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Teacherman1 (49.17)

Penny Stocks in Perspective

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July 13, 2012 – Comments (2) | RELATED TICKERS: CPST , LYG , OCLR

There seems to be a great deal "off handed" dismissal of the category of stocks known as "Penny Stocks".

I think one of the reasons for this, is lack of a clear agreement of just what constitutes a "Penny Stock".

For some, the type of stocks shown on this list http://caps.fool.com/player/tmfstockspam.aspx , is what comes to mind when the term "Penny Stock" is used. AVOID these at all cost in real life. They can be good for CAPS points, but they are "super long shots" to ever make you any money.

For others, including myself, it is generally stocks that trade for less than $10.00.

For still others it is just a "catch all" term for low priced stocks of companies that they consider to either be on the verge of failure, or with almost no chance of ever being a real success.

We all have our own understanding, and are all entitled to that understanding.

Using my criteria (i.e. stocks that generally trade for less than $10.00), the following is a short list of some stocks that once fit into this category, and which over time have proven to be fantastic success stories.

WFM

CMI

AAPL

PCLN

AMZN

There are many others, but this list will serve to make my point.

Proper investing requires understanding the company behind the stock, after doing DD on the fundamentals, understanding what the company does, and why it is likely to become successful in time, and doing all of the things one would do before investing in any company.

Sometimes you will be wrong, just as you can be wrong when investing in "NON Penny Stocks", and you can suffer a loss.

One of the keys to investing, and especially investing in "Penny Stocks" is to "buy at the right price", be willing to add to your position on "dips", don't panic, and keep a close eye on them.

This is not intended to be an exhaustive treatsie on investing in "Penny Stocks", or not investing in "Penny Stocks", but simply an attempt to get individuals to not dismiss stocks of certain companies out of hand, simply because they are "Penny Stocks".

Sometimes it is a case of getting ahead of the "Curve", and getting into an investment at the right time, then waiting for the "Magic" to happen.

This is JMO and worth exactly what I am charging for it.

2 Comments – Post Your Own

#1) On July 15, 2012 at 10:14 AM, HarryCarysGhost (99.77) wrote:

Hi Teacherman, as someone who has dabbled with "penny stocks " in the past, I viewed it this way-

A penny stock is a stock trading for under a buck.

From a buck to five beans was a high volatility stock with low volume since MM's can't touch it. 

I think Checklist34 put it best when he said you really only need 1 of 10 to hit really,really big.

Cheers. 

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#2) On August 27, 2012 at 10:24 PM, joepennies (< 20) wrote:

The definition of a penny stock does seem to vary a great deal. I wrote about this here:

What Is a Penny Stock?

The fool.com site defines penny stocks as stocks under $10 a share which is the broadest definition I've seen anywhere. I personally have trouble thinking of a stock trading at $9/share as a "penny stock" but I guess everything is relative. The most common definition I've seen is $5/share or less.

 When stocks fall under $1 share, I am much more cautious before I buy and I almost never buy the subpennies which I believe should have a different name that penny stocks as they really are in a whole different arena in my opinon.

 Joe

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