Blog : IR Penny Stocks

by Peter Leeds on July 25th, 2011

The following blog entry is directed towards penny stocks, and investors in penny stocks, but is also applicable with other types of shares.  Note that with penny stocks, the guidance in this article is very important.  Do not think of investing in penny stocks without calling the companies from time to time. 

To be publicly traded penny stocks, one of the requirements (among others) is for the company to have an investor relations person or department.  Their job (among other things) is to answer the questions of prospective and current investors.  You will find it quite easy to find the IR contact info for most penny stocks, on their web sites or in their press releases.

It is their job, a duty to which they are bound, and most penny stocks generally enjoy doing it.  In fact, the better the IR penny stocks have, the more likely investors are to buy those penny stocks.

The funny thing is that with penny stocks investors never take advantage of this situation.  They never call.  I'm not sure why, but you'll almost never meet someone who has phoned the investor relations contact of the penny stocks they are interested in.

It is easy, inexpensive, and will do more to supercharge your trading results in penny stocks than just about any amount of online research.  A brief 15 minute phone conversation could mean the difference of thousands of dollars to you, in your penny stocks trades. 

Although no one ever seems to take my advice about this topic, I will stress it again anyway - I highly suggest that with penny stocks you should call the companies and ask questions.  Do this for both penny stocks you are interested in, and those penny stocks that you already own. 

In fact, call them again every three months.  It is your right, and they are getting paid to answer your questions.

Here are some suggestions of what you may want to ask the penny stocks IR representatives:

- What is the outlook for the company in the next six months?  Next three years?

- Who do you consider to be the company's competitors?  Are they big companies, or penny stocks?

- What is the outlook for the industry?

- Penny stocks can be very volatile.  What will be the short term price drivers (meaning what events will move the share price)?  What about long term price drivers?

- Do you anticipate the head count increasing or decreasing going forward?

- Do you anticipate any mergers or acquisitions involving this company in the next couple of years?

- What guidance can you provide about revenues, expenses, earnings?

What you'll generally get with penny stocks is a lengthy answer with lots of details, from even the shortest question.  This is especially true with penny stocks. That's exactly what you want.  Let them talk, pay attention to what they are really saying, and try to glean hidden gems of information that you would never have gotten from simply reading their press releases, or surfing the web sites of the penny stocks.

Be polite.  Take notes.  Get their name and tell them you will call back with further questions if you have any.  Thank them for their time.

This will generally result in much improved clarity about the underlying penny stocks, and help you make far superior investment decisions.  With penny stocks, always call the companies.