Penny Stocks

A penny stock in general trades for under five dollars a share, and as the name implies, sometimes for pennies. Most of the time they’re young companies, or start-ups in speculative markets like mining or technology.

Buying Canadian penny stocks can lead to a big payday when you make the right choice. But the odds against success are high. Penny stocks are almost always involved in riskier ventures, such as finding mineral deposits that can be mined at a profit, commercializing unproven technologies or launching new software.

What’s more, it’s hard for any new company to grow into a profitable business, and it’s even harder in pioneering fields. But it’s relatively easy to launch a stock promotion that purports to have answers to social problems or ways to profit from emerging technologies.

That’s why penny stock promotions are always more common than legitimate start-ups. Penny stock promoters love to make deals—however indirect—with major, household name companies. They find it far, far easier to sell stock to the public if Goldcorp, BHP Billiton or some other major mining company has agreed to look at possibly financing exploration of their mining claims, or if Apple or Intel or some other household-name multinational has agreed to make them a “channel partner” and perhaps someday sell their revolutionary software or “cloud” application. The link with a major gives them instant credibility, especially with investors who are willing to buy penny stocks.

In fact, when a penny stock shoots up on the news of big-company involvement, and the property/program/revolutionary software is still in the early stages of development, it’s often a good time to sell.

There’s room for penny stocks in your portfolio, but at TSI Network we recommend our three-part Successful Investor strategy for the bulk of your portfolio:

1- Invest mainly in well-established, mostly dividend-paying companies;
2- Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; and Utilities);
3- Downplay or avoid stocks in the broker/media limelight.


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Penny Stocks Library Archives

Cash-flow gains lift their appeal

ALAMOS GOLD $7.18 (Toronto symbol AGI; TSINetwork Rating: Speculative) (604-681-2802; www.alamosgold.com; Shares outstanding: 266.3 million; Market cap: $2.8 billion; Dividend yield: 0.4%) owns the Mulatos and El Chanate mines in Mexico, and the Young-Davidson and Island mines in northern Ontario.
The company also has a number of development projects… Read More

Nickel prices lift Sherritt

SHERRITT INTERNATIONAL $1.31 (Toronto symbol S; TSINetwork Rating: Speculative) (1800-704-6698; www.sherritt.com; Shares o/s: 294.2 million; Market cap: $388.4 million; No dividends paid) is now focused on nickel pro duction, with operations in Cuba and Canada. As well, it holds 40% of the Ambatovy nickel mine… Read More

Sherritt buys itself more time

SHERRITT INTERNATIONAL $0.75 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704-6698; www.sherritt.com; Shares o/s: 293.9 million; Market cap: $217.5 million; No dividends paid) has asked for a three-year extension on $720 million of its debt. The junior miner’s plan focuses on three series of bonds due… Read More