Today’s market contains stocks of every type and price. There is a stock trading over $100,000 per share for those seeking to plunk down that chunk of change. Most stocks, however, have much lower prices. Typically between $10 and $100. However, some are far less indeed. The cheapest allow for purchase of several shares for just one penny. Termed penny stocks, many ask “where to find penny stocks?”
So what is the difference between low price stocks and high ones? There are many. The first is that stocks which trade for a penny or under are usually very small and speculative companies. Oftentimes with no revenue or profits, they are but a dream in someone’s head. However, some of the largest most well known companies today started as such.
Hence, the appeal. Which penny stock will be the next huge grand slam? Being able to buy multiple shares for a penny one could accumulate quite a position in a penny stock without having much resources. Should you have picked the right one, a fortune can be made. Do the math figuring how much $10,000 invested in a stock originally at one quarter of a penny becomes if that stock goes to fifty dollars.
However, as with all things, the greater the potential gain translates to the bigger the potential pain. Many companies with a penny stock fail leaving the shareholders with nothing. This is a tangible risk which much be included within your equation. If you are unable to handle this scenario you should think hard before buying a penny stock.
There are many places to research and things to look at when selecting a penny stock. As indicated, many do not possess revenue or profits thus eliminating the traditional metrics which are used for analysis. For example, it is impossible to determine a price to earnings ratio (PE) for a stock with no earnings. It is similarly difficult to project sales seeing there is no revenue.
However, there is often much literature and filings put out by the company. Read these closely. Research the industry as a whole. Search online for any commentary possible. Of course, one has to take things written online with a grain of salt, however any tidbit of gleaned information can be useful. Call the company. Many will talk with you and discuss their products or services.
Official filings with the SEC should all be read. As should all disclosed risk factors. Often reading this material can prove tedious. However, many times you will find something to rightly convince you not to buy that penny stock. Other times your conviction is only strengthened through continued due diligence.
Which type of trader are you? Are you a patient long term investor willing to hold a stock for 20 years if necessary? Or, are you looking for tremendous quick returns? If the latter you may want to research where to find penny stocks.