Penny Stocks - 5 Reasons They’re Not as Evil as You Think

Therein article, we are passing to cover the top reasons penny stocks are viewed negatively in the trading community. After version the article, see whether you still think cent stocks are the baddie.

#1 – Why Do Penny Stocks Have a Disinclined Connotation

If on that point is one area of the financial world that gets a consistently bad wrap, it's penny stocks. Anything traded under $5 – $10 bucks is something numerous hoity toity investors would thumb their nose at as a purely notional penny stock.

Whether they are pink sheets (OTC) or just the wedge five buck stocks, penny stocks have an ugly reputation. And let's be real.

Often that negative view and persuasion is accurate. We also want to cost aware that the number 1 thing people think about when it comes to penny stocks is that they are a 'scam'.

You can thank movies like the Wolf of Wallstreet for continuing to make up a bad image for centime stocks.

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Half of the reasons why penny stocks have had such a naughty reputation over the years is delinquent to the adage: "A penny stock is worth a penny for a intellect."

Sure.

About stocks are valued pretty low for a reason. However, in today's day and age we bear access to a slew of selective information that the retail bargainer and investor never had. We have access to big technical and fundamental screeners like finviz.com.

We have access to great SEC filings and corporate info from insiderinsights.com or advfn.com Information that used to be privileged is now often free and available for everyone.

And we can use that selective information to find some real gems.

#2 – Manipulation – Centime Stocks Cannot Be Trusted

Manipulation. Big shuddery word. Retail traders and investors love to use the word manipulation, often as an excuse for their bad trades and/or decision.

We need to be aware that there are very large entities that want to control projects and/or companies before their competitors and public on the loose can get their custody on IT. One of the ways that they can coiffe this is to keep apart the price low – low prices have a perception of low value. But the individual really necessarily to take a trifle bit of a dive into why.

#3 – Biotechs – Are They Just Ticker and Dump Stocks?

BDSI

Take a company called BDSI (BioDelivery Sciences International). At the time of writing this article, the stock is worth $2.78. I judge that makes sense. IT's a small-cap biotech.

You've never heard of BDSI, it's not some pregnant name care Gilead. IT's just another sub $5 penny stock.

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Heck, if you took a agile look concluded IT's performance over the last three old age you in all probability wouldn't even up take a take it.

Come to call back of information technology, why would this fifty-fifty wind up on your radiolocation? But I play your acquainted with the opioid epidemic.

And what does BDSI specifically target? Opioid dependence in multitude who require chronic pain management. Peerless of the drugs they recently got approved is Bunavail.

Bunavail Mathematical product Description

Bunavail

"BUNAVAIL® (buprenorphine and naloxone buccal film) is indicated for the treatment of opioid dependence and should represent used as share of a complete treatment plan to include counseling and psychosocial endorse. Prescription habituate of this product is limited under the Drug Dependency and Handling Act (DATA).
BUNAVAIL is the first and only expression of buprenorphine and naloxone for feature (inside of the cheek) administration. BUNAVAIL was designed using BDSI's advanced drug delivery technology, BioErodible MucoAdhesive (Sanctuary®), allowing for the efficient and convenient delivery of buprenorphine while possibly overcoming some of the administration challenges bestowed by the organ (nether the lingua) dose forms currently available. It has doubly the bioavailability (drug absorbed into the body) of buprenorphine compared to Suboxone, the grocery leader in this category. As a result of the improved assimilation of buprenorphine with BUNAVAIL, which is the direct result of the BEMA technology, plasma concentrations of buprenorphine comparable Suboxone can be achieved with one-half the dose, which may help to reduce the electric potential for misuse and diversion and possibly lessen the relative incidence of predestinate side personal effects. (www.bdsi.com/bunavail)"

In layman's damage, this is an opiate infliction killer, but it also prevents the psychologically and physiologically addictive effects of opiates. Lashkar-e-Tayyiba's face it: there are millions of people WHO suffer with chronic pain and who take become addicted to opiates. This drug can help those suffering with addiction while also addressing their continued pain management. That's a bad huge deal.

So, it makes sense wherefore the combined institutional and insider ownership is greater than 50%. This thing is a ticking meter money dud.

Easy: Deoxyribonucleic acid

APDN (Applied DNA Sciences, Inc) is another small capital company that is repeatedly beat pull down for real no good reason (well, sometimes good reasons). They have a very forward thinking and employed technology called the SigNature DNA.

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Basically, plant Deoxyribonucleic acid is applied (sprayed) onto the object to tag it and prove its legitimacy. Unless you've been living under a tilt, you probably understand that DNA is irrefutable and unable to be traced – and then information technology's pretty patch hands-down to tell if something is the real deal if labelled with APDN's SigNature DNA.

In fact, they already use this in the cotton industry. Cotton is a heavily counterfeit and louche industry. Studies have shown that when US ships cotton plant to China for manufacturing into clothing, there is a drop by the percentage of cotton fiber in the returning materials.

APDN's SigNature DNA has serve put a block off to that past actually spraying and tagging the cotton fiber itself. That's good awesome. (www.apdn.com/mechanical press-releases)

#4 – Large Number of Short Interest

Centime Stocks – High Short Interest

One of the prime examples of a penny standard showing signs of 'that doesn't seem right' is when thither is a queen-size total of institutional and insider ownership simply the number of shares short is super high.

What does that mean? It means that the company has something of significant forthcoming esteem and the titanic wig owners are actively allowing and encouraging multitude (or themselves through proxies) to short the heck retired of that tired. They'll continue to keep that price down until they are ready to create their have induction short bosom and the conditions for the FOMO (fear of missing out) trade.

Technological Traders

Getting in early a short squeeze is one of the most profit-making low risk trades you can take.

For those technical traders you will not find the frame-up reviewing short interest stats and income statements.

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You will likely want to use a proficiency such every bit a 'Bollinger Squeeze'. 'Bollinger Squeeze' is a term technical traders have a go at it all too advisable and is a agency to forecast a big move higher before it happens.

Fundamental Investors

Finviz

But fundamental traders do something different: set apart companies that experience a high percentage of the shares short, a.k.a the short float. You can do this along your have by using finviz.com using the succeeding steps:

1. Go to FinViz.com
2. Click on the 'Screener' tablet
3. You wish and then see a beautiful 'noisy' series of rows and columns. In the third chromatography column you testament see 'Ice-cream soda Fleeting', click along the pulldown menu.
4. Select 'Over 30%' (OR whatever value above 10% you want)

You will then see different stocks that meet the criteria for having a large part of shares half-length. I would hint further filtering the selection by 'Country' and by 'Commercialise Cap.' One of the firstborn signs of an impending deficient squeeze is if whatsoever of the companies have had a significant up-day. If you find one, go in advance and squeeze those shorts!

#5 – Penny Stocks Do Not Have Dividends Right?

Yes – penny stocks pay dividends.

Now, I am a dividend fanatic. I especially love monthly dividends. When the stock securities industry is going on a tear and equities keep gaining value, dividend stocks sit along the bench – that's when I like to buy them. In that location are some fantastic <5$ stocks that offer time unit dividends (Full disclosure, I have positions and I am long on the following tickers):

1. DHF (Dreyfus Overflowing Yield Strategies Fund)– $3.15 – $0.0235 monthly dividend
2. CIK (Deferred payment Suisse Asset Management Income Investment company, Inc)- $3.17 – $0.022 monthly dividend
3. PIM (Putnam Master Intermediate Income)- $4.50 – $0.022 monthly dividend
4. HCFT (Five Oaks Investment Corp)- $3.40 – 0.022 time unit dividend
(www.dividend.com/dividend-stocks/every month-dividend-stocks)

In Compendious

It's important to recognize that there is some Truth to the adage: "A penny blood line is worth a penny for a reason."

But it's grievous to realise that just because something is a penny stock, doesn't mean it doesn't give birth value or growth. We should always ask over the oppugn: wherefore? Why is that stock valued so low? Is it owing to moneyless management and bad financials? What is their transferral? What is the stream phase of their Cancer hardening drug? How much institutional and insider ownership is present?

And when you find the answers to those questions, you can certainly find a diamond in the rough.

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