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How to Choose the WinnersUnderstanding Penny Stocks

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Research Preparation

Before you begin, it is important to know what you expect to get out of your research.

A wise man once said, "If you do not know where you are going, any path will take you there."

  • Do you just want one penny stock that will return you 100%?
  • Are you looking to develop a short list of ten prospective buys to monitor over time? (As a side note, I would definitely encourage the latter approach rather than the former).
  • Are you just hoping to learn the ropes of finding penny stocks yourself?
  • Are you going to apply what you have learned to a stock you currently own?

Come up with one single, over-riding goal for your research. This should be the most important reason for doing the work, and the one thing you want to get out of all this, even if you have gained nothing else.

Subsequently, list three or four sub-goals that could be benefits from the efforts you are about to expend. Try to keep these goals in mind at all times while doing the research, but do not panic if you also gain other benefits as well!

Applications of Leeds Analysis

Which of these methods will you be applying?

Lone Wolf Apply Leeds Analysis to one single stock. Decide whether or not the company is a good investment based on your research findings. This will help you realize if the stock is likely to increase in price, and why.

The Best of The Best Choose an industry sub-group, or a short-list of stocks, and rate all of them after applying Leeds Analysis. This will reveal which company is better than the rest, and will help you rank the entire list.Stock Screening Apply Leeds Analysis to a pre-screened list of stocks. If you screen by price and market, you will be able to uncover the best stocks from that price range and stock market.

Quick Fix If you are very interested in a stock, you can apply Leeds Analysis to make sure the company has no major warning signs, and to reinforce your investment decision.

Chemistry Approach Look for those companies that seem to be strong from most Leeds Analysis parameters, with the many strengths out pacing those few criteria that seem to be weak. Every stock will have a few weaker aspects when Leeds Analysis is applied, so your job will be to find those companies which will perform very well, despite a few shortcomings.