Oct 10, 2011

Posted by in Penny Stock | 0 Comments

Tips For Buying Penny Stock The Right Way

Buying penny stock the right way is time consuming-but well worth it

Buy Penny StockBuying penny stock can either be the best or the worst decision you ever make. It all depends on how you go about it. For most people, it is a bad choice-at least judging by their results. While some people do get very wealthy, most people lose a lot of money. Here are some tips to help you avoid the fate of most investors and join the successful few.

First things first-you have to find the stocks that sell for under $1. That part is easy. Just go to the MSN stock screening tool. You can narrow it down to just penny stocks using their search filter.

The problem is that you are now left with 1000s of companies to pick from. Here comes the hard part-buying penny stock that will make you money, and avoiding the rest. This is not really complicated, but it is time consuming.

The reason it is difficult is that the best companies are usually ones that nobody has ever heard of, or at least nobody is talking about. A good rule of thumb: if a firm is being featured on a prominent media outlet, avoid it. Unless you get in on it right at the beginning of the buying craze, you will be late and the increase in price will have already occurred.

 

Don’t believe what they say on TV when buying penny stock.

In other words if you make your buying penny stock decisions based on what is on TV, you will be disappointed. If finding the right stock were as easy as taking the latest tips from the “experts” than everyone would be rich. Here is how to find the stocks that nobody is talking about.

First, analyze the price/earnings ratio of them. Quite simply, the higher this number is, the better your chances of making money with that investment. A high P/E ratio indicates a stock that is undervalued. While some people will tell you to invest in every stock with a high number, you should look at how the company is performing as well.

After all, there are plenty of poorly run companies that are undervalued, but that does not mean they are worth investing in. The point of investing in undervalued firms is that long term, they will make money. The only way to do that is by putting money in a well run, profitable (or soon to be profitable) company.

To find out how profitable a company is, make sure they have high profit margins and low long term debt levels. If both these elements are in place, and their future outlook looks good, then buying stock in that firm would be a good option. Follow these tips, and you will become profitable buying penny stock.

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