Wednesday, December 17, 2014

Why Its So Important To Have A Clear Understanding Of All The Different Types Of Penny Stocks'


                                

This is the most common problem with the term penny stock. The definition can be used in a very broad way. Investors in penny stocks and low single digit stocks should keep this in mind all the time. If we are talking about stocks that trade below 1 dollar. We are most likely referring to stocks that trade on the pink sheets or the over the counter bulletin board. Although their are stocks that trade on the nasdaq that trade under 1 dollar for the most part penny stocks that stocks below 1 dollar are going to trade on the pink sheets or the over the counter bulletin board. The quality of penny stocks trading on the pink sheets and the over the counter bulletin board is usually terrible the reason is usually because these stocks do not meet the rigid listing requirements to listed on the nasdaq or the new york stock exchange. As I  have said in a previous post the lower the price of a stock the higher the risk. The ideal penny stock or low single digit stock would be a company that has earnings growing sales on a annual basis the company has clearly established its products or services in the market place the company has been in business for a very long time say 20 years or longer What you  really want to look for in a penny stock or low single digit stock is a company that looks more like a 20 or 30 dollar stock trading on the new york stock exchange than like a 2 dollar stock. Getting back to penny stocks that trade on the pink sheets or the over the counter bulletin board. Many of the companies of these stocks are developmental stage companies they have limted sales  narrow product lines they usually  have a very high failure rate. They have not been in business very long in many cases less than 5 years in many cases. Their products or services have not been around for that long they clearly have not been well established in the market place. Would you rather invest your money in  the company of a 2 dollar stock that has  been selling their products in walgreens stores for over 20 years or in a 2 dollar stock of a  young unestablished company that is in the process of introducing their products to a walgreens purchasing manager. A product or service that has not withstood the test of time is almost always high risk.. One other thing to keep in mind when venturing into stocks trading on the pink shhets or the over the counter bulletin board. Because the companies of stocks trading on the pink sheets and  the over the counter bulletin board are so poorly regulated this is great territory for pump and dumpsters and fraudsters alike. On rare occasions theirs an exception to the rule when the stock of a company trading on the pink sheets or the over the counter bulliten board can be a good investment but very seldom.





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Saturday, November 15, 2014

Why Its Important To Use Limit Orders When Buying Penny Stocks Or Low Single Digit Stocks That Have Very Low Volume



If you are considering buying shares in a  penny stocks or low single digit stock understand that penny stocks or low single digit stocks can have very low volume. Volume is the total amount of shares bought and sold on any given day. Very often penny stocks or low single digit stocks do not even trade everyday. The reason some of these companies are very small and unknown companies their not followed or covered by any major investment research firms theirs little news about these companies in the financial news because of their small size. Thats why its always a good idea to place limit orders on  stocks with little or no volume. Because the supply of shares available for sale  my be very small even a modest increase in the demand for the shares could easily push up the price of the stock by a considerable amount. When you place a market order you are willing to accept  the bid offered you have absolutely no control over the price you pay for your shares. But when you place a limit order on a stock you can specify the price you are willing to pay for your shares. Example suppose theirs a stock that you are considering buying it trades for 1 dollar a share so you place a limit order at 1 dollar your order for those shares will only be executed when the bid reaches 1 dollar this way you will know that you will pay no more than 1 dollar for your shares. Never place a market order for a stock with very low volume after the close because you have no idea what price the stock will open at a 50 cent stock could close at 50 cents and open at 75 cents. The spreads between the bid and the ask price can be hugh on stocks trading below 1 dollar. The bid is the price that you are buying a stock at the ask is the price the seller is selling their shares for. Penny stocks stocks under 1 dollar always have hugh spreads spread is the term used to define the difference between what the buyer is buying the stock for and what the seller is selling the stock for. The one disadvantage of a limit order is theirs no guarantee that your order will be executed at the price you have choosen. limit orders can take time to execute particularly if theirs little or no volume in the shares of the stock your trying to buy. To learn more about the differences between market and limit orders ask a stock broker.


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Wednesday, November 12, 2014

Why Its A good Idea To Avoid Most Stocks That Trade Below 1 Dollar


I really want to make this clear to everyone reading this blog. Always keep in mind the lower the price of the stock the higher the risk. I cannot stress this anymore. I know it sounds a little strange when you think of the term penny stock you think of a stock trading for ten cents twentyfive cents a share. But the broad definition of the term penny stock can include any stock trading below 5 dollars a share. I know that I have been referring to penny stocks as stocks trading below 1 dollar and low single digit stocks as stocks that trade between 1 dollar and 5 just to avoid any confusion. Most of the  low single digit stocks worth buying trade on nasdaq or the new york stock exchange and they trade above 1 dollar all stocks listed on the new york stock exchange must maintain a share price of at least 1 dollar otherwise they will be delisted Once in a very great while some sub 1 dollar stock will be a attractive investment even if the stock trades on the pink sheets or the over the counter bulletin board. But very seldom. Generally speaking the vast majority of attractive stocks trade over 1 dollar. Again. because I do not want to rule out all stocks trading below 1 dollar. I will say it again once in a very great while theirs an exception to the rule a stock that trades below 1 dollar could be an attractive investment even if it trades on the pink sheets or the over the counter bulletin board. I do not want to scare anyone  Its just that so many of these sub 1 dollar stocks are of such poor quality it takes a real pro to spot a junk stock from a diamond in the ruff. Many of these sub 1 dollar stocks that trade on the pink sheets or the over the counter bulletin board do not have financial statements that are up to date unlike most stocks trading on nasdaq or the new york stock exchange. These pink sheet stocks or the over the counter bulletin board  stocks can easily be manipulated. This is great territory for fraudsters pump and dumpsters unscrupulous stock promoters scam artists and the like these markets are not regulated like the nasdaq or the new york stock exchange.  Remember most of the quality sub 5 dollar stocks trade between 1 dollar and 5 on nasdaq or the new york stock exchange. So many of the really spectacular performers over the years have been stocks that traded between  1 dollar and 5 dollars a few examples apple yes apple traded at just 3.60 back in 1998 petsmart traded for just 2 dollars in 2000 and netflix traded for 4.00 in 2002 believe it or not today netflix is a 400 dollar stock apple was around 500 just a few months ago before the company split its stock five for one I think it was and petsmart trades for 72 or so. You will always find more great investment candidates between 1 dollar and 5 than under 1 dollar.




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Tuesday, November 4, 2014

Why So Many Of The Best Performing Penny Stocks And Low Single Digit Stocks Tend To Be Companies That Have A Product Or Service That Consumers Really Need.


Now here is something that I like to stress to investors of penny stocks and low single digit stocks. I always prefer investing in the stock of companies that sell a product or service that consumers really need food  companies companies in the healthcare sector come to mind first. A great example of another type of business that has products or services that are always in demand are companies in the pet supply business. Who would not take their cat or dog to the vet if it was sick who would not buy flea and tick medications if their dog or cat had fleas or ticks.What about companies that do car repairs.Cleaning product companies are another great example. A company in the Greeting card business another business would be the janitorial business. A company that makes filters for residential or commercial use another  Companies that make a product or service thats always in demand  have a more predictable earnings and sales cycle than companies that sell a product thats non essential


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Why Avoiding Penny Stocks Or Low Single Digit Stocks That Have A Long History Of Large Loses Is Such A Good Idea


Now here is one excellent piece of advice for investors  investing in penny stocks and low single digit stocks. Watch out for companies that have reported very large losses quarter after quarter this is usually a very bad sign.check out the news releasees on the company on yahoo finance  or google finance. If a company is losing huge amounts of money quarter after  quarter theirs bound to be major turmoil at the company. If the news release reads like this jmp reports a huge loss in forth quarter on sharply declining same store sales. jmp plans a major restructuring closing up to ten percent of their stores. jmp also plans on closing two distribution centers will take major charge in first quarter. jmp is out of compliance with listing requirements on the new york stock exchange. Chief financial officer resigns. jmp is out of compliance with loan covenants on revolving line of credit with  z bank. jmp attempting loan modifications to come back into compliance with loan covenant violations with z bank so far unsuccessful. z bank reduces loan available on revolving line of credit with jmp . from fifty million to twentyfive million dollars. jmp stock plunges from 2 dollars to 1 dollar  after Standard and poors downgrades jmp credit rating on ten years notes from B- to -C. jmp suspends dividend.. {jmp exploring strategic alternatives}This could mean the company is planning to file bankruptcy or selling the company if  it can find a buyer. Not a pretty picture As you can see from reading the news releases on the company their in very serious trouble to say the least. You can get the feeling that this company could go out of business or file bankruptcy. Always read the news releases on a company you plan on buying stock in before you buy the stock. Do not be alarmed if theirs some negative news releases on a stock most stocks trading below 5 dollars or under 1 dollar will have some negative news releases from time to time what your really looking for or really want to watch out for are signs that the company is in very serious trouble.


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Sunday, November 2, 2014

Why Having A Diversfied Portfolio Of Penny Stocks Or Low Single Digit Stocks Is So Important


Now please heed this word of advice when investing in penny stocks and  low single digit stocks. Never put all of your money in a single stock never Regardless of how great the propects appear for the company that your investing in. This is the worst possible thing a investor in penny stocks or low single digit stocks could ever do. If you are placing all of your money in one stock and that stock goes to zero you will have zero money left. Its not necessary to put all of your money in a single stock theirs many stocks with good prospects The problem is you can never be sure what stock will perform very well and what stock will perform very poorly that why its so important to own a fairly good number of stocks  The best advice is to own at a minimum  20 stocks  Try not to have more than four stocks in the same sector. Diversification  is especially important when investing in penny stocks or low single digit stocks. Stocks trading below a dollar are almost always very risky. Stocks trading between 1 dollar and five dollars also can be very risky. The risk profile for penny stocks and low single digit stocks is much higher than the typical twenty or thirty dollar stock. Thats why. Diversification  is so very important when investing in penny stocks and low single digit stocks. By investing in different types of companies and different sectors you will not be placing all of your money on one horse. If one company or sector fails to perform well another my perform very well different companies and sectors move in different cycles whats hot today may not be hot tomorrow.



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Why Its Better To Favor A Penny Stocks Or Low Single Digit Stock That's In The Food Or Healthcare Industry.


Now here is a great suggestion for those considering purchasing shares in a penny stock or low single digit stock. Stocks in the food or healthcare sector I am not referring to biotech stocks by the way generally have a lower risk profile simply because the demand for what they are selling does not fluctuate as much as say the products  a building supply company sells. The demand for lumber drywall my decline sharply in bad economic times. The the demand for food and healthcare services will most likely increase year over year regardless of what the economic conditions are like..I prefer investing in a company that has a product or service thats going to be in real demand regardless of what the economic conditions are like. Thats why I favor food and healthcare over other sectors. The less a company is effected by economic conditions the better



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