Penny Stock Investing

The nature of Penny Stocks 

For anyone new to investing in penny stocks, you should be made of the differences between these micro-cap stocks and the more conventional blue-chip and mid-cap investments. First conscious Unlike buying shares in a large, stable company like Ford or IBM, you are dealing with speculative investments.

Penny stocks literally trade for pennies per share, or as much as a few dollars. The beauty of penny stocks, of course, is that sometimes they 'grow up' and become mid-cap stocks, multiplying in value hundreds of times over and making many people very rich.

With penny stocks, also called micro-caps or juniors, you will see much greater price volatility and therefore a greater and faster gains and losses in the value of assets. It is precisely this volatility which draws investors to the junior markets, as a good choice you could make hundreds of times what you could ever make on the larger markets.

Of course, there is more risk than buying bonds, blue chips or defensive stocks - but this added risk is tempered with the possibility of making the big profits.

Most penny stocks, but not all, are resource or technology companies who initially sold shares in an effort to raise money for exploration or product development programs money. Many of the companies have large debt burden and are not necessarily more money than they lose.

However, it is the possibility of a large, or even lack of success in their quest that often dramatic feed rate increases and this is where the value is located.

Profit Potential

Modern Strategies Inc. owns http://www.pennystockinsider.com, is in the business of research penny stocks for many years, and is effective at uncovering the best small cap investment opportunities and the most rewarding profit situations in the penny stock market .

There are several ways to take advantage of penny stock investments. Modern Strategies Inc. has uncovered the most rewarding investment situations.

Promotional Stocks - These issues may or may not have much real value. To arouse interest for these types of promoters stocks in an effort to drive higher. Share prices The initiators have large equity stakes and so they make more money the higher the share price travels. Eventually, they sell their business in the promotion and generate great personal profit. Then they move on to the next project, leaving the original stock and all its investors behind. Without the work of the promoter, the promotional issue soon comes crashing down.

These are the kind of investor shares hear horror stories about, because many people often lose a good deal of money if they are naive about promotional ploys. However, getting in on a promotional stock early in its life, and keep an eye on the actions of the promoter can be very, very rewarding. It's like having a full time stock promoter doing everything in his power to the share prices of the stocks you own to go through to get the roof and investors who get in early you go along for the ride!

Technical Precursors - often technical analysis can reveal patterns in the cycles of penny stocks trading. Sometimes these patterns illustrate excellent buying opportunities, where the underlying stock has to move strongly, a great opportunity up and only a small chance of falling in value.

In addition, there are sometimes situations where several positive technical indicators combine to reveal that a problem is very likely to increase greatly in price, indicating that the specific problem is for a short time at once has excellent investment potential.

Fundamental Strength - Fundamentals involve criteria such as income, debt, assets, and many others. It was long thought that earnings were the main driving force behind share prices, but Modern Strategies Inc. has since disproved this theory as it applies to penny stock companies. Instead, uncovering the best medium to long term investment opportunities must be done through exhaustive analysis of company financial statements. Investors who get involved in the companies that make the most money should have to improve. Most effective management, and trends in all factors of their operations As well, industry comparisons and to present the research of key financial ratios clues about which companies are destined for higher share prices.

Good fundamental analysis of penny stock companies will generally show that there are about 2 or 3 superior investment opportunities on the 100 companies surveyed. These 2 or 3 excellent corporations often represent better investments than 90% of stocks on the large-cap markets like the NYSE.

Undervalued Situations - Sometimes companies see their share price slide dramatically. There are occasions where this decrease has very little to do with the underlying fundamentals, and to factors such as overall market weakness, interest rate increases, or others more.

Opportunity exists in such situations because the shares are often 'unfairly valued' and a return to more realistic prices is inevitable. There are often cases where companies have more cash on hand per share than the market price, or price to earnings ratios as low as 5.0. Although there is much more to uncovering the best undervalued situations, this is the basis behind the concept.

Minimized Downside - Often the combination of technical analysis and undervalued situations can reveal penny stock companies that have tremendous upside potential, and have a very low probability of declining in value significantly.

Such investments are excellent choices for penny stock investors that are less risk-averse.

Special notes about Penny Stock Companies

Penny stock companies change their names more often than other listed companies, and are also subject to more stock-swaps and consolidations. In each of these events, your shares in your account will be replaced with the appropriate stock will be delivered to you. Automatically by your broker and notice

For example, if you have 5000 shares of EXO owned and you get to two shares for every five shares of LOR, you would find your account holdings revised 2000 LOR which can be traded like to display normally. You will no longer have the 5000 EXO.

In rare cases, a penny stock company to be delisted. This means that the shares will no longer trade on the stock market, and if the company is not listed on another exchange or re-recorded at a future date, you may be subject to a loss of capital is equal to 100% of the total investment. However, this is a very rare event, and there are simple ways to protect discussed periodically. Modern Strategies Inc. publications yourself Delisting is a greater concern for investors who intend to establish a long-term use (several years) buy and hold strategy with penny stocks generally.

Peter Leeds, one of North America's leading Investment Coaches, is a self-made millionaire who made his fortune in the stock markets. He is also empowered thousands of people to do the same. His personal success and incredible ability to consistently pick money-making stocks has earned him a loyal following of successful investors and has generated a lot of attention from the financial world.