What are Penny Stocks?

Many of the first time readers here have heard about penny stocks, but what exactly are they? Most people think of small, thinly traded companies trading for a few cents. Well, sometimes they have it right, but penny stocks are actually any shares trading for $5 each or less.

In general, you'll see some trading for 3 or 4 dollars, while others trade for only fractions of a penny each. I imagine that you understand a company trading at $4.75 per share is generally higher quality than those changing hands for one tenth of a cent.

Why Trade Penny Stocks?

You will often stand to make the greatest return on your investment if they are smaller (and possibly the more volatile). In other words, you have to gauge your risk/reward tolerance as you scoop up shares of the absolute best penny stocks.

You'll find all sorts of great investments that can make you plenty of money, while other low-priced or sub-$5 shares are nothing more than the remnants of once successful companies.

If you get involved in those companies which are fundamentally solid, have great financial strength, leaping revenues, and growing market share, you stand to have your small investment multiply several times over, and probably pretty quickly too.

Avoid Dangers

How do you avoid the dangerous or lackluster investments, and get a piece of the highest quality sub-$5 shares?

For starters, you pay attention to the 3 don'ts of penny stocks:

• Don't buy shares on the Pink Sheets
• Don't buy stocks you heard about for free
• Don't follow free tips, e-mails, or web sites

Finding the Best Penny Stocks

Now, if you abide by the three don'ts, you're ready for the next step: How to find the best low-priced shares.

Did you know that many penny stocks represent America's best undiscovered, up-and-coming companies? Many are trading for pennies a share simply because they are undiscovered or just getting started.

Many of these tiny companies go from obscurity to world renowned in a matter of years, or months! And guess what? They take their investors along for the ride.

Many penny stocks have gone from $1/share to $40, turning a small investment of $500 into $20,000. Investing in high-quality companies early is a great way for investors with limited funds to increase their wealth, without any major outlays of cash.

It all comes down to knowing which of the several thousands of penny stocks out there are going to go up in price. This is where Peter Leeds comes in. He applies his demanding Leeds Analysis criteria to thousands of shares, which reveals those slated for a near term upward move in price.

Of all the penny stocks that Peter Leeds puts through Leeds Analysis, less than 5% pass.

Of those which do pass, Peter and his team go into serious analysis mode, picking the companies apart, and revealing the absolute best opportunities to you each week.