5 golden rules for penny stocks

Download 5 golden rules for Penny Stocks

Post on 21-Jul-2016

23 views

Category:

Documents

3 download

Embed Size (px)

DESCRIPTION

Document about penny stocks

TRANSCRIPT

  • FIVE GOLDEN RULES FOR INVESTING IN PENNY STOCKS

    SPEND ANY TIME AROUND BLUE-BLOODED WALL STREET TYPES AND I GUARANTEE YOU THIS: THEYLL NEVER SHARE A HOT TIP ON A PENNY STOCK A STOCK TRADING FOR UNDER $5.

    Why not? Well, consider the reasons from these high-level investorsMutual Fund Managers: Theyre prohibited from investing in stocks with such tiny prices. So they dont even bother researching them.

    Hedge Fund Managers: These high-flyers are simply too rich to own penny stocks. With billions in capital to throw around, they cant buy and sell penny stocks without radically influencing market prices.

    Sell-Side Analysts: They shun penny stocks, too. Even if they wrote an overhyped research report, theres just not enough investment banking business available to make it worth their time.

  • 3FIVE GOLDEN RULES FOR INVESTING IN PENNY STOCKS

    But in case you think I just cherry-picked a winning penny stock example, let me warn you penny stocks can tank just as easily, too. Just because a stock is cheap doesnt mean the only way is up. It could get even cheaper.

    With that in mind, you might think that its not worth investing in penny stocks.

    Wrong! Theres a fortune up for grabs. But if you dont want to get burned, its critical that you go about it in the right way. Heres how

    THE PROOF IS IN THE PROFITSIf youre skeptical about investing in penny stocks, consider ION Geophysical (IO): which provides seismic imaging for the oil and gas industry.

    I first recommended the stock to my WSD Insider subscribers at a bargain-basement price of $4 per share when Wall Street wouldnt dare pay it any attention. But we cashed out with profits of 151%.

    A gain like this makes penny stocks worth a closer look.

    But in case you think I just cherry-picked a winning penny stock example, let me warn you penny stocks can tank just as easily, too. Just because a stock is cheap doesnt mean the only way is up. It could get even cheaper.

    Thats exactly why I recommend that you adhere to the following five rules when investing in such a speculative corner of the market

    FIVE RULES FOR TRADING PENNY STOCKS

    RULE #1 Focus on Fundamentals: A cheap stock price is no reason to abandon sound financial analysis. In fact, its even more important that you conduct proper due diligence. Be picky when investing in penny stocks. Insist on buying companies with solid and improving fundamentals. That means looking for strong sales, profits, cash flow, margins and return on equity, with manageable debt.

  • 4FIVE GOLDEN RULES FOR INVESTING IN PENNY STOCKS

    RULE #2 Limit Your Investments to $1,000 or Less: By making small bets on penny stocks, you can limit your downside risk and rest easier, knowing that a total loss wont torpedo your entire portfolio. If you want to wager slightly more, thats up to you. But dont wager too much, or else youll undermine any efforts to reduce your risk.

    RULE #3 Cut Your Losers Quickly: When it comes to penny stocks, buy and hope is not an investment strategy. Were after fast gains. So dont expect to hold any penny stocks for more than three to six months, unless prices are heading steadily higher. Either these companies pay off quickly, or they dont. If its the latter, sell and move on to a better opportunity.

    RULE #4 Use Limit Orders: Most penny stocks sport lower-than-average trading volumes. If we use market orders, well end up paying more, which ultimately cuts into our profit potential. Instead, use limit orders to buy penny stocks. And be patient. Penny stocks are notoriously volatile, which means you should never have to chase prices. Eventually a dip in prices will materialize.

    RULE #5 Theres No Crying in Baseball: When investing in such a speculative area of the market, youre bound to invest in a few duds from time to time. So expect it. As long as youre keeping your purchases small and not investing more than you can afford to lose, theres no reason to shed a tear.

    In the end, if you follow these five rules, your winners should far outshine your losers making hunting profits in penny stocks a worthwhile endeavor, indeed.

    Ahead of the tape,

    Louis BaseneseChief Investment Strategist, Wall Street Daily

  • Nothing published by Wall Street Daily should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Wall Street Daily should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

    2013 Wall Street Daily, LLC. All rights reserved. 105 West Monument Street, Baltimore, MD 21201 // T. 877.242.1730 or 410.864.2542 F. 410.223.2650

    In a world of liars, the TRUTH starts here.