Fund picks and pans stocks

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The definition of penny stocks, also known as micro-cap stocks, varies. A stock is termed as a penny stock based upon its market capitalization and share price.

According to the US Securities and Exchange Commission (SEC), a stock is termed as penny stock if its share price is below $5. However, many in the investor community believe that a penny stock is one with the share price of $1 or less. As junk bonds are compared to investment grade bonds in fixed income market, penny stocks are compared with blue chip stocks in stock markets.

Trading in penny stocks are far more riskier and speculative than trading in blue-chip or other mid-cap or large-cap stocks. Several investors believe that investing in penny stocks is like gambling, that one has to be prepared for losing money. Moreover trading penny stocks can be more expensive. Penny stocks are usually traded in the Over-the-Counter exchange or on the pink sheets.

If you intend to invest in penny stocks you should know the differences between penny stocks and other stocks, such as blue chips and mid-caps. While the performance of mid-cap and large-cap stocks is driven primarily by fundamentals, several analysts believe that the performance of penny stocks is driven primarily by investor speculations. If you analyze the fundamentals of 100 penny stocks, perhaps only two or three would be generating superior returns.

Despite the issues associated with penny stocks, several investors intend to invest in penny stocks, since they believe many of today’s blue-chip stocks, such as, Microsoft (Nasdaq: MSFT) and Wal Mart (NYSE: WMT) were once penny stocks. However, the share prices of these companies were almost never trading for pennies, however it appears that way when one looks at the price adjusted for stock splits. Many investors ignore this fact.

Since many penny stocks are traded on the pink sheets and are not scrutinized by the SEC, you will find it more difficult to find credible information about them.

Penny stocks often lack liquidity, which means investors would find it difficult to buy or sell. A lack of liquidity often helps fraudulent investors to manipulate the share prices. The SEC itself in Schedule 15G states ‘Investors in penny stock should be prepared for the possibility that they may lose their whole investment’.

A penny stock traded on the over-the-counter exchange has a higher chance of being delisted for lack of compliance. If the particular company is unable to list its stock on another exchange or become re-instated, you may lose 100% of your investment. You should consider this seriously, if you intend to take long positions in a penny stock.

Several new investors are attracted to penny stocks, given their low price and potential for substantial gains. There have been instances where penny stocks rose more than 1000% in a few days in the past, but this is extremely rare and often the price is not sustained. There are historical evidences that most penny stocks lose their entire value. If you are a new investor, you need to be aware of the risks involved.

If you still want to invest in penny stocks, do the relevant research into the company’s fundamentals and ignore the pre-conceived theories about the successes of the penny stocks in the past.

Penny Stocks Investing: Christian stock
Penny Stocks Investing: Christian stock investing: How to be … Christian stock investing: How to be Biblically responsible. Have you ever wondered how to pick investments that line up with your beliefs?

Penny Stock  stock quotes
Penny Stocks – ABK ACTC ADVNB APPY C CHTR CNB CTIC FED FIG FITB GNTA IRE MCET RBS SAY SOLM SPSN SSCC STEM STSA TSFG UYG Stocks – ABK AMD AMR CDE CPSL CPST ESLR ETFC F FMNTQ FRPT

Penny Stocks Market
Penny stocks are ordinarily offered up by a concern that has been established for less than three years and has not greater than 5 million dollars in solid assets, or a business that has at the very least three years.

Penny Stocks Investing
The Business Desk (registration)Advice for SMEs on raising finance on PLUS stock marketThe Business Desk (registration), UK – 15 hours agoBy Anastasia Weiner – Business Correspondent A SEMINAR advising business leaders.

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Against The Top Down Approach To Picking Stocks

If you have heard fund managers talk about the way they invest, you know a great many employ a top down approach. First, they decide how much of their portfolio to allocate to stocks and how much to allocate to bonds.

At this point, they may also decide upon the relative mix of foreign and domestic securities. Next, they decide upon the industries to invest in. It is not until all these decisions have been made that they actually get down to analyzing any particular securities. If you think logically about this approach for but a moment, you will recognize how truly foolish it is.

A stock’s earnings yield is the inverse of its P/E ratio. So, a stock with a P/E ratio of 25 has an earnings yield of 4%, while a stock with a P/E ratio of 8 has an earnings yield of 12.5%. In this way, a low P/E stock is comparable to a high – yield bond.

Now, if these low P/E stocks had very unstable earnings or carried a great deal of debt, the spread between the long bond yield and the earnings yield of these stocks might be justified. However, many low P/E stocks actually have more stable earnings than their high multiple kin.

Some do employ a great deal of debt. Still, within recent memory, one could find a stock with an earnings yield of 8 – 12%, a dividend yield of 3- 5%, and literally no debt, despite some of the lowest bond yields in half a century. This situation could only come about if investors shopped for their bonds without also considering stocks. This makes about as much sense as shopping for a van without also considering a car or truck.

All investments are ultimately cash to cash operations. As such, they should be judged by a single measure: the discounted value of their future cash flows. For this reason, a top down approach to investing is nonsensical. Starting your search by first deciding upon the form of security or the industry is like a general manager deciding upon a left handed or right handed pitcher before evaluating each individual player.

In both cases, the choice is not merely hasty; it’s false. Even if pitching left handed is inherently more effective, the general manager is not comparing apples and oranges; he’s comparing pitchers. Whatever inherent advantage or disadvantage exists in a pitcher’s handedness can be reduced to an ultimate value (e.g., run value).

For this reason, a pitcher’s handedness is merely one factor (among many) to be considered, not a binding choice to be made. The same is true of the form of security. It is neither more necessary nor more logical for an investor to prefer all bonds over all stocks (or all retailers over all banks) than it is for a general manager to prefer all lefties over all righties.

You needn’t determine whether stocks or bonds are attractive; you need only determine whether a particular stock or bond is attractive. Likewise, you needn’t determine whether ‘the market’ is undervalued or overvalued; you need only determine that a particular stock is undervalued. If you’re convinced it is, buy it – the market be damned!

Clearly, the most prudent approach to investing is to evaluate each individual security in relation to all others, and only to consider the form of security insofar as it affects each individual evaluation. A top down approach to investing is an unnecessary hindrance. Some very smart investors have imposed it upon themselves and overcome it; but, there is no need for you to do the same.

About The Author – Geoff Gannon writes a daily value investing blog and produces a twice weekly (half hour) value investing podcast at www.gannononinvesting.com.

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SSS to stay out of stock market for now

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How to Research Individual

Stocks There are good research resources available to the individual investor, many at your local library. In addition, if you hire a full-service broker, you can indirectly avail yourself of his or her research department.

In our opinion, the two most basic, cost-effective, and objective research tools are the Value Line Investment Survey and Standard & Poor’s Stock Guides. Both may be available at your local library.

The Invaluable Value Line

The basic Value Line service covers approximately 1,700 stocks. For each stock, Value Line provides two rankings: timeliness and safety. Of the two, pay particular attention to safety. Stocks are ranked on a 1-5 basis, with 1 being the safest. Don’t consider any stock with less than a 2 rating.

Value Line also provides scores for four other key indicators:

Financial strength
Stock price stability
Stock price growth persistence
Earnings predictability

In addition to the rankings and key indicators cited here, Value Line includes a great deal of relevant statistical and narrative information. Value Line reports are updated regularly. The individual company write-ups will take some getting used to, but after a while, you will find that you can easily determine a company’s earnings growth rate and the consistency of that growth rate.

Use Value Line to help you select at least 25 stocks that:

Are safe or very safe (that means a ranking of 1 or 2)
Are growing at an above-average rate
Are growing consistently and steadily

What does "above average" mean? We suggest you look for a minimum of 8 percent and, ideally, 10 percent growth. And keep an eye on consistency. For a 10 percent grower, 10 percent a year is perfect but rarely achieved. A range of 8-12 percent is consistent. From 6-14 percent is acceptable. But if the company’s earnings swing between 0 percent and 30 percent, for example, it’s too volatile to be in your portfolio unless you know exactly what you’re doing.

S&P Stock Guides

Standard & Poor’s Stock Guides (Bond Guides are also available) are an excellent research tool. The guides come out monthly and cover over 6,000 stocks, 700 mutual funds, 600 closed-end funds, and 800 preferred stock issues.

Newspapers

Finally, two newspapers, Investors Business Daily and The Wall Street Journal, do an excellent job of tracking the stock market and individual stocks. Either may be available at your local library.

If you simply must follow the market during the day, both CNBC and Bloomberg Information TV do a good job of keeping you current.

For a nightly wrap-up, check out PBS’s Nightly Business Report.

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NEW YORK (MarketWatch) — US stocks remained entrenched in losses early Thursday after data showing the sale of new homes fell to the lowest monthly level on record.

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Wall Street has turned cautious as weak profit reports and record unemployment claims offer the latest evidence of the economy’s struggles.

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The trick to finding the best penny stocks!

One of the hottest ways to make money in the stock market is taking a chance with what is known as "penny stocks" – shares that have incredibly low prices in the hopes that they jump up.

There’s the potential to make some huge dollars so let’s have a look at what makes the best penny stocks.

Obviously there’s a risk to investing in these stocks. The companies behind them aren’t "in the big times" yet and run the risk of going under. The best penny stocks, for obvious reasons, are ones that have been properly researched.

Choosing penny stocks in a reasonable fashion means having the business model of the company selling them independently appraised. This is like buying shares in any other company that’s being publicly traded. It’s important to understand the company’s business model, what they’re doing, who’s competing with them, what they make and what products are being offered.

The thing that makes penny stocks so appealing is that most businesses offering them are actually extremely simple. One typical example of a penny stock company is that of a mining company that profits only when the price of the material it extracts reaches a certain number. There are also a few oil exploration stocks that are valued in this way. The best penny stocks in terms of performance seem to be the ones that react to the price of an external commodity.

Penny stocks are rated as a high risk vehicle by the Securities and Exchange commission. Some of the risks you’ll encounter when dealing with these stocks include incomplete and indirect financial reporting, limited liquidity and even complete fraud. People who are playing with a day trading strategy will find that sudden demands for penny stock creates enormous volatility. Penny stocks are hard to short sell for this reason.

The financial reporting guidelines on the best penny stocks are actually pretty loose. Unlike the national exchanges, not much is required of companies that list this way – in fact, sometimes these stocks will just de list for a few days! In the investment type called Pink Sheets, penny stocks have nearly no regulatory requirements at all, including few to no minimum accounting standards or reporting guidelines.

Because these stocks aren’t standardized and don’t have an generally accepted requirements for accounting, they can be extremely vulnerable to being manipulated or even just plain fraud. People posing as independent observers can encourage people to run up the price, then they sell and de list the stock. This is the classic pump and dump scam.

Of course, that doesn’t mean you should never invest in penny stocks. There are lots of real, legitimate startup companies out there, and they need to have a good place to get up and running. If you’re able to pick a winner, you’ll get an impressive return.

If you’re able to find a company with lots of promise, you could get an enormous payday. The best penny stocks will land you a massive gain on your money! Even if you lose four out of five of your picks, the single winner you get will give you enough to forget about the other losses.

Bank Stocks Lead Wall Street RallyFor one day, at least, battered bank stocks actually helped the markets. Reports that the government was considering a deal to set up a “bad bank” to absorb toxic assets ignited a broad rally on Wednesday.

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Learn to Invest Money in Small Cap Stocks and Make Triple Digit Profits

Ever hear of no risk, no reward? Well, buying riskier small cap stocks that could return triple digit gains doesn’t have to be a risky proposition.

In the articles of this small and micro cap series, the first four rules focused on buying strategies. In this last article, the last and fifth rule will cover selling strategies.

Rule Number Five: Remove emotions from your decisions with disciplined selling strategies.

So now that we’ve covered how to buy in to such stocks, let’s review selling strategies because they are just as important. With selling, always limit your downside with stop losses of 10%-15% in long positions and stop losses of 25% with options. Using this strategy eliminates much of the risk from attempting to capitalize on double digit and triple digit gains. In fact, once you become good at identifying opportunities, having winning pick percentages of 70%-85% would not be unusual. And if you attain these percentages, the 15% of picks you lose several hundred dollars in becomes irrelevant when offset by your huge gains. In reviewing what to do about gains, just abide by one rule.

Don’t get greedy and always lock in gains.

If you don’t get greedy, there is no way you should not make money from a stock that has experienced explosive growth. But this scenario does happen. And only one thing causes this to happen. Greed. People will watch 100% profits turn into 20% losses because of greed.

Just as you did with your buy in price, have a predetermined selling price. As opposed to the buy in price range, I would choose a more specific price. For example, let’s consider stock YYY again and assume you bought the stock for $3 a share. Say you set your goal at $5 a share, a 67% increase, but that it blows right through that price two weeks later.

Now what do you do? Hold on or sell?

With sell strategies of rapidly rising stocks, the picture becomes slightly murkier than with sell strategies of stocks that are falling. When a stock passes through your 15% stop loss order (see part I of this article), it will sell automatically, no questions asked, with all emotions removed from that decision. But what do you do when the stock is shooting skyward with seemingly unlimited upside? It depends on what’s driving the price up. If pure speculation is the only thing driving the price, sell half your position and then put trailing stop losses of 20% on the remaining half. In other words, now that stock YYY has risen to $5 a share from my original buy-in price of $3 a share, I sell half my position, and my stop loss price on the remaining half has now moved up to $4.25 a share. This way I’ve locked in my predetermined 67% gain on half of my position of YYY and the least amount of profit I can make on the remaining half is 42%.

Now if earnings and sales are driving the price up, I may take another strategy. Instead of selling half of my position in YYY, I’ll hold onto my entire position, but again institute a trailing stop loss of 20%, moving my stop loss price-point up to $4.25. This is riskier than the first strategy, but the important thing to note is that I am still locking in gains. In this scenario, I still guarantee myself a 42% gain no matter what happens with the stock from here on out.

The key, and I can’t emphasize this enough, is to always take gains off the table or to lock them in with trailing stops. By doing this, you remove your emotions from your decisions. Formulate a disciplined sell strategy and you’ll make a lot more money than you would by trying to forecast the direction of the small and micro-cap stocks you invest in. Plus you’ll save a lot of money on the psychiatrist you won’t have to hire due to all the unnecessary stress you would have caused yourself by not employing these strategies.

So to summarize, always limit your downside and lock in gains with stop loss orders when investing in small and micro cap stocks and you can invest in stocks with enormous potential without the stress associated with the enormous risk of some of these stocks.

About The Author

John Kim is the founder of Global Market Opportunities. He has over thirteen years of experience in finance and financial services, and has earned a BA in Neurobiology from the University of Pennsylvania, a Master in Public Affairs from the University of Texas at Austin, and an MBA with a concentration in finance from the McCombs Business School, University of Texas at Austin. To learn how to discover small and micro cap stocks that consistently and significantly beat the market indices, click http://www.globalmarket-opps.org

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