Best Penny Stock – How To Find The Top Penny Stocks Consistently
Despite being on many investors’ radar for many years now, there appears to be no general definition of penny stocks. Thus, when you ask about the best penny stock, you will most often be provided with many answers that pertain to the many definitions of the term itself.
Just consider this fact of life as a penny stock investor: You have to deal with three – yes, three – definitions of penny stock depending on whom you are talking to about the matter. Take a look at these definitions:
* Price per share – According to the Securities and Exchange Commission, any stock that trades for less than $5 per share is considered as penny stock. However, it must be noted that issuing organizations themselves as well as the individual investors will have different cut-off amounts.
* Market capitalization – This term refers to the total trading value of the issuing company, which is computed by multiplying the total number of outstanding stocks with the value of each share.
* Market where stock trades on – Stocks that trade in the OTC-BB, American Stock Exchange and the Pink Sheets
Lest you think that even the best penny stock will not hold up to the worst blue-chip stock in the market, think again. You will be able to find many of the most followed companies in the world with their shares being considered as penny stocks at one time or another. We can mention Sun Microsystems, Sprint Nextel and even the Ford Motor Company.
The most important thing in choosing penny stocks as investments also applies to choosing stocks being traded on, say, the New York Stock Exchange. We are, of course, talking about doing your research, research and more research before actually plunking your money on a certain company’s shares. In this line, we can recommend three steps in the analysis of the penny stocks being presented for your consideration as an investor.
* Find the most desirable target based on primary and secondary parameters. The parameters must include increasing revenues and earnings; competitive advantages; low debt levels; improving financial ratios; market and industry risks; legal actions; and changes in management. In short, you want to weed out as many of the dubious companies as possible and just leave those that show promise.
* Apply the techniques of fundamental analysis. Basically, you will be evaluating the strengths and weaknesses of each company in relation to its potential.
* Apply the tools of technical analysis. Your math skills will come in handy as this is the part where computations will be made as to the best prices to buy or sell the penny stocks under consideration.
Indeed, locating the best penny stock takes time and effort to achieve but the rewards should be well worth it in the end. Also, you have to do your research because penny stocks can be very volatile to the point of being high-risk investments but the high rewards should offset said risks. So, scan the papers and stock exchanges, ask fellow investors, and inquire from your broker about penny stocks today and reap the significant benefits soon enough.