From the community

Most Preferred Penny Stocks

Posted Dec. 19, 2012, at 2:47 a.m.

Frankly, we are not sure what this means! A ‘most preferred penny stock’ for one investor might not be seen in the same light by another. Does the term ‘most preferred penny stock’ mean a stock that offers steady returns? Or as one of our readers claimed, a stock that is volatile is the most preferred penny stock. Clearly, there are no minimum standards as to what constitutes the ‘most preferred penny stock’ in fact, it is just like OTC market itself; stocks on the OTCBB and Pink Sheets have no minimum standards of requirements that they need to fulfill. So what then would we consider are the ‘most preferred penny stocks’?

We think the most preferred penny stocks should be those with a company history and a story to tell. Let us explain: Many of the companies being traded on the OTCBB are brand new and there is little if any information available. For every new ‘large’ company that is initially traded on the OTC, there are a thousand that have no prospects of generating profits for its investors. We do not know the background of the promoters, what kind of licenses these companies hold, the background of the members of Board of Directors, company policy and so on.

Due to some PR activity we might know something about the service or product that is being offered but nothing about the company’s manufacturing or marketing strategy and because these companies are not obliged to put out any information, it is also difficult to research these new companies.

Building the ‘Most preferred Penny Stocks’ list

To build up a list of the ‘Most Preferred Penny Stocks’, ideally; you should be looking for companies that are being promoted by known entities. You would be looking at companies that have staffed their Board of Directors with people with strong backgrounds and stronger prospects of achieving goals.

There has to be clear cut corporate goals, a clear business plan, clear products or services on offer and lots of verifiable information available. You do not want your ‘Most preferred Penny Stocks’ list to be filled with companies of which you know little or nothing. Stocks of such companies irrespective of how promising they might appear to be are usually not worth the pennies you invest in them as per stock market forums. You could end up buying hundreds of dollars worth of completely useless stock.

Look for companies that have entered bad times but with good prospects of bouncing back. The recent economic downturn resulted in many companies losing value simply because they were caught unawares. A lot of these companies might be near bankruptcy but are fighting back. Look for financial and marketing tie-ups. A company that is currently in the doldrums but is entering into financial and marketing tie-ups is a company that is fighting back. These are companies that will bob back into profits and climb out of the penny stock label. Look out for them and invest in a staggered manner, i.e. small sums over a period of time. It will also give you time to track the company’s performance vis-a-vis your own assessment.

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