How to Buy Alternative Energy Penny Stocks
When it comes to playing the stock market, keeping a small portfolio of promising penny stocks is very attractive. After all, for a few hundred bucks, you can buy a couple thousand shares in the hopes that one day your company explodes on the landscape. Well here are some tips on how to find great penny stocks whose company focus is alternative energy.
- Difficulty:
- Moderately Easy
Instructions
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1
Define what alternative energy is within the market. It seems that every few months there is a new "hot way" to create alternative energy. Because the paradigm is always changing, do some research on what that hot item is in the market. Common alternative energy sources are wind, solar, ethanol, corn, soy and more.
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2
Think about what makes the most sense for the world's demand for energy. This is where the mark of a great investor is made. A great investor will be ahead of the curve and realize that the play is not solar energy, but wind energy (as an example.) Think about what the world is building and what it needs to run those items. For instance, a battery powered car needs a lot of copper. This is because batteries produce less horse power. Therefore the cars need to be lighter to reach normal traveling speeds. So though "copper" is not a natural alternative energy play, it is when you look at the greater landscape of where the world is headed.
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3
Search companies that specialize in the items you think are vital. The important thing about a penny stock is that the company is real. Meaning you can go to their headquarters and see them producing ethanol, or see them making solar panels. So many times penny stocks are shell companies for losing ventures. Physically being able to see what they're producing will save you a lot of heartache.
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Check the company's financial record. Now let's be honest, there's a reason a company is a penny stock, because their earnings are in the infancy stage. What you want to see when you look at the financials (which are required to be published every quarter) that each quarter they are making more and more money. Also, that their debt is shrinking (every company needs seed money) and that their profit margins are healthy. This means on every item they sell or produce they are making a decent amount of money. That percentage will vary in each industry.
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5
Watch the stock for a decent amount of time. Penny stocks usually trade low volume. This means that they can spike and drop rapidly with just several thousand shares being traded. You want to make sure when you purchase the stock that you are not buying in because the company sent out a bunch of junk email (this is a common practice which people get caught in.)
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Buy the stock in thirds. Determine how much money you want to invest. Then buy a third of it. Wait several weeks before buying again. This way if it goes up, you've made a little money. If it's gone down, then you have a shot to buy it lower which will make the average price you purchased the stock at closer to the current valuation.
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7
Do homework on the companies that you've invested in. Just because you bought the stock doesn't mean you sit back and forget about it. Make sure to keep up on the financial information. If the company starts to tank, then cut your losses and look for other alternative energy penny stocks. If you're making money, then ride that pony all the way to the bank.
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Tips & Warnings
Think of investing in penny stocks like gambling in Vegas. You should only use recreational money which you can afford to lose, as many times you often do.
