We’ve mentioned this before, but we can’t say it enough… if you’ve got a question or suggestion for this site, please send it in. We read them all, and respond to every legitimate one. We got this one recently specifically about penny stocks, and why we don’t look at more of them.

The reader writes…

Dear Editor, Just a quick question about the Penny Stock Analysis section on your site. I wondered why most of the stocks are above one dollar rather than penny and/or sub-penny levels as the section implies? I am always looks for start up companies with good products or services that I can invest in with the potential make a nice profit. It would be nice to get your take on up-coming companies who have a chance to go big rather than stable companies who are already turning a profit as in your Small Cap Stock Analysis, which already does this. Just a thought and thanks for your valuable info!

Thanks for the note and great question.

The short answer is, given the choice of making some high-odds money versus swinging for the fences on a few penny stocks that will probably not pay off, we’ll take the former. And, those have been our only two viable choices of late.

The long answer is a little more complex, but still worth discussing.

We’ve had this discussion internally recently….. the choice between focusing on stocks priced under $1.00 (or comparable small caps) versus the choice of trying to just buy low and sell high no matter what the share price. IN THE CURRENT ENVIRONMENT, we’ve been more of the mindset that making some money is more important than scouring through an ocean of true penny stocks just to find a very rare gem. (Not that they’re all ever collectively healthy, but in a normal environment, at least some penny stocks have a shot at producing returns)

Oh, don’t hear us wrong… most penny stocks are crap most of the time. Right now though, almost all of them are crap all the time. Since we face the exact same headaches you do (like manipulation, bad information, inconsistent volume, etc.) when it comes to finding good sub-$1.00 stocks, we’re not going to try and squeeze blood out of  a turnip.

Or, think of it like this….. we’d rather have a 70% shot at a 50% gain instead of a 15% shot at a 300% gain.

We’ll probably stick with the favorable risk/reward scenarios of higher-priced stocks for a while longer, but as the economy continues to strengthen, we expect to find more and more penny stocks worth a look.

Something else to bring up (though the reader didn’t specifically mention it)…. it should be something of a given that we’re not likely to issue a short-term, ’swing’, or day trade alert for any penny stock. We just have too big of a list to mail to, and we have to take a little too long to craft a message to do so.

We frequently talk about penny stock trade ’set ups’ in the community articles though, so you can find those kinds of ideas there. As for what we’ll be focusing on on the newsletter, it will probably be more of the longer-term (days, if not weeks) penny stock trade picks.

Bottom line? Be patient - they’re coming.

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