subject: Best Penny Stock Picks For 2010 - How Do I Choose the Best Penny Stocks? [print this page] Best Penny Stock Picks For 2010 Best Penny Stock Picks For 2010
Small cap stock picks are defined in many ways. First, it is defined according to the price per share. Under SEC rules, a share of stock is considered a penny stock when it is trading for $5 or less per share. Second, a penny share is traded in venues other than the so-called Big Boards such as the New York Stock Exchange. So, you will find small cap stocks like the Pink Sheets and the OTCC. Third, penny shares are issued by a company with less than the SEC-mandated minimum of $50 million for inclusion in the Big Boards. Best Penny Stock Picks For 2010
No matter the definition, there are certain things that must be done in order to create a list of the best small cap stock picks. This way, you are assured of profits in the short term. Also, penny stocks are best traded on a short-term basis instead of becoming part of long-term investments.
Tips on Choosing the Best Picks
As previously implied, you must adopt certain criteria in choosing the best small cap stock picks. You should calculate the Price-Earnings (PE) ratios of all the stock picks under consideration. Choose the penny shares with the highest PE ratios. (PE ratio is computed as stock price divided by earnings per share)
Then, you should compute the Price/Earnings/Growth (PEG) ratio. Just divide the PE ratio with the projected growth rate in the next 3-5 years. You can then trim down the selection to the stocks with the lowest PEG preferably those with less than 1.0 ratio.
However, it is not just ratios that we are looking for when choosing the best small cap stock picks. You also need to consider the financial statements. You have to look for the latest financial statements in order to determine net profits, cash flow, liquidity and solvency, among other criteria. Best Penny Stock Picks For 2010
You must also do your research into the company management. After all, it is people who steer the company into better or worse grounds. If possible, you should get to know the people behind the management.
Where to Find Penny Stocks
As previously mentioned, there are many venues from which to trade in penny stocks. You can go to the NASDAQ SmallCap Market, which is probably the most reliable and safest place.
The shares listed at the NASDAQ SmallCap Market are usually valued at $1 and above so that any stock worth less than $1 is immediately dropped down to the OTC-BB. Brokers and traders have no problem dealing within this market because of excellent investor visibility and strict reporting standards.
There is also the American Stock Exchange. Although the shares traded in AMEX are less than those found at the NASDAQ SmallCap, you will still enjoy the same benefits. You can also find stock picks at the OTC-BB and the Pink Sheets. These are less reliable than NASDAQ and AMEX but if you exercise caution, you can still get the best stock picks. Best Penny Stock Picks For 2010
Best Penny Stock Picks For 2010 - How Do I Choose the Best Penny Stocks?
