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Last Post: 4/24/2015 3:39:37 PM - Followers: 215 - Board type: Free - Posts Today: 0

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Penny Stock Investing
The Nature of Penny Stocks

For anyone new to investing in penny stocks, you should first be made aware of the differences between these micro-cap stocks and the more conventional blue-chip and mid-cap investments. 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 for as much as a couple of 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 wealthy.

With penny stocks, also called micro-caps or juniors, you will see much greater price volatility, and thus greater and quicker gains and losses in asset values. It is precisely this volatility which draws investors to the junior markets, as one good pick could make you 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 gains.

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. Many of the companies have large debt loads and are not necessarily making more money than they are losing.

However, it is the potential of a major, or even minor success in their quest that often incites dramatic price climbs, and this is where their value lies.

Profit Potential

Modern Strategies Inc. has been in the business of researching penny stocks for many years, and has become effective at uncovering the best small cap investment opportunities and the most rewarding profit situations in the penny stock markets.

There are several ways to profit from penny stock investments. Modern Strategies Inc. has uncovered the most highly rewarding investment situations.

Promotional Stocks - These issues may or may not have much actual value. Promoters generate interest in these type of stocks in an attempt to drive share prices higher. The promoters own great amounts of shares and so they make more money the higher the share price travels. Eventually, they sell their holdings into 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 type of stock investor hear horror stories about, because many people often lose a good deal of money when they are naive about promotional ploys. However, getting in on a promotional stock early in its life cycle, and keeping 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 get the share prices of the stocks you own to go through the roof, and investors who get in early can go along for the ride!

Technical Precursors - Often technical analysis can reveal patterns in the trading cycles of penny stocks. Sometimes these patterns illustrate excellent buying opportunities, where the underlying stock has a high probability of moving up strongly, and only a low probability of declining in value.

In addition, there are sometimes situations where several positive technical indicators combine at once to reveal that an issue is very likely to increase strongly in price over a short time frame, indicating that the particular issue is has excellent investment potential.

Fundamental Strength - Fundamentals involve such criteria as earnings, debt load, assets, and many others. It was long thought that earnings were the major 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 should get involved with the companies that are making the most money, have the most effective management, and have improving trends in all factors of their operations. As well, industry comparisons and the examination of key financial ratios present clues as to which companies are destined for higher share prices.

Proper fundamental analysis of penny stock companies will generally reveal that there are about 2 or 3 superior investment opportunities out of every 100 companies examined. 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 in price has very little to do with the underlying fundamentals, and more to do with factors such as overall market weakness, interest rate increases, or others.

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 their share price, or have 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 to any significant degree.

These type of investments are excellent choices for penny stock investors that are less risk adverse.

Special Notes About Penny Stock Companies

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

For example, if you owned 5000 shares of EXO and for every 5 shares you were to receive 2 shares of LOR, you would find your account holdings re-adjusted to reflect 2000 LOR which can be traded as normal. You will no longer have the 5000 EXO.

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


#12372  Sticky Note I would like to invite you to our PENNYBUSTER 11/26/14 08:52:44 AM
#11686  Sticky Note Unusual Volume and Important News And Filings. Sign PENNYBUSTER 02/18/14 04:35:07 AM
#11398  Sticky Note 2 Newsletters.. 2 Ways To Hit It Big.. PENNYBUSTER 08/08/13 04:35:03 PM
#9925  Sticky Note Twitter Account!/PENNYBUSTER1 PENNYBUSTER 12/30/11 07:06:04 AM
#13089   $IHSI Email Response. PENNYBUSTER 04/24/15 03:39:37 PM
#13088   In $UGAZ 1.91 PENNYBUSTER 04/24/15 02:27:46 PM
#13087   $WOLV David Chalk keynote intro Cabroncita 04/24/15 12:16:28 PM
#13086   $ANY 4.20 Possible Squeeze Starting. On Watch. PENNYBUSTER 04/24/15 11:42:01 AM
#13085   Reasons to invest in CYBG NYC Trader 04/24/15 10:07:04 AM
#13084   $CYBG BarChart Technical Analysis NYC Trader 04/24/15 08:27:16 AM
#13083   Good Nite CS! PENNYBUSTER 04/23/15 10:54:18 PM
#13082   Great list... Ima crash bro.. Peace ChrisTianSurfer 04/23/15 09:51:30 PM
#13081   Great #s, yoy growth, profitable, 5.1 p/e==> industry ChrisTianSurfer 04/23/15 09:48:50 PM
#13080   Ive had good luck with that one. Timing PENNYBUSTER 04/23/15 09:47:37 PM
#13079   EOX just sold some shares, dipped pretty hard ChrisTianSurfer 04/23/15 09:45:22 PM
#13078   Will do. I'll put it on scan. Thanks.. PENNYBUSTER 04/23/15 09:42:34 PM
#13077   Yes. all the oil plays, well many anyways PENNYBUSTER 04/23/15 09:42:03 PM
#13076   Check out HTM.. ChrisTianSurfer 04/23/15 09:41:02 PM
#13075   Great company, bad timing.. They brought in a ChrisTianSurfer 04/23/15 09:35:36 PM
#13074   Find us Another Big Board Out There. Im PENNYBUSTER 04/23/15 09:34:29 PM
#13073   MPO VTG EOX SD RIG big board oil ChrisTianSurfer 04/23/15 09:33:06 PM
#13072   Ive been bidding more $VTG At .35. Not PENNYBUSTER 04/23/15 09:32:55 PM
#13071   Oil popping to.. Advantage Vantage ;) ChrisTianSurfer 04/23/15 09:29:57 PM
#13070   Sold sprint a bit ago when it jumped ChrisTianSurfer 04/23/15 09:28:36 PM
#13069   Thats Awesome CS It's nice to see some PENNYBUSTER 04/23/15 09:25:37 PM
#13068   Yep, been holding since then, sold today over ChrisTianSurfer 04/23/15 09:24:34 PM
#13067   $RAD At .99 Now Thats Cheap Shares. That PENNYBUSTER 04/23/15 09:22:18 PM
#13066   Remember this? ChrisTianSurfer 04/23/15 05:15:48 PM
#13065   AMD 2.23.. Grabbed 1k here.. Techs going thru ChrisTianSurfer 04/23/15 04:37:44 PM
#13064   $CNCT (OTCQB) Locates Needle in Hay Stack with NYC Trader 04/23/15 12:46:27 PM
#13062   ENGLEWOOD, Colo.--(BUSINESS WIRE)-- NYC Trader 04/23/15 09:17:04 AM
#13061   $VTG recent news/filings PENNYBUSTER 04/22/15 07:17:17 PM
#13060   $GBGM recent news/filings PENNYBUSTER 04/22/15 07:11:18 PM
#13059   $GBGM .0001 x .0002 PENNYBUSTER 04/22/15 01:17:54 PM
#13057   $ALGA only two mm's left to a HOD NYC Trader 04/22/15 12:58:06 PM
#13056   Yep, they have some crazy rich land in ChrisTianSurfer 04/22/15 12:40:47 PM
#13055   Boardmarked Thanks CS!! PENNYBUSTER 04/22/15 12:38:46 PM
#13054   Looking at GSS on the dip too.. ChrisTianSurfer 04/22/15 12:14:05 PM
#13053   Watching it close bro, just broke .39.. ChrisTianSurfer 04/22/15 11:57:41 AM
#13052   $TVIX Acting up a little here this morning. PENNYBUSTER 04/22/15 10:16:24 AM
#13051   $UGAZ Has a Little Spunk this morning. PENNYBUSTER 04/22/15 09:41:55 AM
#13050   $CYBG OTC Market Place: OTCQB NYC Trader 04/22/15 09:32:53 AM
#13049   I may grab a few more $VTG if PENNYBUSTER 04/22/15 09:21:31 AM
#13048   $GBGM .0002 x .0003 Heated Up Quickly Today PENNYBUSTER 04/21/15 07:52:03 PM
#13047   $IFAN Updated Traders Cheat Sheet NYC Trader 04/21/15 12:01:54 PM
#13046   $BYSD News Reduces 67% its Issued & Outstanding Shares PENNYBUSTER 04/21/15 11:10:03 AM
#13045   $CYBG Cybergy Holdings, In (CYBG) NYC Trader 04/21/15 10:43:44 AM
#13044   $BRGO ~ Branded product lines are products and/or Penny Roger$ 04/21/15 10:42:23 AM
#13043   $IFAN 0.186 x 0.187 ETRF top bidder now NYC Trader 04/21/15 10:35:29 AM
#13042   $BYSD ANTHEM...... PENNYBUSTER 04/21/15 10:23:01 AM
#13041   $ACOL Historical Prices ( Cabroncita 04/21/15 09:19:56 AM
#13040   $CYBG Basic Tech. Analysis ( NYC Trader 04/21/15 07:47:08 AM
#13038   Thanks carlcarlos :) PENNYBUSTER 04/20/15 07:25:09 PM
#13037   $BYSD announces revenue; $MMMW anticipates profits carlcarlos 04/20/15 07:24:28 PM