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When you are about to invest in a
penny stock, the number one question you need to ask yourself
is: What's the catalyst?
Without some big event or monolithic development coming down the
road, there's no reason for investors to care about these tiny
companies.
You see, the majority of investors are only interested in making
5%-10% per year. That's pretty much the maximum you can expect
to gain if you are investing in blue chips. Here at Penny
Sleuth, we view the stock market a little differently.
We want the money multipliers - double-, triple-, even
quadruple-digit gains. For that to happen, we need some kind of
spark to set our penny stocks apart from the rest. After all,
there are currently over 6,000 to choose from.
So, what kind of catalysts can make a penny stock pop? Let's
look at a couple big ones:
* Commercialization - After years of research and
development, and sometimes painstakingly long clinical trials
and efficacy tests, there comes a time in any successful start
up company's life when it needs to actually manufacture and sell
its products or services. Just take a look at what happened to
Tata Motors Ltd. (NYSE: TTM)...
As you might already know, this was the growth story of last
year, and it continues to today. Tata is the Indian car giant
that made its mark on the global economy, when it released the
world's cheapest car.
In March of this year, the company commercialized a new product.
It started selling the Tata Nano in India. Investors were so
excited by this car design, they started buying enormous amounts
of Tata stock. Since the company started pre-selling the car,
shares are up 165%.
* Buyout Candidates - Sometimes, it's as simple as
waiting for a larger competitor to buy the penny stock. When one
company buys another, they agree on a price. Many times, that
price is much higher than what the soon-to-be-purchased
company's share price is currently trading. This gives those
shareholders an instant gain.
A few weeks ago, I discussed the consolidation of the soda
industry. Both PepsiCo Inc. (NYSE: PEP) and Coca-Cola
Co. (NYSE: KO) are buying out their bottling operations to
save on expenses and double spending.
Pepsi is in the process of buying its two largest bottlers:
PepsiAmericas and Pepsi Bottling Group. Shares of both of these
companies popped more than 22% the day it was announced. From
their March lows, PepsiAmericas is up 67% and Pepsi Bottling
Group is up 94%.
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* Legal Battles
- The
last of the major catalysts is court rulings. In many cases,
a simple ruling can make or break a penny stock. Hardly any
company has been entrenched in the courtroom more than
TiVo Inc. (NASDAQ: TIVO).
We wrote about TiVo back in December 2007. Its revolutionary
digital recording technology is both a huge moneymaker and a
legal nightmare. You see, plenty of other competitors claim
rights to certain TiVo patents.
It takes a tech geek to decipher the differences between
most of its intellectual properties, which isn't usually a
prerequisite for a judge. For the last five years, TiVo has
been tied up in court with its competitor EchoStar
Communications Corp, now part of Dish Network Corp., over a
patent dispute. The court finally ruled in favor of TiVo,
rewarding the company $103 million plus interest.
Upon the day of the ruling, shares of TiVo jumped 53%. This
gain sent TiVo's stock over $11 per share and out of penny
stock land. That just a drop in the bucket of what a lawsuit
ruling can do for a company. Imagine what $103-plus can do
for an even smaller company...
These are just four types of things to consider when
thinking about buying a penny stock. But even if you do have
the perfect catalyst lined up, that's only the beginning...
Sincerely,
-- Jim Nelson
Editor
Penny Sleuth
P.S.: Penny Stocks can be some of the most lucrative
investments on the market. But you need a plan in order to
succeed...That's where the CXS Money-Multiplier Strategy
comes into play. This scientific system helps me find
enormous gains-- and it's incredibly easy for you. I'll tell
you when to buy and sell.
As you can imagine, the profits can be astounding. Get
access to our entire potentially profitable penny plays
right here...
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The Hunt for the Safest
Dividend
Both Wall Street and Main
Street are looking for something they can be sure of in
the year ahead. And for income investors, that means
finding a safe and rewarding dividend yield. So which of
these companies has StreetAuthority editor Carla
Pasternak determined to have one of the safest dividends
in the market?
A.)
Verizon (VZ)
B.)
American Capital (ACAS)
C.)
Gannett Co. (GCI)
D.)
Archer Daniels Midland (ADM)
E.)
Fifth Third Bancorp (FITB)
(Please click on one the
links above. After you make your choice, we'll show you
the correct answer on our web site.)
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Visit this link to read additional articles from today's
leading market experts! |
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 Paul Tracy
Co-Editor
TopStockAnalysts Digest
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P.S. -- If you're not already a subscriber to one of
StreetAuthority.com's premium investing newsletters, which include a wealth of
additional information and specific investing guidance that you
won't find anywhere else, then please visit the following
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