How to locate and invest in penney tocks?

Question

How to locate and invest in penney tocks?

Answer 1

To start, the definition of a "penny stock" these days is anything under $5 a share, although not too long ago it was anything under $1.

I think you will find a little over 100 on the NYSE, but considering the standards of that exchange, it is pretty certain that they are so cheap because things have gone really wrong. Sure, if they come out of it, you could score really nicely.

There are about 270-ish on the AMEX, and over 3500 on NASDAQ. But the real penny stocks (and not all of these are penny stocks) are what are called Bulletin Board and Pink Sheets (not necessarily the same thing, although the terms are frequently used interchangeably in general discussion).

A nice thing about these super cheap stocks, you can make a killing when you find the right one at the right time. I could not believe that Nortel got as cheap as it did several years ago, but I got in when it started coming back up and made some nice money with it. I found a company that was making a then-novel approach to virus making when the bird flu was scaring people spitless. It is a wonderful thing to buy a few thousand shares of a dime stock and watch it climb to a couple of dollars where I cashed out.

But, and this is important, there are piles and piles of really risky stuff out there. There was this one that I put some money on (just my risk pool, not the bulk of my retirement funds) that gobbled up a big mass of mining claims in Alaska. The winters were apparently rough, so in a few years they were (just for the winter, of course) scouting out uranium deposits in Arizona. Well, they went and changed their name to show that they were now after uranium, not gold. Needless to say, that did NOT go over well with my value. Yet that worked better than when I invested in a company that sold Voice Over Internet Protocol (VOIP) systems to mid sized companies. I didn't look close enough to see that the real value of the company was in a couple of tiers of supershares, so when they sold out the VOIP business, I was elated -- until I looked at my portfolio values. They then sold out the remaining shell business, and suckers like me to some tin mine in Nevada, which did a deep reverse split. Those shares are now worth a total of 4 cents and are too cheap to sell (as in commission will cost more than their worth). Of course when I put some spare cash, that was just sitting there, into a little company that said they had some underwater manipulation machinery and were going to sell it to deep water drilling companies, I was confident that even if they sold out (I was hoping for an acquisition bid from a bigger fish in the oil business to buy them out), they sold it (their special technology) to pay some debts, so now they have part interest in a few dozen oil wells in Texas, and aren't sure they will be able to keep up their end of the expenses. This one is still worth a little over a dollar for the several hundred of them. Finally, although a couple more could be told, there was a company that had this snazzy interpretation technique for aircraft and satellite space images to help them spot mineralizations, which they then would find someone to buy the rights and dig. Well, I still have 111,000 shares, supposedly worth a whopping $11.10 of a company that hasn't filed any regulatory reports in a couple of years. They did find some mineralization--it was in Nevada where the tailings of gold mining past were left in evidence across the landscape of several counties. All they did was spot the mining wastes where someone already found and dug the minerals.

That said to say this, if you want to INVEST, find companies with value, but for the penny stocks, absolutely do not bet the farm, just use your spare change on account and limit it to one or two a year. Good luck.

Answer 2

As with any type of investment in the stock market, the best way to determine good stocks at any price point is to develop a trade plan.  You need to have a system in place that identifies what chart patterns you like as entry and exit signals.  What technical indicators will you use as confirmation of those chart patterns.  

A trade plan defines Where you Are, Where you want to be, and how you will get there.  So as you use sites like Yahoo Finance! or Google Finance to research your stocks or Stock Charts to look at the chart/price graphs for you stock, develop a checklist of items you deem important as a part of your trade plan.  This will help you to be able to repeat the process.