To Find The Right Company, There Are A Few Things You Need To Look For

Category: Finance.

Most people consider penny stocks to be a poor investment. I will now outline for you what you need to know about penny stocks and how to find the best one in which to invest.

I, on the other hand, think that investing in a penny stock before that company becomes profitable company is the best way to invest, because you can make a lot more money with penny stocks than would ever be possible with blue- chip stocks. Penny stocks are defined differently depending on who you talk to. Regulatory agencies sometimes classify them as a stock with a price below$ But, a penny stock, generally speaking is any low- priced security that trades on one of two exchanges. Stockbrokers define them as any stock that trades below$ 5 per share. The Pink Sheets or the OTC Bulletin Board. There are no listing requirements to be traded on this exchange.

The Pink Sheets are an exchange where most startup companies first get listed. A company does not have to have any sales, nor does it have to reveal how many shares outstanding it has to qualify for the Pink Sheets. It is typically easier to attract additional capital, and execute contracts, obtain financing and agreements if a company is publicly traded, even if it is on the Pink Sheets. The reason why a company tries to get listed on the Pink Sheets, even though their stock will not go up in price because they have no sales to speak of, is because it gives their company more substance and credibility. Also, it is easier to get transferred from the Pink Sheets to one of the larger exchanges than it is to go from being a private company to hopping directly on to one of the major exchanges, such as the NASDAQ or NYSE. Foreign companies often have some of their shares sold in the United States by listing them on the Pink Sheets. Companies listed on the Pink Sheets trade as ridiculously low as$ 00001 per share, all the way up to$ 500 per share and sometimes beyond.

The OTC( Over- The- Counter) Bulletin Board is similar to the Pink Sheets. Companies listed on it are sometimes fully reporting( meaning that they reveal how many shares they have outstanding and what their balance sheet looks like) . This exchange consists of relatively young companies either with no sales or a small amount of sales. Often, companies go from the Pink Sheets to the Bulletin Board once they are ready to become fully or semi- reporting. Rarely does a company go from being private directly to one of the 3 major exchanges. Most publicly traded companies that are now listed on one of the major exchanges( NASADAQ, NYSE, AMEX) , at one time or another, were penny stocks listed on the Pink Sheets or Bulletin Board. Google is a rare example of a company that was able to do that, because they were so successful so quickly.

So, investing in penny stocks can be an excellent investment because some of these young companies will one day be worth a fortune. But, most companies have to pay their dues and edge their way up from the penny stock exchanges to the bigger ones. The hard part is finding the right company to invest in, because for every successful startup company, there is also one that fails within the first year or two. Number one, you need to do some research and try to find out how many shares the company has in its float. To find the right company, there are a few things you need to look for. The float is the number of shares that are currently being traded.

It is usually contained in articles written about the company, or in TV or radio interviews with company officials that are sometimes archived on certain websites. Companies listed on the Pink Sheets usually do not officially report this number to the public, but with a little research, you can usually find out. You can also look for the information on message boards or forums where stock traders chat with each other. This is important because you do not want to invest in a company that already has something like 500 million shares in its float. Simply do a search on Google and read every article ever written about the company, and you will likely find out about their float. Companies with this kind of share count are likely having problems moving forward, so they have issued more and more shares to raise money just to stay alive.

Other things that you should look for in a new company are barriers to entry, and consumer demand, patents. You want to look for companies that have approximately 5 to 100 million shares in their float. Here are the questions you need to ask yourself when analyzing the probability that a company will be successful: 1) Barriers to Entry: Are there are obstacles that will make it difficult for the company to sell its products or services? 2) Patents: Is the product that the company is going to sell patented? Sometimes a company has a great new invention or an exciting technology, but if it is not something practical that consumers are going to want or need, then it does not matter how great it is. A patent will prevent other companies from producing the exact same product. 3) Consumer Demand: Will there be a demand for what the company is selling? Try to set aside some money for investing in penny stocks and start while you are still young.

Just make sure you do your homework before you invest and you should do extremely well. The earlier you get started, the more money you can make in the long run.

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