How to Purchase Penny Stocks

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When purchasing penny stocks, the first step is to contact the company that's been identified or the trader, and inform them of these intentions. Discover how to look up penny stocks in data screening operations with help from a portfolio manager in this free video on penny stocks and investments.

Part of the Video Series: Penny Stocks
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Video Transcript

Do you like to buy companies that sell for less than a dollar? Hi this is Roger Groh at Groh Asset Management. If you do, then you like to buy penny stocks. Remember in penny stocks the person that sells you that share is probably getting paid in two ways, one is they're getting a commission off of every share, the second way is they're keeping the spread between the bid and the ask in that stock. So don't believe them when they just tell you that they're getting commission. There's a tremendous amount of fraud in the penny stock area and you need to be smart about things. For me though, what I would do would be to contact the company that you've already identified that you're willing to buy stock in or to contact the trader and tell them ahead of time that you were looking to buy or sell shares in this company. The reason? Trading is probably very thin in that stock and they are always looking for offsets to trades that they have to do, especially if they have a market in that stock because the value of what they own will go down as long as they have an overhang of stock to sell. Where can you get a list of them? I'd start with Bloomberg and Reuters. They're the largest, most efficient data screening operations and you can search for companies of any revenue size and any dollar size. If it's less than a buck, it's a penny stock. Hope that helps, don't get stuck with bid and ask and commission. If you can do it, get it wrapped. I'm Roger Groh with Groh Asset Management, thank you very much for spending time with me.

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