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The Worst Penny Stocks
There are many different factors to look at when evaluating a penny stock. You can learn about what to look for in a separate section of the Penny Stocks Guide. Here you will discover warning signs of the worst penny stocks.
The worst penny stocks, ones that you should avoid at all times in all markets, usually have one or several of the following criteria:
Trade on the Pink Sheet markets
Trade for fractions of a penny (ie - $0.092)
Have five letter ticker symbols (the fifth letter means things like bankrupt, failure to report financials, etc...)
Are shares in a bankrupt company that still trade (ie - Enron traded for $0.25 for nearly a year after the company went bankrupt. Those shares then were worth zero.)
Poor reporting history (no regular quarterly or year-end reports)
Did You Know?
Often the companies with the best "story" are the most dangerous investments. For example, a penny stock that is working on a cure for cancer. Great story, everybody is buying shares, the price is going up.
However, companies like that often end up trading way higher in price than is justified, because so many people buy into it. Then, eventually the horrible financial foundation of the company comes to light, and the shares tank.
Always make sure to get involved with companies that have strong fundamentals and good financial positions, rather than just being based on a story.
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