Picking Penny Stocks - Penny Stock Tips
Penny Stocks are most often found on the OTC BB and the Pink Sheets markets. If on the OTC BB, they
have filed information with the SEC. his information is available on the SEC.gov website in the EDGAR
system. If in the Pink Sheets, they are on the OTC Markets website.
OTC BB
Penny stocks on the OTC BB have filed information with the SEC. There are no other qualifications to be
on the OTC BB (unlike the NYSE and other exchanges). You can find information on them on the OTC
Markets website and the SEC EDGAR system
To access the SEC EDGAR database, Go to SEC.gov. Look for "Forms and Filings." If new, go to the
tutorial. Go to "Search for Company Filings." Click on "Company or Fund Name." Enter the company
name.
There are different types of SEC Filings: 10-K - annual report, 10-Q - quarterly report, 8-K - special event,
14-D - proxy, 13-D - large changes in shareholdings, Form 4 - insider changes in shareholdings, S-1 -
application to register securities, 424 - final prospectus for registering securities. S-8 - registering securities
for employees, Form D for private sales.
The Pink Sheets
The Pink Sheets website is now the OTCMarkets website. Caution: Information on Pink Sheet stocks may
be out of date, inaccurate or missing. Many companies make limited filings
Use the Pinks Sheets ratings: Current Information, Yield - limited info, Stop - no info, Caveat Emptor -
buyer beware.
Picking Penny Stocks
Price is first - anything at a price. Once I invested in a stock, sold it a week later for a big gain and one week
after that the company declared bankruptcy. (Don't try this at home.)
Once you have the price, find out if the stock is cheap. Cheap to me means below book or asset value and
cheap on earnings, NOT future value - present value only.
Collect Cheap Stocks
Once you have a list of good, cheap stocks, look for the ones that will go up. A hot stock is one that is
exciting to investors. Wall Street is a fad industry. Much depends on the public's perception of what is hot.
Internet start ups were once all the rage, a few years later you couldn't give them away. Many shareholders
went from nothing to $30 million in market value and back to nothing in a few years (like me.)
Pink Sheet promoters often enter into "hot" businesses to sell overpriced stock to the public. Look out for
frequent changes of business to follow fads, this company may not be sincere.
Now study the chart. You can find good charts on Stockcharts.com. As far as chart indicators go, I use
trends first. I also use indicators that show buying or selling: On balance volume, Force index,
Accumulation distribution.
Will give you more on technical indicators in a later article.
Summary
To pick penny stocks use SEC EDGAR and OTCMarkets or data from your broker's website. Pick out the
cheap stocks as that reduces risk in a risky area and keeps you from buying scams. Select ones that look like
they will go up and study trading with stock charts. Find entry and exit points using trend lines.
high volume penny stocks