Penny Stocks To Buy

| February 23, 2015

Penny Stocks To Buy – What You Need To Know

Penny Stocks to buy… if you’re searching for that term on the internet… then you’re probably looking for a list of penny stocks to buy.

If all you want is a list of Penny Stocks, try this link…

http://www.pennystockresearch.com/category/penny-stock-list/

Every month I try to find new and interesting lists of penny stocks. And readers get those leads first!

But if you want more than just a list… keep reading.

Finding Penny Stocks To Buy

I’m glad you stuck around… you see, today you might get one or two ideas on penny stocks to buy, but the real secret to trading penny stocks is being able to find your own ideas.

How do you do it?

Hard work!

It takes time… and I’ve been doing this for almost 20 years now… so let me share with you a few tips. Take them as shortcuts to make your life easy!

In my world, I’ve found great penny stock trading ideas from a handful of resources.

OK, don’t fall out of your chair, but places like CNBC, the nightly news, even The Wall Street Journal have been critical resources in finding penny stocks to buy and add to my trading account.

But here’s the twist…

The real leads come from ideas – I’ve never once read about a True Penny Stock in The Wall Street Journal that was worth investing in.

Nope.

None of the news channels ever highlight penny stocks either… you know why? It’s because they are trying to appeal to the largest group of viewers. Let me tell you, far more individual investors own Apple stock than any group of 10, 20, or even 100 penny stocks.

So, how do I find penny stocks worth trading?

I look for trends.

The Journal, the nightly news, the business networks are always great at highlighting trends. They find a small trend and hype it to the moon…

Need proof? Just look at the trend in the summer of 2014 over the pot stocks!

You couldn’t go 20 steps without seeing a news article on someone selling, producing, trading, or making money from Cannabis.

And of course, the stocks of the small companies in the industry took off to the moon… and then came crashing down!

Penny Stocks to Buy - Not this one Chart - GRNH

You can see it in this chart of GRNH… a meteoric rise of a penny stock, and the subsequent fall back to earth!

Ok, the rise was spectacular… and the fall was scary… but it taught many first time traders an important lesson…

NOT everyone makes money scooping up hot penny stocks.

A Different Way To Find Penny Stocks To Buy

I take a very different look at penny stocks…

I like to look for long term trends – and trends that aren’t a violation of the federal laws!

It’s that simple…

Look for industry-wide trends that can propel stock prices higher. The truth of the matter is, a rising tide does lift all boats… and if you find an industry doing well, it’s likely that other penny stocks in the industry will do well too!

For example, as I write this, the housing market is recovering… it’s a major trend that will last for years… Healthcare is another area seeing huge growth! Try to find very specific trends, and you’ll no doubt find great penny stocks profiting!

Now, I’m sure you’re thinking to yourself…

Why Don’t Hedge Funds Just Buy Up All The Penny Stocks?

It’s a great question… and one that many investors don’t think about.

Mutual Funds and Hedge Funds have Billion and Billions of dollars. Why don’t they just swoop in, buy everything up and hold the profits for themselves?

Let’s start with the popular mutual funds industry. Why don’t they just dominate the market buying up penny stocks left right and center?

Well, most mutual funds are prohibited by their fund charter from investing in penny stocks… often stocks that trade below $5!

So what about hedge funds that don’t have those restrictions?

The reality is, most hedge funds are too big to mess with small penny stocks…

Here’s why…

Let’s say you run an average size hedge fund of $1 billion. (Nice work if you can get it.)

You can’t take a position in a company over 5% without running into regulatory hurdles… and at 10% and 20%, the rules get more obnoxious.

So, you’re looking at these small penny stocks… Let’s say you find an exciting one that has a $50 million market cap (a decent size for penny stocks)… remember the 5% rule… well 5% of $50 million is $2.5 million.

It sounds like a lot of money, but it’s not…

If you’re running a billion dollar fund and you put $2.5 million to work in every company you find, you’ll run yourself ragged.

Do the math.

$1 billion divided by $2.5 million is 400!

That means you’d need to find, track, follow, and monitor 400 different companies! It would require a team of analysts. It’s just not practical.

That’s why the bigger funds focus on bigger companies… it’s the only way they can put their money to work effectively.

But that’s not the only problem.

There’s also the issue of liquidity in the market.

Penny stocks aren’t liquid enough to allow funds to buy and sell at will.

If they take a big position, it might take them weeks of buying to get the position… and to exit… it might take them even longer…

To take a 5% position in a tiny stock would blow up the stock! Prices would skyrocket on the buying… and crater once buying stops… it’s just not practical.

Another Problem With Penny Stock To Buy

Here’s another issue.

Most penny stocks don’t have research analyst coverage.

I won’t get into all the details here, but penny stocks are just too small for most penny stock brokers to follow. There’s not enough market activity to make money!

You see, brokers make money from moving stock. You’ve got to buy and sell and sell and buy to generate commissions… and most penny stocks don’t have enough volume to warrant the attention of a broker dealer… let alone an analyst.

As a result, analyst coverage is tiny…

And that means many companies are un-analyzed. And that means very little attention is being paid to them by anyone on Wall Street! It’s a huge opportunity to find something truly undiscovered!

But, it opens up a new can of worms…

Penny Stock Opportunities And Risks!

The lack of analyst attention means that you can really uncover opportunities in the market.

You might come across a company that has the next great thing in their industry… or a new drug… or a new patent… or a new product… or a new piece of software…

And nobody knows about it!

Because of this knowledge vacuum, it opens the markets up to great opportunities.

Opportunities to turn a tiny investment into hundreds of thousands or millions of dollars!

But is also brings out the scammers!

Read my free report about penny stock scams exposed here!

This is why you see lots of Investor Relations Promotions.

You’ll also see paid for research. Email blasts and websites set up to hype stocks and penny stocks are the number one target of these activities.

The goal is to get people to think of these hyped stocks as penny stocks to buy.

The more activity, the more money the scammers make!

Identify the Real Penny Stocks to Buy…

So how do you protect yourself from the scammers… and still find the best penny stocks out there?

In a word, RESEARCH!

You’ve got to dig deep on a penny stock you want to buy. Look at the company, look at the filings. Understand their business and their financials.

When you find red flags, kick the company to the curb… and start all over.

Doing the research isn’t a guarantee of success, but I’ll tell you it will kick a lot of the sure thing failures out of your portfolio.

You’ll quickly discover losing company after losing company.

You’ll be able to sniff out a penny stock scam in a heartbeat… and that will dramatically improve the odds of you making money – big money – buying penny stocks.

I don’t have time to cover in detail how to do due diligence on all of the penny stocks you want to buy… but stay tuned, we’ll cover those details in the coming weeks and months.

Good trading…

Brian Kent
Penny Stock Research

Note: Brian Kent has been trading the markets for more than two decades and now writes and edits for PennyStockResearch.com. You can sign up for the penny stock research newsletter, a trusted source for the truth about penny stocks! Sign up today and get a free research report – http://www.pennystockresearch.com/free-reports/.

 

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Category: Penny Stocks

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The Dynamic Wealth Report works with a number of staff writers and guest experts who specialize in everything from penny stocks to ETFs to options trading. These guest analysts post under the 'staff writer' moniker for ease of use.

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