Mar 21, 2012

Posted by in Penny Stock | 0 Comments

What Are The Best Small Cap Stocks To Buy?

How to find the best small cap stocks to buy

small-cap-stocks-to-buyFinding the best small cap stocks to buy is not that hard. A lot of small company investors are focusing on irrelevant questions, such as the length of time the bull market will go on for. Do not worry about this. A quality purchase can make you money regardless of how the overall economy is doing. Here are 4 tips for helping you make the most money from these small cap firms:

The best small cap stocks to buy are quality companies

Many small company investors only look at stock price. They never pay attention to the company itself. Instead, you want to find a quality firm that has been making money for a long time, and that has low levels of long term debt. There are many smaller firms in this situation, and these tend to be the most stable. Sure, everyone wants to find the newest small company that is on the rise, but going with stable firms is the best strategy.

Make sure the stock price is undervalued

If this is the case, you will make money. The best small cap stocks to buy are firms with a market capitalization that is 70% or less of the company’s intrinsic value. If so, you can be reasonably sure the stock will go up in the future. The reason is that stocks in the long term tend to reflect the company itself, whereas short term they are affected by a lot of variables that have little to do with how the company is performing.

Use discount stock brokers

A lot of investors are shelling out up to $50 for each trade, which is far too much. There are plenty of good internet brokers that charge $5 a trade or less, and they are not hard to find. Going with them will just help your profit margins.

Use stop loss orders

The reality is that even what you feel are the best small cap stocks to buy will not make you money, simply because tinier companies are risky. Therefore, make sure you set the stop loss at roughly 15% of what you bought the company for to limit the damage if it goes down. This way you can limit your losses and ride out the winners.

Conclusion

Finding the top small companies not difficult. Use these tips, and you will locate the best small cap stocks to buy shortly.

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