How to Choose the WinnersUnderstanding Penny Stocks by Peter Leeds

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You need to take the big picture into account when looking for tomorrow's explosive penny stocks.

It is unlikely that you will find a company that is outstanding in fundamentals all across the board. (If you do, then you have done something wrong in your penny stock analysis).

Instead, you are looking for a chemistry of parameters that make the stock ripe for ongoing growth. Perhaps they have some debt, but you can ignore it because they have just started making money for the first time. Perhaps they do not have any earnings, but that is because they are funneling all of their money into research and development for a new ground-breaking drug.

It is more important with fundamental analysis to rule out the bad penny stock investments than it is to find the good ones. As has been said by a wise man, "The pen is more effectively used by crossing out than writing down."

It is a lot like buying a house. When you find that penny stock which really gets your attention, you will know it. Until then, you will see a lot of crap.

You need to analyze trends in revenues and earnings, and be able to tell if any decreases are based on factors that may be reversed by the company, or if they tell a darker story. At the same time, discover if earnings are sustainable, and if the current growth rate can be maintained. Did a company get a one-time payment of several million dollars by dishing off some assets, which then obscures their financial picture, or have they been continually expanding into new markets and growing through sales?

The upcoming discussion on fundamental analysis for penny stocks is what I suggest you use to discover the best investment opportunities. To reveal the most opportune buying and selling prices of those stocks, I encourage you to use our proprietary technical analysis techniques.

Now let's get to my favorite part - Advanced Strategies in penny stocks.