What Are Penny Stocks?

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Penny stocks refer to companies that sell for less than a dollar, but the definition is often stretched to include companies that sell for under five dollars. Find out how a penny stock could be small in the U.S., but large in another country with help from a portfolio manager in this free video on penny stocks and investments.

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Video Transcript

Do you like to buy and sell companies that sell for less than a buck? Hi this is Roger Groh at Groh Asset Management. If you do, then you like to buy and sell penny stocks. Technically those are companies that sell for less than a dollar. But the definition frequently gets stretched to talk about about companies that sell for under, depending upon the discussion, maybe 4 dollars or maybe even 5 dollars. The similarities, thinly traded, bit spread between bid and ask and a lot of fraud. One note though, you would think that all penny stocks would be tiny, just because in many cases the share prices are tiny, but sometimes they US price is tiny, but the price in the country where that company may be based could be very large. Also, companies that have financial difficulties here in the Unites States, frequently sell down to a break up value and you can have a formally very large business selling for a very cheap price. Want an example? Look at US banks as a proxy for that today. Or, US auto manufacturers as a proxy for that today. There are among the biggest companies in terms of employees but among smallest in terms of share price. So penny stocks traditionally sell for less than a buck. I'm Roger Groh with Groh Asset, thank you very much for spending time with me.

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