Best Penny Stock Picks

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The best penny stock picks can be found in a few different industries, including banks, automobile businesses, real estate and energy. Learn about buying into companies that aren't likely to stay low 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 buck? Hi, this is Roger Groh at Groh Asset Management. If you do, are you having trouble getting research? Well, maybe today, we can come up with some ideas of industries that you can look at in which penny stocks are prevalent. Typically, during recessions -- and today certainly qualifies -- the cyclical industries don't do well, meaning we travel less, we don't buy as many cars, we don't buy washers, we don't... And so as sales go down and the financials tighten up and losses creep up, the share prices decline. Why do I suggest those types of industries? In a larger company, management teams tend to be grizzled, and they understand what it takes to survive through the downside of a recession. Plus, 80 percent of the profit typically in a company comes from products created in the last five years. So hopefully, even though things are in the down cycle, they're doing their homework to come up with products that they'll be selling in two years and three and four because their competitors will not be able to do that as they will be...they just won't have the cash flow to do that. Okay. How can you get names of penny stocks? Well, today, we're going to talk more about industries where you're likely to find lots of names. Number one, banks. Not all banks have problems. We've all heard the big names which have taken federal money, but there are plenty of regional banks. In fact, most regional banks are local banks which don't have problems which sell for very cheap prices. Number two, the automobile businesses. Now, we've all read in the papers about the fact that in an average year, typically, there are 90 million cars sold, and last year, there were 68 million cars sold. This year, in '09, how many cars? I don't know. Maybe 50 million. So things are tough, but not all the car companies really have the problems of the U.S. Big Three. So I would urge you to look in the really high end at the car business, maybe especially Japan. Next, the companies here in the U.S., which are cyclical, but which don't have problems, meaning not every home builder has problems. And eventually, as the real estate bubble burns off and the number of unsold homes goes down, we're going to start to build homes again. And there are going to be survivors in there. And then, if I were a trader today, maybe I would look into energy. Why energy? Well, prices of oil have come in half over the last six months, and as a result, the share prices in many oil companies have come down, too. Are oil prices likely to remain low? Maybe for a little while, but it seems to me the global demand for oil is only going up. Hope that helps. I'm Roger Groh of Groh Asset. Thank you very much for spending time with me.

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