How To Invest In Penny Stocks?

How do you find the right penny stock that can give you a good profit

? No doubt, it is a challenging job to find a good penny stock keeping in view the lack transparency. There is no public financial for you to go through. There is no current annual report to compare with the previous annual report.

So how would you begin your research for the right penny stock? Begin by selecting an industry that you understand. The world of micro caps is full of opportunities. But you will have to sift through it to find the right penny stock for investing.

We all have hobbies or line of work that we can talk about for hours. Suppose, your hobby is watching movies and you are a movie fan. You can research good film production companies trading on pink sheets.

Another method is to focus on something that you work in. For example, you are finance professional; you can look for a finance company listed on Pink Sheets.

Suppose you are a movie fan.You do the research and find a film production company in the process of making a movie that has a good cast and a good love story filmed in spain. You know the importance of good movie reviews and are sure that this movie is going to get good reviews.

Movie industry is highly profitable. You think you have a great penny stock company with a good future potential. Now do some more research on the movie industry online. Find its growth propects for the next few years. You find the movie industry is expected to grow by more than 25% in the next three years.

You have now a discovered a good market, the movie market. You make an educated guess about the future prospects of the film production company. You make a list of questions like what is the financial condition of the company, what are the numbers of authorized and outstanding shares that film production company has and what are its business development plans. You also want to know about the insider ownership and institutional ownership of the film production company.

Now you have a list of questions. You want them answered so that you can make your final decision about investing in that penny stock film production company. Naturally, keeping in view the fact that financial statements of that film production company are not in front of you, so you decide to call the CEO of that company. So, you call the CEO of that company and tell him that you are serious about investing in his company. You ask him these questions, he gives you satisfactory answers. Well and good. He can even direct you to a spokesperson who can answer your questions in detail. If this happens, then seriously think about investing in that company. On the other hand, you get a lukewarm response, in that case find another company to invest in.

Just remember, many good companies do move on from the pink sheets to Over the Counter Bulletin Board (OTCBB) or even NASDAQ! So, if you have done your research well, you can find some real hidden gems!

by: Ahmad Hassam

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