You guys have a great knack for finding penny stocks that are financially sound. One stock that you noted, was Tesoro Energy which I recently bought last week. This week, and particularly today, it's up over 140%!
Blog [ RSS Feed ]
Calling Penny Stocks Companies
August 16th, 2006
The best thing you can do when researching a penny stock, is to call the company. Talk to the investor relations contact, and ask them a few questions until you get a feel for their corporate optimism (or pessimism).
When I call penny stock companies, I love to talk to them about market share, competitors, and guidance.
Market Share: Ask them what their market share is for their product, and they no doubt will have a number for you. Then ask them what their market share was two years ago.
You see, with penny stocks, having a "25%" market share is not as important as knowing that they used to have 50% or 5%. The trend is what is important in penny stocks.
Competition: Penny stock companies often have some heavyweight competitors. Think Mobile Pro (MOBL - trading at 14 cents) versus Google. Ask them if they consider themselves an acquisition target by a bigger player. Also, how are they going to survive and compete against a powerhouse that may enter the same field?
Guidance: My favorite. How much money are you going to make next year? What will your earnings be? Any new contracts, acquisitions, products...?
Remember, don't focus too much on the literal answers to your questions, because these are no doubt rehearsed, good-feeling, good-sounding comments. What you should pay attention to when talking to investor relations contacts of various penny stock companies is their underlying optimism.
A company on the way up often reveals itself through the excitement, confidence, and attitude of it's representatives. This is especially true of penny stocks.