Best Penny Stocks To Buy|Cheap Stocks To Buy

In a world where everyone wants instant gratification and to go rags to riches, it makes sense that they would be looking for the best penny stocks to buy. However, if you want to buy penny stocks because they're cheap, I'm going to ask you to rethink that.

Requested is an expert in buying cheap stocks and can very quickly screen down a list of stocks to buy quicker than anyone I have seen. if you want quick cheap (free) methods to learn how to make money with stocks online, this is it. He talks about why you should buy cheap stock, and what exactly a cheap stock is.

With all other things being equal, the cheaper stock in terms of dollers per share would be the best stock to buy. Unfortunately, things aren’t that simple. A company may offer a hundred thousand shares or a hundred million shares, in either case, a company may be worth a lot or a little. This is what is so confusing to people. If every single company was required only to offer 100 shares and people bought shares in fractions, then a single share would represent 1% of the company. However, with so many more shares available, it can take anywhere between thousands and hundreds of thousands of shares just to own one percent of the company. Of course, the larger the company and the more it’s worth the more shares it will require. Even if you were able to buy 1% of each company, many people would much rather have the larger company as 1% of a 100billion doller company would be 1 billion dollers. Obviously people aren’t going to pay 1 billion dollers per share, so the company must dilute the shares by issuing more so it’s affordible for most people. Ultimately the stock is cheap if you can get it less than what most people in a normal market would pay for it.

Using Zacks, we will go to their research wizard. If you don’t have that, you can simply use their free custom stock screener. What we are going to do is start out finding cheap stocks that are cheap in terms of P/E. So we will screen all stocks that have a P/E ratio of 10 or less. From there, we will also make sure that the PEG is under 2. P/S or price to sales ratio is another important indicator. We want to make sure that each company’s growth and earnings isn’t coming from the liquidation of previous assets, and we want to know that the company is cheap relative to how much it’s actually selling. So we will make sure the companies have a P/S ratio of under 3. For me, cash flow is very important, and I want a company that has the cashflow to pay for it’s own growth and to pay for it’s previous liabilities. I don’t care as much about debt as long as it has the cashflow to cover it. So I want a company that’s cheap realative to it’s cashflow. So we will screen all stocks with a P/Cashflow ratio of 5 or less. Now book value is a way to measure value as well. Book value is what’s left over on the books, it’s the companies assets minus liabilities. If you take a companies price divided by the book value, and you get a number less than one, you have an indication that you can actually buy those assets for less than they’re worth. So if the company bought 100 million in material, and has 20 million in cost, there’s 80 million in material. If buying out all shares of the company would cost 60 million, you’re getting 80 million in material for 60 million. This is one way to get a cheap stock, it’s like buying a doller for 75 cents. You only realize that cash once a stocks’ been appropriately valued, but it’s like using a coupon for your goods. So we will seek all stocks that match their book value or better. P/bookvalue must be one or less. Finally Current Ratio measures the value of a stocks current assets and current liabilities. If A stock has a current ratio of 1 or MORE, that means it has MORE current liabilities then current assets. This means that it doesn’t need to depend on it’s earnings or growth to cover it’s own butt, and it doesn’t have to depend on selling it’s assets to make payments. A company that has more current assets than liabilities is undervalued and thus cheaper than one that doesn’t. Lets summerize the screen and show you the results.

P/E (F1) LESS THAN “10″
PEG Ratio LESS THAN “2″
Price/Sales LESS THAN “3″
Price/Cash Flow LESS THAN “5″
Price/Book LESS THAN “1″
Current Ratio GREATER THAN “1″

So just like that about 30 of the cheapest stocks to buy are found. Guess what... Most of them are not penny stocks! So The common impression on the subject of penny stocks is wrong. However, does that mean that there aren't some gems out there that ARE penny stocks? Of Course, but those are more likelyto go to zero, so a different approach needs to be taken.
Although Requested is known for finding the best stocks to buy, he is also good at finding the best penny stocks to buy now.

For this screen you are going to head over to Zacks and find the free custom zacks screener. Now determine what you consider “penny stocks” For me this means anything under a doller. So go to Price&Price changes and select current price =1.
Now we have 229
Now the thing about penny stocks is there can be panics when companies suddenly go from a positive margin to a negative margin. We want the company to actually have the ability to grow and that requires positive margins.
net margins > 0
operating margin 12 month – most recent > 0
wow, suddenly we’re only down to 25 stocks.
Okay, not the only thing to make sure is that the stocks don’t have negative earnings.
So P/E (trailing 12 months) > 0
wow, suddenly there are no stocks that meet the screen.
Okay, so there’s a possibility that the company is negative now but it’s getting better. For this, delete that last entry and check the forward PE. This is based on the next estimated earnings. And we have 1 penny stock worth buying according to this screen. USOO.OB a trucking company called “US 1 Industries Inc.”.
Now to be fair, not a lot of penny stocks even have estimates. So if you want, you can go through your list of 25 stocks that have been screened and see if some are currently in negative earnings but there’s good reasons why these stocks will not be.
However, instead I would prefer to allow companies with slightly more debt, but positive earnings fit in the screen. So change debt/total capital to less than 9, and put trailing p/e at greater than 0.
Finally, you have 9 stocks that you can look through. the problem is, there’s more things that I would personally want to screen out. For example, I like to make sure that the earnings are actually growing. It’s okay though, if you must buy penny stocks, these are among the best penny stocks you can buy.

CHINA 3C GROUP CHCG
DAC TECHNOLOGS DAAT
DEL GLOBAL TECH DGTC
DIRECT INSITE DIRI
ITEX CORP ITEX
LML PAYMENT SYS LMLP
HEMACARE CORP HEMA
NEUROBIO TECH NTII
ORSUS XELENT TE ORS
US 1 INDUS INC USOO
RADIENT PHARMAC RPC

Personally, I wouldn’t buy a stock with negative growth rate, and all of these happen to have it, and these stocks have too much debt for my taste. But if you want to take risks on a stock, a stock like this with slightly higher debt is at least safer then the rest of the crap penny stocks of the world. Please don’t go making a career out of buying penny stocks, they’re for speculation only. Really, this shouldn’t even be a post, but people keep asking me about the best penny stocks to buy now so I had to at least address the issue. My hope is this will prevent people from making a stupid mistake and loading everything up on a single penny stock, because nothing is for certain, and this certainly is no exception. If you want to buy the best penny stocks in the stock market, then perhaps you do research on all of these 9 companies, and see if everything checks out.

That is the type of info you get as Requested will also show you the best penny stocks to buy now at his best stocks to buy now blog. So which is better? This blogger thinks that it's the cheap stocks and if they happen to be penny stocks than that's all the better. Personally I'm not totally convinced. If you are playing in a virtual stock market game you want low market cap penny stocks that can be moved a lot in a short amount of time. If you want to win the game of life, you have to take some chances. However, be that as it may, you need to understand those chances and prepare for the fact that most of them won't work out.
Personally, I like to look at the difference between the success rate of each one. This requrires more than a screener, it actually requires backtesting software such as Zack's research wizard. This is the fun part, you will actually want to use the Kelly Criterion. The important thing is not always your return on invested capital, but your overall dollar return when using the equivlent money management. This means that you should take the maximum amount of money you invest and multiply it by your return in a system. Then compare it to your other system's potential maximum and compare.

Say one form of trading system has a success rate that allows you to invest 2% of your capital in a given trade and it expects to gain 20% per year average. Another system gains a 12% per year return but it's less volitile so you can invest 4%. if you had the choice between the two and wanted to maximize your return per amount invested (amount invested based on the kelly criterion), with all other things being the same (overall risk that you take), you would actually want to chose the 12% per year strategy with more money invested. Everyone misses this when trying to choose penny stocks or cheap stock. This actually may favor the cheap stock more often than penny stocks, however, a penny stock trader who invests in multiple penny stocks may certainly be better than someone who buys a single cheap stock. Whether you have found the best penny stocks to buy now, or the cheap stocks to buy now, you can count on the fact that he who manages his/her money the best deserves to have more.