Advanced StrategiesUnderstanding Penny Stocks by Peter Leeds
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Advanced Fundamental Analysis
Beyond the fundamental analysis we use to pick penny stocks for our subscribers (Leeds Analysis), there are further ratios and methods that you may wish to learn and apply.
To learn more about Leeds Analysis, the best way to discover and research up and coming penny stocks, visit us at www.PeterLeeds.com.
I generally feel that these techniques are over-rated, and that they fail to apply to some penny stocks that are driven on speculation, but we will describe them here for you because they may be of value in certain scenarios. It is also a good idea to have a well-rounded knowledge of research techniques as you learn to apply them.
A Quick Secret
One of the most effective yet under-used research techniques with penny stocks is quite a simple one - contact the investor relations person of the company you are interested in, and ask them some questions you have already prepared.
Let them talk and don't interrupt. Often they will lead you to the important information that you need to know, without your having to ask, even if it is off topic from your original question.
Make sure to express your main concerns with the company, and see how they address your tough questions. If this penny stock company is losing money year over year, ask them how they intend to raise the necessary funds, and when they are going to start bringing in some earnings. If a new competitor has risen up in their sector, ask them for details of their plan to adapt to this new situation.
Listen especially hard for the underlying message that they are providing you with. Are they coming across like a pushy salesperson, or are they confident and excited about the company's prospects?
Go a step further, and contact the investor relations department of the company's competitors. Make sure not to confuse which individual contact-person you liked best with which company has the best prospects. With penny stocks, always remove emotion from the equation.
In Penny Stocks, You are the Key
Do not ignore any specialized or insider knowledge you have in a particular industry. If you are working at an oil refinery, you should know whether your company is expanding or contracting.
If you or a reliable friend/family member is working in the technology sector, you may be able to have advanced warning before they release their next product launch announcement. You may also be able to get an idea of whether or not the new technology has any merit, and if it will be so expensive to bring to market that it breaks the back of the company in the process.
If you are a doctor, perhaps you have the advantage of understanding the technical reports that your favorite biotech penny stock is putting out, and perhaps even whether or not their concept has any appeal or practical use. Do not ignore your own intuition or that voice in your head! If you have a trading advantage, leverage it. If you do not have a trading advantage, admit it to yourself and act accordingly.
Note: None of this is insider trading. You will never get in trouble for it. The misconception that society has about insider trading is far off the mark.
This is what we do with our newsletter. We provide our subscribers with the insights that other traders do not have, and thus enable you to profit significantly. I strongly encourage you to get a free trial subscription to our site at www.PeterLeeds.com. I believe you will be both enlightened and pleasantly surprised.