2-11 Adherence“ (September 2021)
  A detailed discussion about the Rule 211 compliance deadline, explaining how it affects trading and quoting of dark stocks.
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• “Rule 2-11 Drop Dead Date Quickly Approaching“ (September 17, 2021)
  This article provides insights on the Rule 211 deadline and how it impacts microcap stocks and investor sentiment, with updates on companies attempting compliance.

Finding Value in Ugly Stocks: Both Maj and Dan discussed the potential of finding value in “ugly” stocks—companies that are deeply discounted or forgotten by the market but may still hold long-term value. Dan focuses on buying stocks that are trading at lows or have been neglected.

Dan’s Blog and Stock Writing: Dan started NoNameStocks.com as a way to improve his own stock analysis and understanding. Writing about his investments helped him clarify his thought process and connect with other investors.

Specific Stocks Discussed:

• Ieh Corp. (OOTC:IEHC): One of Dan’s long-term holdings, which he continues to buy this manufacturer of electronic connectors and components, even after holding it for about 10 years.
• $GSFD: Dan mentioned this fishing bait and lures stock as an example of a dark stock where an investor actually convinced the company to start filing reports again. The stock is very illiquid but presents an interesting case study.
• Soluna Holdings, Inc. (NASDAQ:SLNH): A data center stock that has transitioned from Bitcoin mining to AI hosting.
• Moro Corporation (OOTC:MRCR): Another long-term holding that Dan has been buying for 10 years, reflecting his patient investment approach.
• $EKCS: A perimeter security company that had an African port contract that didn’t materialize, causing its stock to plummet. GeoInvesting covered this stock rather extensively (and patiently) and were ultimately very disappointed in the way things panned out.

Other stocks that entered into the conversation were Greystone Logistics, Inc. (OTCQB:GLGI), Wavedancer, Inc. (NASDAQ:WAVD), Pharmchem, Inc. (OOTC:PCHM), and Agent Information Software, Inc (OOTC:AIFS).

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The post NoName, Big Gains: Dan Schum’s Journey Through the Lonely World of Microcap Investing [GeoWire Weekly No. 157] appeared first on GeoInvesting.

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