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Picking penny stocks can overwhelm the average Joe. The OTC bulletin board looks like a jigsaw puzzle. Stockbrokers talk endlessly about profit margins and other fancy terms. Then there's the scam artist who keeps calling about penny stocks from a company poised to break through. Before dipping into the penny stocks pool, here are some basic questions you should ask when searching for the right penny stocks investment. Is the company profiting or losing money? Once you receive a hot tip, go online and check the company's financial health. SEC filings can help you determine if a company incurred profits or losses the last quarter. Many penny stocks companies are young and have yet to make money. Find out how many products the company sold last year and if it has a well laid out plan on how to keep its customers happy. What is the company's business model? What are the products being sold by the company? Does the company offer any professional services? Does it provide marketing channels for other companies? Is the company a chain of stores? Is the company working as a joint venture? Find out if the company business model is feasible. Check other companies that have used the same business model to see if they succeeded or failed to improve earnings. Who are the people managing the company? If you're investing in penny stocks, you would want to know who will be spending your money. Do the company executives have proven track records? If this is their first shot at running a business, are they upstanding citizens or do they have a shady past? Find out about other investors too. Are they successful in this field? Are they uptight or prone to taking risks? How is the company keeping up with current trends in the market? What is the current state of the industry? Is the industry bullish or bearish? Are the company's products and services gaining ground or eating the dust of the competition? Learn more about the company's research and development strategy. Compare its current products with the latest market trend. How does the company manage its debts? Find out how large the company debt is and how the company is managing it. Again, SEC filings are your main source for this type of information. Quarterly reports are readily available online. Insurmountable debt can put a company out of business, so it is important to understand how the company is balancing profits, operation expenses, and financial obligations. What is the media saying about the company? While news wires offer penny stocks companies very little media coverage, they will never miss out on financial scandals, bankruptcy rumors, and reports on corrupt executives. Newsletters can be a good source of information, but be skeptical of publications that hype a company because they were paid to do so. Make sure the author is an independent and qualified business analyst. Valuable news stories include product releases, new markets, and new deals. Finally, ask yourself, do you really trust this company and its leaders? Follow your gut and invest only in penny stocks you believe in.
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Nir Dotan is a writer and promoter of Penny Stocks services, and Penny Stocks Preferred source for the latest news and information on the best and brightest Small Cap Stocks.
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