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Penny Stocks: The Hype Vs Reality

January 29th, 2009

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.

anglo irish bank stocks 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
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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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3 Stocks for Beginners

January 22nd, 2009

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.

i need a list of symbols that represent stocks 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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