the definitive guide to penny stocks on the web

Penny Stock Risks

A penny stock is basically any stock that trades under $5.00 per share. For many brokers, this is a threshold limit where they will not spend money on research, and will not loan against the value of the stock. Therefore, there is great potential as these large firms are not paying attention to these stocks. Because of that fact, it can be harder to get information on them.

 

That is where these online and printed newsletters and research firms come in. Most are independent and concentrate on these stocks that the big-boys are ignoring. It's not that these companies are not great companies; it's mainly that the larger brokerage firms depend on large transactions, planning and merger activities to make money. These smaller companies only have limited value to huge firms such as Merrill Lynch or Goldman Sachs. They basically get ignored.

 

While these smaller stocks are riskier than their larger brothers, they have a tremendous reward potential if you can find the good companies. While some small companies have gone from 50 cents to zero, some have also gone from 50 cents to $25.00.

 

More recently, investors are quickly learning that these penny stocks are the future companies of America and the world and have great potential. Microsoft itself was once a penny stock.

 

The greatest potential of a penny stock is its ability to move a large amount in a short amount of time. Think of a large company such as IBM with a stock price near $75.00 per share. It would take a modern miracle for IBM's stock price to double to $150.00 per share - even after several years. However, a small company with a stock price at $2.00 could see its stock double to $4.00 much more easily. In fact, we have seen many stocks with prices like these double in just days or weeks. That is where the great profit potential lies.

 

You will see that this can be the case quite a bit. Our upcoming review of penny stock newsletter sites online will show how common it can be. One of the sites we are reviewing had their 2004 penny stock picks more than double in a year. In fact, their average 2004 penny stock pick tripled - that's right, 200% gains and more.

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