Are you interested in penny stocks?
Here is why you should probably keep looking for other stocks.
Any stock with a share price less than $5 (USD) is classified as a “penny stock” and 99.9% of penny stocks never break out past $5.
If you live in a country where a lot of stocks are less than 5 dollars (in your native currency), please be careful and make sure you use the 4M Confidence Booster before buying a stock.
Penny stocks are essentially businesses that have run out of ways to raise funds. Bank lending has slowed down or completely stopped, venture capitalists have lost interest, and even private equity laughs them out the door.
So how do businesses like this raise more capital?
The simple answer is to go public. In other words, they try to raise money for regular people like you and me. Unfortunately, most retail investors don’t know the difference between a good business and a bad business.
And when these stocks go public, they arrive at a low share price such as less than $10 (USD). A lot of retail investors believe they can “get in early” and make big bucks when in reality, large institutions won’t even pay attention to these stocks and the share price will never rise.
If you have ever seen the movie, The Wolf of Wall Street, you may remember Leo DiCaprio’s character calling these stocks complete garbage, except he didn’t use the word “garbage.”
Penny Stock Rules:
- When a stock drops to $5 (USD) or less, there is a 99.9% chance the stock will never go higher than $5.
- When a stock drops between $5 and $10, there is a 90% chance the stock will never go higher than $10.
- When a stock drops below $10, it’s wise to wait for large institutions to start moving the stock first.
Don’t rush into penny stocks thinking you’ll make big returns. In most cases, they are a trap.
Keep looking for better businesses.
Most stocks in Tykr that are On Sale and Watch are typically Mid Cap, Large Cap, and Mega Cap. These are businesses with stronger financials. In other words, these businesses are well-established, have growing revenue, have growing profits, have a lot of free cash, and have a strong balance sheet.
Overall, penny stocks are very weak businesses. If these types of stocks are in Tykr, they are typically classified as Overpriced.