Penny Stocks

Discussion in 'The Stock Market' started by blondie0420, Aug 20, 2007.

  1. blondie0420

    blondie0420 Locks of Gold

    A penny stock is basically one that sells for less than $1.00 per share, but sometimes people consider stocks less than or equal to up to $5.00 per share penny stocks too. (I'm talking in dollars here, but for the boards it'd be in grams obviously.)

    They're highly speculative. Since they trade at such cheap prices, people usually buy a lot at a time, which means your money can leave you pretty quickly. But at the same time, you're not really spending a ton on them, and the earnings potential can be astronomical. For instance, Oplink Communications at one point traded for about $1.64 per share, then soared to $17.95 per share. That represents a 1089% gain. Pretty freaking good, huh? (If you had purchased 1,000 shares at $1.64 each and sold them for $17.95 each, your return would be about $16,310.)

    One thing you do have to be careful of is buying a penny stock that's not getting a lot of action. You don't make money if no one is making any bids on your company's shares, you know? I looked up a couple of penny stocks and noticed that hadn't been traded since the beginning of August! Sure you're not going to lose money if your stock isn't moving, but you're also not going to make any either.

    What do you guys think of penny stocks? Good idea/bad idea?

    I just purchased 1,000 shares each of two different stocks trading for .43 a share. I'm thinking that even if they bomb, I still only invested 430 grams for 1,000 shares of each. A whole 860 grams total doesn't seem like a big deal to me, so I'm just trying them as a little experiment for the time being. I didn't really have much luck in the other stocks I bought (which traded for around 20-30 grams per share). I lost a lot of grams really fast with those, so I'm thinking this could turn out to be an ok thing. Only time will tell, I guess.
  2. 5drive

    5drive Slacker

    Some of the cheapies get played/hyped. Some outfits (supposedly) advising on low priced stocks will put out news that a company is going to make a big move, put out new technology, etc. and the stock is gonna shoot up. Usually by the time you get in on one of these deals, you're a day late and your buy price is quite a bit higher than before the hype, and the only people making a profit are the ones that put out the news (they sell before the price drops back). Some of these stocks make a big move and stay up, but not often.
  3. Jake

    Jake Sr. Member

    Yeah, after all of my first stocks were on really big corporations, every stock I bought was over 20.00, I bought a lot of smaller ones under 10.00.

    The smallest one was around 6.00, I think.
  4. k20

    k20 New Member

    Where do you find penny stocks? I'm not sure how to search for them... but since penny stocks have such a low cost does that mean they may be close to bankruptcy? or does it mean something else? companies/stocks can go bust, right(excluding the thought of liquidation, cause I know that'll do it)?
  5. IBlazedHeavily

    IBlazedHeavily New Member

    the value of a penny stock depends on mainly a couple factors...

    1. is how many shares exist? if a penny stock has 100 million shares. @ say 10 cents. that gives the company a market capitaliztion of 10,000,000 (market cap is amount of shares existing X current market value)

    2. a penny stock typically trades at a value 5x the market cap, but of course depending on the situation of the company, as every company is in a different spot

    for example i bought a penny stock called world water and power(WWAT) @ 70 cents. this company makes solar powered cells for huge power needs. right now the stock is sitting at 2 bucks. and its future looks promising.

    when looking for penny stocks the best ones to go for are the ones who have cash on hand..the problem with penny stocks is that the company needs to raise $$$ so what they do is sell shares to private funds or investors in exchange for their cash..the holders end up sellin these shares further diluting the companies stock.. that is why u have so many penny stocks sitting under .01 cents..

    i have 6 years experience in the stock market and trust me it is more complex than u think..there are so many variables and paperwork (sec forms) u need to understand and analyze. its a very stressful occupation..that is why i now just trade for fun, more of a hobby now

    word of advice: if ur thinking of investing..brush up ur skills with paper trades (pretending to buy at whatever price, and selling at whatever price) see how u do, and once ur confident enough you can really start playing with some cash :cool:

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