There simply isn’t as much information available for penny stocks versus those traded on the New York Stock Exchange. The information that actually is available for top penny stocks is unreliable. How do you go about finding the top penny stocks? The best way to pick the top penny stocks is to combine your own research with professional advice. There are many penny stock selection services available. When you join one, they might be partial to a particular penny stock for a variety of reasons. It could be sincere – the firm might really believe that a particular buy is one of the top penny stocks. On the other hand, it could be underhanded – the firm might be receiving some kind of “incentive” for getting you to purchase a particular stock. Regardless, just because your selection service tells you to pick a particular penny stock doesn’t mean that you should.
Conversely, don’t throw all of your money into something you deem a top penny stock from your own research. Your judgment might be a little clouded from all of your research. You worked so hard to find a top penny stock that you want your pick to work out, even if it isn’t a good buy. This is especially a problem if you don’t have any investment experience, or have had failed investments in the past.
The best approach, then, is to combine the advice of a professional with your own research. If your selection service tells you that XYZ Corp is a top penny stock, find out why. Investigate the company. Get as much information as possible about the company, especially press releases and other media buzz. Draw your own conclusions about the company from your information gathering. Make sure your research confirms the numbers and details that your selection service provides. After thorough evaluation, make sure that the stock fits your risk tolerance, investment objectives, and investment timeframes.
In fact, before you begin picking stocks, you should put yourself through a thorough and honest self-evaluation. Ensure that you thoroughly understand your own financial situation, investment goals, and tolerance for risk. Then, after your own research into potential stocks is conducted, watch and track the stock before buying. Check its fluctuations. Follow the media and consumer buzz regarding the company and see whether the stock reacts negatively or positively. If you find that the price of the stock has gone up since you began your research, you might feel as if you’ve missed out on an opportunity. Fear not, however. If this is the case, it can be a good indication that your method of picking the top penny stocks is a reliable one. Rinse and repeat your formula and see how you fare. You might find that you’re on to something
The Right Penny Stock Can Make You Money Written by EditorsChoice Thursday, 30 August 2007
Most people consider penny stocks to be a poor investment. I, on the other hand, think that investing in a penny stock before that company becomes profitable company is the best way to invest, because you can make a lot more money with penny stocks than would ever be possible with blue-chip stocks. I will now outline for you what you need to know about penny stocks and how to find the best one in which to invest.
Penny stocks are defined differently depending on who you talk to. Stockbrokers define them as any stock that trades below $5 per share. Regulatory agencies sometimes classify them as a stock with a price below $2. But, generally speaking, a penny stock is any low-priced security that trades on one of two exchanges; the Pink Sheets or the OTC Bulletin Board.
The Pink Sheets are an exchange where most startup companies first get listed. There are no listing requirements to be traded on this exchange. A company does not have to have any sales, nor does it have to reveal how many shares outstanding it has to qualify for the Pink Sheets.
The reason why a company tries to get listed on the Pink Sheets, even though their stock will not go up in price because they have no sales to speak of, is because it gives their company more substance and credibility; it is typically easier to attract additional capital, obtain financing, and execute contracts and agreements if a company is publicly traded, even if it is on the Pink Sheets.
Also, it is easier to get transferred from the Pink Sheets to one of the larger exchanges than it is to go from being a private company to hopping directly on to one of the major exchanges, such as the NASDAQ or NYSE. Companies listed on the Pink Sheets trade as ridiculously low as $0.00001 per share, all the way up to $500 per share and sometimes beyond. Foreign companies often have some of their shares sold in the United States by listing them on the Pink Sheets.
The OTC (Over-The-Counter) Bulletin Board is similar to the Pink Sheets. This exchange consists of relatively young companies either with no sales or a small amount of sales. Companies listed on it are sometimes fully reporting (meaning that they reveal how many shares they have outstanding and what their balance sheet looks like). Often, companies go from the Pink Sheets to the Bulletin Board once they are ready to become fully or semi-reporting.
Most publicly traded companies that are now listed on one of the major exchanges (NASADAQ, AMEX, NYSE), at one time or another, were penny stocks listed on the Pink Sheets or Bulletin Board. Rarely does a company go from being private directly to one of the 3 major exchanges. Google is a rare example of a company that was able to do that, because they were so successful so quickly. But, most companies have to pay their dues and edge their way up from the penny stock exchanges to the bigger ones.
So, investing in penny stocks can be an excellent investment because some of these young companies will one day be worth a fortune. The hard part is finding the right company to invest in, because for every successful startup company, there is also one that fails within the first year or two.
To find the right company, there are a few things you need to look for. Number one, you need to do some research and try to find out how many shares the company has in its float. The float is the number of shares that are currently being traded. Companies listed on the Pink Sheets usually do not officially report this number to the public, but with a little research, you can usually find out. It is usually contained in articles written about the company, or in TV or radio interviews with company officials that are sometimes archived on certain websites.
You can also look for the information on message boards or forums where stock traders chat with each other. Simply do a search on Google and read every article ever written about the company, and you will likely find out about their float. This is important because you do not want to invest in a company that already has something like 500 million shares in its float. Companies with this kind of share count are likely having problems moving forward, so they have issued more and more shares to raise money just to stay alive. You want to look for companies that have approximately 5 to 100 million shares in their float.
Other things that you should look for in a new company are barriers to entry, patents, and consumer demand. Here are the questions you need to ask yourself when analyzing the probability that a company will be successful:
1) Barriers to Entry: Are there are obstacles that will make it difficult for the company to sell its products or services?
2) Patents: Is the product that the company is going to sell patented? A patent will prevent other companies from producing the exact same product.
3) Consumer Demand: Will there be a demand for what the company is selling? Sometimes a company has a great new invention or an exciting technology, but if it is not something practical that consumers are going to want or need, then it does not matter how great it is.
Try to set aside some money for investing in penny stocks and start while you are still young. The earlier you get started, the more money you can make in the long run. Just make sure you do your homework before you invest and you should do extremely well.
-------------------- Trading is a blast!! Posts: 4921 | From: Rhode Island | Registered: May 2005
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quote:Originally posted by stockcop: I do have a question :
Could someone explain the exact steps one by one they follow to DD any stock?
Thanks.
Charts 1st to decide the trend, then the trend lines to see where it's going, then the price pattern for how volitile it is for easy in ... easy out. Can't afford to lose it.... don't use it.
-------------------- All post are my opinion. Do your own DD. Who's clicking your buy/sell button!? Posts: 7800 | From: Virginia | Registered: May 2006
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