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penny stocks as invesntment - 4/22/2007 7:05:46 PM

pahunkboy

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does anyone do penny stock invensting?

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RE: penny stocks as invesntment - 4/22/2007 7:20:09 PM

OedipusRexIt

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Lots of people do. Some even get rich. Most don't.

Don't make it a retirement plan out of it, but it can be a fun, sometimes rewarding hobby.

My background's finance, and you know I wouldn't steer you wrong, 'Boy.

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RE: penny stocks as invesntment - 4/22/2007 7:24:41 PM

b12345

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No, and it is generally a bad idea. Pink sheet and OTC traded stocks are much less liquid than major market securities. Also the vulnerablity to manipulation and fraud is much greater in the penny stock markets. The only reason I can think of to invest in a penny stock is if you have intimate knowlege of the company you are investing in. As far as trading in penny stocks It seems much more like gambling than anything else. Althought the thaughts of very high return potential is appealing,the normal investor will not be resonably compensated for the risk they bear.

You might want to read this:
http://www.fool.com/investing/small-cap/2006/12/16/why-we-love-wild-penny-stocks.aspx

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RE: penny stocks as invesntment - 4/22/2007 9:55:23 PM

popeye1250

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I get e-mails everyday from "Touts" telling me that a stocks is "on fire" and that I "need to buy it now!"
These things are called "pump and dumps", they buy the stock for themselves and get a bunch of other people to buy it and hopefully it goes up then they "dump" their shares.
Not a good way to "invest."

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RE: penny stocks as invesntment - 4/22/2007 10:22:51 PM

Real0ne

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penny stocks arent something you invest in. So i assume you mean trading.

i bought a bunch of kmart when it was under a buck but other than that kind of situation run like hell from penny stocks because they are the most manipulated on the market. if you want to trade take a look at the index futures, ym, nq's sp, er and the like, much more predictable, or do option spreads if you are good at prediction trends.

i know some people who trade mutual funds but then you may as well trade the sp or dow. i would stay away from pennyu stocks althoughthey look attractive because theyt are cheap.

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RE: penny stocks as invesntment - 4/23/2007 4:41:40 PM

subfever

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No. I personally know people who have lost tens of thousands speculating in penny stocks, via "hot tips" and other nonsense. Even worse, some of these people drew in friend and relatives as investors, only to see them lose money too.

Generally speaking, those who try to hit home runs with speculations tend to strike out far more often.

But if you're just looking for an interesting hobby, and don't plan to throw any more than chump change at it, then have yourself some fun. Later in life, you can always talk about the home runs, and keep quiet about all the strike outs...

When I get into a speculating mood, I trade somewhat complex option spreads... typically in the futures markets.

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RE: penny stocks as invesntment - 4/23/2007 7:39:09 PM

samboct

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I'm not sure the rules are any different than any other stock- make sure you know that the company is well managed and that you understand it's business model. With the crunch in the IPO market, there are folks buying shell companies to get started and they're not NASDAQ listed at this point. The downside is that there's a long lag time before you can raise cash- so the company has to be able to run very lean for at least a year or two. But this is becoming a more accepted business model in the past two years or so which means that the advice years ago to avoid pennystocks like the plague may be a little outdated. Any reasonable company could get listed on the Nasdaq with some $50M in sales- occasionally less a few years back- it's now been bumped up for $100M. (Sarbanes Oxley sucked- it solved no real problems and has increased the amount of work accountants do- which of course grows the economy better than anything -NOT!) Pennystocks offer a way to tap into the public markets with a few $M in sales- maybe less.

And I'd certainly agree with the comment that you should never bet the farm on a penny stock (nor any other as far as I'm concerned.) But I like the odds in the market a heck of a lot better than at Atlantic City or in the Lottery. By the way- I'm one of the folks who rode one stock from $0.35 to selling it off at $3.50 or so- (and yes, I sold it off making a nice profit) but I've had another stock go from $2.50 to $0.25 or so. And you couldn't tell which company from the research I did had a better chance of success, so there's an element of luck involved- and this is with meeting the management- spending time understanding the technology, and deciding that yes, they did have a real market and a solid chance to get there. I pay no attention to other analysts- I suspect I'm something of a contrarian. I'd definitely use Warren Buffett's advice- don't invest in a stock unless you understand the business. But if you're willing to do this level of digging on a stock- then I think pennystocks can be OK- and it's a lot more fun than Atlantic City! Hey- you play the house- you lose in the long run- no ifs ands or buts. I'll bet my ability to analyze a company against anybody- and there's nothing that says that there HAVE to be losers, i.e. you and I can both pick winning stocks- one persons success does not require another persons failure.

Sam

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