Surprising Penny Stock Facts

There are Many Facts About Penny Stocks Which May Surprise You

Money Growing on Tree
••• Money Tree. CSA Plastock

With penny stocks, not everything is as it seems, and sometimes the tiniest companies around us pack the biggest punch.  The following facts about penny stocks demonstrate that not all low-priced investments are to be feared. 

Fact:  Multi-Billion Dollar Penny Stocks?

Some massive, well-known corporations were once or are currently trading in penny stock territory.  

For example, most people don't think of Ford Motor Company (F) when they think of penny stocks.

 After all, they are one of "the Big 3," aren't they?  Yet, Ford was trading at only $1.87 three years ago.  The shares now go for closer to $15 a pop.

As publishers of a penny stock newsletter, we focus on the smallest stocks (in terms of price per share).  However, when a huge corporation sees its shares dip into the $2 range, they are fair game for us to profile... which we did when Ford was trading, as we mentioned above, at $1.87 per share.

Fact:  The Economy is Built by Small Business

Most of our (or any) economy is built by small businesses, which as a group are also the largest employer nationwide.

As they grow, many of these new or tiny companies take the next logical step - to become publicly traded on the stock market.  Often, it is the small businesses just gaining their listing which have significant momentum, and become pretty rewarding investments.

Fact:  Penny Stock Scams are Easily Avoided

Just be wary of any penny stock pick you hear about for free, and you'll successfully avoid almost all potential scams and pump & dump promotions.

As with anything, stick to a trusted source or do your own due diligence.  Understand exactly what you are buying, and take responsibility for your trading decisions.  

For anyone looking to benefit from penny stocks, but with reservations or concerns, you should be starting with no risk and no money - by Paper Trading.

 Doing this will help you get comfortable with the process of finding winning penny stock picks, without ever risking a single dime!  (This is even how I got started personally, once I had lost all my money in a single trade)!

Fact:  Popularity of Penny Stocks

Most investors have traded penny stocks - they just don't admit it.

Often people get caught up in penny stock scams, or buy shares in a company which goes to zero.  While anyone is more than willing to shout about their profits from the rooftops, they certainly will not go out of their way to mention their embarrassing mistakes.

Fact:  Quality Companies

In our mind, and based on decades of analysis and experience, 95% of penny stocks are not great companies.  However, the five percent which do pass our review should be considered very high-quality, and typically display strong financial positions, growing market share, improving revenues, and great management teams.

So don't paint all penny stocks with one brush - there are great ones, and not-so-great ones, just as can be said about anything.  The trick is to quickly eliminate the lackluster companies, so you can spend more time looking into the higher-quality shares.

These five facts may be surprising, and they might just change your outlook on the smallest shares.

 Typically an investment trading for 32 cents is not as strong as one selling for $214 per share... but that doesn't necessarily mean the penny stock isn't a great value, an exploding business, and an incredibly profitable venture.