Knowing How Penny Stocks, Pink Sheets and Micro Caps Differ Can Be A Profitable Journey
Its easy to use the term penny stock interchangeably with pink sheet. The same goes for bulletin board and micro cap. Unfortunately, investors are doing themselves a great disservice by mentally lumping all four distinct descriptions into one category. More specifically, investors may be overlooking tremendous opportunities by not acknowledging their differences.
One way to educate yourself about the true definition of these terms is to use word association. Think of an aspect of the term and come up with a commonality with the actual name.
Whether you consider a penny stock as one that trades under $1 or one that trades under $5 really doesnt matter. Although the universe of stocks to choose from will definitely expand as the stock price rises.
If you want to short or buy a penny stock on margin, make sure you know whom youre doing business with. Some brokerages will not allow shorting of any stock under $5; others dont place a limit. So, choose wisely.
Many low-priced exchange-listed stocks are cheap due to a temporary situation that once cleared up, will send the stock higher. The company size or its exchange do not determine its status as a penny stock"which can be a pink sheet or bulletin board stock (see below).
One of the riskiest types of stocks to invest in is a pink sheet stock, traded on an over-the-counter quotation system. Before you completely eliminate them from your investment world, its worth doing a little homework because this stigma isnt always deserved.
Where a foreign company chooses to list their stock is not a gauge of credibility. For some technical or logistical reason, the stock cannot be listed with one of the exchanges or the bulletin board system.
If viewing weekly financial statements of a company is a deal breaker for you, then stay away from pink sheet stocks. The majority of them dont disclose audited accounting statements because they arent required to do so.
However, if a stock isnt listed on the NYSE or AMEX but rather the OTC market or as an OTCBB stock, it still means it has met SEC reporting/disclosure requirements and is considered to be of fully reporting status.
This may come as a surprise, but the bulletin board system is not the only over-the-counter game in town. Both pink sheet and NASDAQ markets are OTC markets.
Bulletin board companies dont consider share price when determining if a stock should be listed there, but market cap may be.
Some bulletin board stock can be stronger and more productive than many exchange-listed stocks, so dont inherently steer clear of bulletin board names, or necessarily have blind faith in the stability of any exchange-listed stock.
When it comes to determining is a company is considered a micro cap, share price doesnt matter, but it usually has a market cap of $250 million or lessgive or take a few million.
You may think that the companies listed on the New York Stock Exchange are bigger and stronger than all the others, but thats not true. The minimum market cap stands at $25 million, so even a micro cap stock can make the NYSE.
Bottom Line
By not knowing the key and unique ingredients of penny stocks, bulletin boards, pink sheets and micro caps, you might overlook or steer clear of an investment that might be a benefit to your portfolio.
Your most educational website for information regarding penny stocks to top stock picks is www.smallcapnetwork.com. We offer timely and meaningful market commentary and trading ideas. Sign up for the free e-newsletter today. - 23159
One way to educate yourself about the true definition of these terms is to use word association. Think of an aspect of the term and come up with a commonality with the actual name.
Whether you consider a penny stock as one that trades under $1 or one that trades under $5 really doesnt matter. Although the universe of stocks to choose from will definitely expand as the stock price rises.
If you want to short or buy a penny stock on margin, make sure you know whom youre doing business with. Some brokerages will not allow shorting of any stock under $5; others dont place a limit. So, choose wisely.
Many low-priced exchange-listed stocks are cheap due to a temporary situation that once cleared up, will send the stock higher. The company size or its exchange do not determine its status as a penny stock"which can be a pink sheet or bulletin board stock (see below).
One of the riskiest types of stocks to invest in is a pink sheet stock, traded on an over-the-counter quotation system. Before you completely eliminate them from your investment world, its worth doing a little homework because this stigma isnt always deserved.
Where a foreign company chooses to list their stock is not a gauge of credibility. For some technical or logistical reason, the stock cannot be listed with one of the exchanges or the bulletin board system.
If viewing weekly financial statements of a company is a deal breaker for you, then stay away from pink sheet stocks. The majority of them dont disclose audited accounting statements because they arent required to do so.
However, if a stock isnt listed on the NYSE or AMEX but rather the OTC market or as an OTCBB stock, it still means it has met SEC reporting/disclosure requirements and is considered to be of fully reporting status.
This may come as a surprise, but the bulletin board system is not the only over-the-counter game in town. Both pink sheet and NASDAQ markets are OTC markets.
Bulletin board companies dont consider share price when determining if a stock should be listed there, but market cap may be.
Some bulletin board stock can be stronger and more productive than many exchange-listed stocks, so dont inherently steer clear of bulletin board names, or necessarily have blind faith in the stability of any exchange-listed stock.
When it comes to determining is a company is considered a micro cap, share price doesnt matter, but it usually has a market cap of $250 million or lessgive or take a few million.
You may think that the companies listed on the New York Stock Exchange are bigger and stronger than all the others, but thats not true. The minimum market cap stands at $25 million, so even a micro cap stock can make the NYSE.
Bottom Line
By not knowing the key and unique ingredients of penny stocks, bulletin boards, pink sheets and micro caps, you might overlook or steer clear of an investment that might be a benefit to your portfolio.
Your most educational website for information regarding penny stocks to top stock picks is www.smallcapnetwork.com. We offer timely and meaningful market commentary and trading ideas. Sign up for the free e-newsletter today. - 23159
About the Author:
James Brumley is an expert in the small stock arena covering penny stocks and small cap stocks for over 10 years now. Investors with an appetite for high risk/reward investment ideas should consider getting his free newsletter publication by visiting www.smallcapnetwork.com and subscribing.
posted by X - Men @ 4:07 AM
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