Understanding Fundamental Analysis of Penny Stocks
The first thing we want to do is to stay focused. We want to concentrate
on penny stocks in the $5.00 or less category. Why? It's very simple. The more
shares we control, the more money we make. Let's say you have $5000.
You can buy 5000 shares of a $1.00 stock, or 100 shares of a $50 stock.
A 50 cent move up on your $1.00 penny stock (times 5000 shares) makes you
$2500.00. The same 50 cent move on a 100 shares of your $50 stock
would make you only 50 bucks. That 100 shares of the $50 stock would
have to move up $25 a share to make you $2500.00, and that's not easy.
Again, we want to control as many shares (of a good penny stock) as possible
to maximize our profits.
Note! You'll be subscribing to a high quality alert service (us) that makes
buy/sell evaluations. Hopefully, we'll do a good job of researching all of the
companies we pick, but we can sometimes be wrong. For this reason you need to know yourself .. what traits to look for in a good low-price penny stock.
These traits are what's known as the fundamentals. You'll be doing your
own fundamental analysis of any company that gets recommended by
your newsletter writer. This knowledge will also enable you to search out
your own penny stocks, without the aid of a stock-picker.
Basically speaking, fundamental analysis means that we'll be looking for
and finding, every bit of financial information available that could affect
the performance of the company's penny stock price. You'll be looking at the
past performance and making comparisons to the present performance.
These companies make public their financial statements. It's required.
This information can be found in the annual 10-K statement, and also in
the quarterly 10-Q statement. This information is readily available online
with just about every online service. (AOL, Yahoo & brokerages.)
You need to examine the company's total tangible assets and compare
these numbers to the overall financial condition of the company. You will
consider past and present sales, quality and desirability of the product,
the quality of management, and future sales potential of the product.