How to Find a Winning Penny Stock
Are penny stocks legitimate?
How can these small cap sized stocks make large gains in a short period of time while bigger companies with more established track records are hardly increasing in size?
The reason why penny stocks are making large gains are because someone is losing money. How else can you be gaining money?
There are many reasons for this. The first reason is the “boat theory”. It takes a long time for a big company to make big rackets across the ocean floor and big waves are much harder for them to make. It takes a big boat to turn around in the ocean. A small company, one that is represented by a penny stock can make quicker turns faster. They are more nimble and quick.
A second reason is because penny stocks are usually of new or lesser known companies. While established companies already have their technology in place, these stocks are probably just developing their product or service. People buy these stocks to help finance the rapid production of these services.
As soon as the company finishes their product, the stock price jumps in value.
The problem is, a lot of these companies do NOT finish producing their product.
Here are some examples of rapid price jumps:
- A mining company raises money so they can afford to buy property for expansion. The price remains in the $1 to $2 range… until they discover gold. This pocket of gold looks very attractive and their share shoots up to $15 per share…
- A high tech company is working on new technology that could change the face of computing. They’ve been working around the clock to launch this new product. Their stock is trading at $0.15 per share. As soon as they launch their product, it impresses the global market and their stock rises to $20/share.
(As a side note this happened to Microsoft: In 1986 their price was about $0.10 per share. But 1990 their price has risen to $1 per share. In February 2000, their share was nearly $50 per share. If you had bought only 100,000 shares at just $0.10 per share in 1986 for a total of $10,000, and sold it at $40 per share, you would have made over $39,900,900.)
-A Biotech company is developing a new cure that will end a formally incurable disease. They need to raise money to fund their tests, an essential part of the FDA approval process. After discovering their technique works their share price jumps from $0.45/share to $5/share.
These are the reason why companies are trading at affordable prices and can make rapid gains in a short period of time. These are many success stories waiting to be discovered.
No related posts.
Related posts brought to you by Yet Another Related Posts Plugin.
