About Penny Energy Stocks
Penny stocks are low cost stocks that run around $5 dollars or less. Often the official definition has to do with the amount of stockholder equity and total market value. For the investor, however, price is king. While penny stocks tend to be riskier, energy stocks in general tend to be a little more stable.
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Warning
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Expect to investigate the company heads as you select your stock. Not all companies are run by the most reputable people. Just like any other type of stock, you have to have a good product and management to make a niche in the market. Don't forget to use good judgment regardless of the price. Remember any stock mentioned in the article is not a recommendation, simply an example.
Significance
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Many people find stocks in renewable energy, like wind or solar power. Mas Tec Inc (MTZ) started out as a borderline penny stock back in 1990 when it hovered between $4 and $5 a share. The company makes equipment that transfers the power from the turbines to the grid. With the potential for renewable wind energy as an alternative, look into smaller companies that produce energy from the wind and have good management.
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Types
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Biodiesel and ethanol companies offer other options. A number of penny stock companies produce biofuels from corn, grapeseed, algae and soybeans. Each one has benefits, but algae seems to utilize the least amount of space for the maximum return. One acre of algae cab produce enough fuel to drive a car 370,000 miles compared to most biofuels that only get abut 2,000 to 31,000 of miles per acre from the fuel. Many stock options offer green energy solutions. Many of the smaller companies involved in energy, look for solutions that are good for the environment. These types of stocks have great potential for growth. Still other penny stocks are from companies that explore and develop fossil fuel.
Considerations
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Investigate the potential of the product and its market. Some of the rising foreign nations offer a great opportunity to the smaller penny energy stock companies. The company might sell older technology, but it may be perfect for that underdeveloped country. Investigate not only the company, but also the country where it sells its products. Be wary of nations that continuously change leaders, or arbitrarily change the rules of the game. If you buy oil and gas stock, always check the country where the reserves are located.
Prevention/Solution
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Look for the least amount of risk when you buy oil and gas stock. The least amount of risk is from drilling in proven oil fields where large companies know about the reserve, but they need it to be larger in order to pursue it. Smaller companies can turn a substantial profit in these situations. This reduces the risk you take and the expected returns are 20 to 40 percent. The Toronto Stock Exchange is a great place to look for solid oil and gas companies that are penny stocks. These companies aren't start up, but just smaller. Much of the U.S. oil and gas comes from Canada and the Toronto Stock Exchange lists over half the oil and gas companies in the world.
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Resources
- Photo Credit Stock.xchng:Dominik Gwarek(kikashi).
