how do i find a good penny stock?
by Gary James on Saturday, September 4th, 2010 | 4 Comments
I get tired of all the web sites that claim they have the best list of penny stock, and all you have to do is sign up for their service. I would like to invest, but don’t have a lot of money. How can I find good penny stocks to invest in?
Hey everyone, Gary here. Stock trading was never my forte'. I lost tens of thousands of dollars listening to stupid advice and letting other people trade for me.
The term "good penny stock" is an oxymoron. If the stock was good, it would not be a penny stock. Investing in penny stocks without YEARS of stock investing experience is about the most ignorant and financially risky thing you could possible do! Penny stocks wipe out 10,000 investors for every ONE that makes a decent return!
There is one great way to locate good stock picks and that’s by poking around through blogs and other forms of public commentary where fellow and sister investors regularly commune. I’ve been working penny stocks for more than fifteen years and routinely do rather well, financially. I also hold some stocks that are higher dollar but clearly the penny stocks are much more fun and I make more money through them.
You can visit these for stock pick ideas:
1. http://www.marketwatch.com
2. http://www.investortshub.com
3. http://www.investorvillage.com
You can also sign up for a regular newsletter detailing excellent analysis in addition to steering you towards some more promising investment picks:
http://seekingalpha.com/article/194537-three-china-small-caps-set-to-double-in-six-months
I spend time at all of these sites daily. Incidentally, 35% of my portfolio NAV is invested in Chinese start-up companies.
These are all FREE. I never spend on ideas, preferring to hobnob with others who also love this work. The true stock lover is excited to share positive experiences.
As for those who insist you’re going to lose your money, all I can say is that only you can decide for yourself what risks are acceptable for you. I’m not going to urge you one way or the other. However, if you do get involved, I hope you’ll go slowly at first until you feel comfortable. And be sure to read what each site has to say about the picks before deciding what to invest.
In the end, all stocks, regardless of the share price, present elements of risk. We mitigate that reality by studying hard, cross referencing until our brains are fried and then we make our choices by setting up buy or sell orders. From that point onward, we tweak the engine—adding on dips if it seems appropriate, selling all or part when gains mount.
I absolutely love this stuff, can’t imagine doing anything else. What other job would allow me to bake three cakes during work hours? LOL
Len
There’s really no such thing as a "good penny stock." Here’s some info on what a penny stock really is:
Companies trade their stock on organized exchanges like the New York Stock Exchange. The NYSE has certain requirements that companies must meet in order to have their stock traded on the NYSE. However, if a company does not meet those requirements, the stock is delisted from the exchange. The stock can only be traded over-the-counter (OTC). This OTC market is known as the Pink Sheets. This market is virtually unregulated and there are no requirements at all to be trade stocks on the OTC market.
Those companies that do not meet the requirements to be traded on an organized exchange and have to be traded OTC are known as penny stocks. There is little to no financial data available for penny stocks so they are highly speculative. Usually, penny stocks are for those companies that are not in great shape. In case you don’t know, companies that go into bankruptcy are automatically delisted from the NYSE. WaMu and General Motors used to be traded on the NYSE but were delisted after going bankrupt.
Owning stock in a company is like owning the company itself. When a company goes bankrupt, creditors are first in line to get money. Bondholders are the first entities to be entitled to money. Afterwards, it is those who hold preferred stock. Those who hold common stock are entitled to nothing at all. The only case where they get any money is if there is anything left after paying back bondholders and holders of preferred stock.
So keep this in mind when you look to invest in penny stocks. You may be buying stock in a bankrupt company. You might as well throw that money in the trash can because you aren’t going to get any of it back unless somehow, the stock shoots up.
A good way to find good penny stocks is to learn by yourself how the stock market works, and to use a stock screener to look for stocks that you might be interested (things like price < $5, Volume above 100K, Insiders have at least 20% of the company, and so on).
Then you can analyze a chart on yourself and look for a good entry and exit point.
In case you don’t want to look for the stocks on your own, I don’t see how you can find good stocks unless you join one of the websites you’re talking about, where you join, and they send you stock picks (for free or as a subscription service).