Value Investing in Penny Stocks

Sunday, June 18, 2006

A Little Known Secret, Penny Stock Value Investing

A Little Known Secret, Penny Stock Value Investing

I’m probably one of the few people who knows this who would tell it openly and for free. There is a ton of money to be made in good markets and in bad by picking penny stocks on fundamental value, and buying them at a bargain. When you buy this kind of stock that has solid earnings and a proven track record over time (find out by reading annual reports), you are buying real value. The company underlying your stock is a real force in their business in the real world, although they may be small compared to most companies listed on the NYSE, they make money. On this kind of stock transaction you are trading the bottom line. If the P/E ratio is below 1, and you are using this years numbers, you are buying the stock for less than it earns per share.

Since most stocks trade for P/E’s higher than one you know it has upside potential, but if, and only if, you are sure there are no major changes or problems in the underlying business. Once you have done the necessary work to know these few bits of important information the only thing left to do is put in a buy order, and wait until the stock doubles or triples in value, then sell it. It is investing made easy. I, personally can’t figure out why so much money is invested in stocks with P/E’s of 30 or 40. It’s often possible to find a solid penny stock selling for 0.45 per share that earns as much (or more) than a lot of Big Board (NYSE) stocks that trade for 45.00 per share. Now, to me, that’s real and obvious value.
Penny value investing, and penny day trading are really what my whole site is about. Check out my other articles for the ins and outs of how to identify opportunities, and a lot of other useful tidbits. I started this site as a Blog, but it occurred to me that I had real proven knowledge to share, and that I could do it in a magazine format, and share what I have learned the hard way with a lot of people. It’s become a larger project than I originally envisioned, and I am learning a lot about building websites, and web publishing in general.

It’s amazing to me how many people are skeptical of the real opportunities I have personally taken advantage of over and over for almost a decade. It’s not a silver bullet, or instant money, after identifying value and buying, it is necessary to wait, sometimes a long time for the market to wake up to what you already knew, and provide you with your profits by driving the stock price to or above it’s true value. However, with an hour a week to keep up with what you own, learn any important changes, and find new opportunities when you have ready cash. It’s almost an absolute certainty that you will make more than the pathetic 3% savings accounts usually pay you to use your money for their investments.

It’s really not that hard, just find a source of reliable P/E ratios, preferably searchable, find the low ones, read the annual reports and news, and voila, you are ready to earn way more than the 3% banks pay, and maybe 10 or 15 times more than the 10% “experts” predict on an average stock portfolio. Penny stocks might not be the place for you life savings, but they are almost certainly worth a look. But of course, as I have written elsewhere, sometimes things go wrong, seemingly solid plays go sour, and believe it or not, people make mistakes sometimes when managing their own investments. Luckily, the upside is usually so large that a few bad trades won’t kill you. Penny Value investing is the right place for any small speculative portfolio or portion of a portfolio.

I’m just telling you what I know to be fact, because I know that a lot of people who don’t know what they are talking about will say that all penny stocks are worthless. Some are, usually the ones that get the most hype, but if you buy that line, you are missing an opportunity for great fun and superior profits. It’s work to be a good penny trader, but I’m averaging about 80% gains per year across 10 years of trading, and turned $1800 that was sitting in a savings account into $16,000 gross, and $11,000 net, not bad for a hobby, if I do say so myself. The only other hobby I ever put that much into never paid me back a dime, and wasn’t this much fun, sure I have losses occasionally, and I used to be very stubborn about selling losers (hence the difference between my gross and my net), but just speaking for myself, penny value investing is better than sliced bread.

Ok, I admit I’m not telling you this for absolutely free. I’m selling advertising for my site just like the big media companies in TV, newspaper, radio, etc. do. I‘m a freelance be my own boss journalistic “wanna be.” Check out my other pages and stuff.


At 1:51 AM, Blogger John Andrew said...

I would like to share it with you, this might help you in getting a good advice. you will need to find right penny stocks for your investment. You can choose the SmallCapFirm to get right calls and alerts of all winning penny.

At 2:17 AM, Blogger Anna Watson said...

This comment has been removed by the author.

At 2:49 AM, Blogger Jon Sigurdsson said...

Thanks for sharing this!

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