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Last Post: 5/4/2015 4:05:01 PM - Followers: 217 - Board type: Free - Posts Today: 9

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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
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#13203   $AMZG That was a Sweet Last Hour. Huge PENNYBUSTER 05/04/15 04:05:01 PM
#13202   One under-$10 basic materials player that's starting to PENNYBUSTER 05/04/15 02:53:34 PM
#13201   $AMZG Chart and Analysis. PENNYBUSTER 05/04/15 02:51:07 PM
#13200   $NTLK Moovin On This News. PENNYBUSTER 05/04/15 02:42:45 PM
#13199   NXTD Filings and Disclosures Cabroncita 05/04/15 01:57:32 PM
#13198   I'm grabbing more $AMZG Today. Im getting filled PENNYBUSTER 05/04/15 01:39:54 PM
#13197   $NXTD Latest news ( NYC Trader 05/04/15 01:21:59 PM
#13195   $ADMD UNITED STATES PENNYBUSTER 05/04/15 07:40:08 AM
#13194   $TALC Another Tiny SS Trip Zero At .0009. PENNYBUSTER 05/03/15 12:14:17 PM
#13193   $CYBA .0099 x .03 The Smallest Market Cap PENNYBUSTER 05/03/15 12:11:08 PM
#13192   Take a Look At $GBHL .0015 x .003 PENNYBUSTER 05/03/15 12:09:18 PM
#13191   Nice Post. Tweeted! PENNYBUSTER 05/03/15 12:04:54 PM
#13190   Investors seem to trade it on oil price, ChrisTianSurfer 05/03/15 10:10:41 AM
#13189   Looks like you found a winner. I missed PENNYBUSTER 05/03/15 09:56:24 AM
#13188   I especially liked the last sentence here==> Cash ChrisTianSurfer 05/03/15 09:54:19 AM
#13187   Very Nice CST Profire Energy Reports Financial Results PENNYBUSTER 05/03/15 09:51:25 AM
#13186   PFIE 1.65 PPS read entirely ==> ChrisTianSurfer 05/03/15 08:10:39 AM
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#13179   $RBEIF recent news/filings PENNYBUSTER 05/02/15 01:49:28 PM
#13178   $CYBA .0099 This is The Lowest Market Cap PENNYBUSTER 05/01/15 08:03:24 PM
#13177   Looking for that dollar candle mondee :) ChrisTianSurfer 05/01/15 06:04:56 PM
#13176   $HERO Rollin Rollin Rollin... It Could Break Into PENNYBUSTER 05/01/15 06:00:51 PM
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#13173   GPSI IS A LOW FLOAT, 100 MILLION A/S eleniak 05/01/15 10:11:13 AM
#13172   $XCLK UPDATE on its way! valleyrabbit 05/01/15 12:52:14 AM
#13171   Triple Zero's have been flying lately. I found PENNYBUSTER 04/30/15 05:15:59 PM
#13170   Great DD surf. Tweeted.. Thanks!! PENNYBUSTER 04/30/15 04:59:14 PM
#13169   CYIO IS A LOW FLOAT, 100 MILLION A/S surfkast 04/30/15 04:47:05 PM
#13168   $HERO Looks On It's Way Back Up Here. PENNYBUSTER 04/30/15 04:45:09 PM
#13167   4 Our Newsletter Members. Here is a Great PENNYBUSTER 04/30/15 04:43:39 PM
#13166   Thanks 4 posting here surfcast. $CYIO is on Radar! PENNYBUSTER 04/30/15 04:42:28 PM
#13165   Given the heads up to radar this board. surfkast 04/30/15 04:36:48 PM
#13164   HERO lookin good bro.. ChrisTianSurfer 04/30/15 04:32:09 PM
#13163   Hey surf, what's up brother... ChrisTianSurfer 04/30/15 04:30:17 PM
#13162   $STOY has concluded a funding of approximately $750,000 NYC Trader 04/30/15 02:21:57 PM
#13161   BREAKING SUPER HOT FIND Co-Signer Breaking Update Find…  New Articles valleyrabbit 04/30/15 01:32:04 PM
#13160   $GMNI Basic Tech. Analysis ( NYC Trader 04/30/15 10:59:49 AM
#13159   Authorized shares! surfkast 04/30/15 10:03:27 AM
#13158   news reaction watch $CYIO,$HERO,$XCLK, $MMMW carlcarlos 04/30/15 07:05:32 AM
#13157   Great $MMMW summary, PENNYBUSTER. (Thanks). carlcarlos 04/30/15 07:03:15 AM
#13156   u bet.. PENNYBUSTER 04/29/15 11:34:04 PM
#13155   $XCLK Good info! Thanks for posting valleyrabbit 04/29/15 11:11:41 PM
#13154   $MMMW recent news/filings PENNYBUSTER 04/29/15 10:19:36 PM
#13153   $CYIO recent news/filings PENNYBUSTER 04/29/15 10:18:30 PM