Use these three tips to spot winning penny shares

by , 17 May 2013

There are over 200 penny shares quoted on the Johannesburg Securities Exchange, in which you can invest in. Each week, various contacts will suggest looking at over 80 shares that have some potential. But if you're to make any gains while investing in penny shares, you have to separate the winners from the given universe of shares by eliminating all the obvious losers. Here are three tips you can use to do this…

Billionaire investor Warren Buffett’s strategy is to always look at the downside of any prospective investment and, if it looks too risky, he’ll walk away, no matter how tempting the upside is.

As he puts it: “Rule number one of investment is not to lose money. Rule number two is to remember rule number one”.

Senior Analyst at Red Hot Penny Shares Francois Joubert, shares the same sentiments.

According to Joubert, the filter method of share selection comes in two parts: Non-financial and financial. “These are qualities that should always be the basis for all investment decisions, but are too often ignored in the hype one hears from certain stockbrokers,” warns Joubert.

So what should you look for in the non-financials to determine if a company has what it takes to be a winner?

Use these tips to spot small companies that’ll give you great returns on your investment

  1. Management is crucial. Always check if a company’s senior managers are demonstrating real financial commitment to the company. They must be committed in a financial sense to grow the business and reward their shareholders, “It’s disheartening to see senior managers whose pay levels and annual remuneration increases bear little relationship to the company’s record of adding value for shareholders,” says Joubert.
  2. Let the trend be your friend. It’s usually better to invest in shares that are on an upward trend than ones that are on the reverse, a sensible investor should let the trend be his friend. “A share may look cheap, but if its price is on a persistent downward path, it often means someone, somewhere, knows something bad,” warns Joubert. If you were aware of similar information, chances are you wouldn’t think the share was still cheap.
  3. Listen closely – what’s said, is often not what’s meant. Reading between the lines isn’t always easy, but sometimes it pays to take notice of hints that all may not be well. This involves being a “psychologist to some degree, but often the small nagging voice deep down inside indicates danger,” Joubert advises.

There you have it! Using these tips will help you separate the winners from in the penny share universe from obvious losers.


Related articles

Related articles

Watch And Learn

Trending Topics


Princess phillip 2013-05-23 16:22:34

Hot does penny sharer invest work

Maureen Jantjies 2013-05-23 16:19:23

Want to invest bt am nt sure how

© 2016 All rights reserved.

Contact Us | Privacy Policy | Our Products | About Us | Disclaimer | Glossary | Our Shop | Welcome To Trading Tips | Welcome to Money Morning | Events Calender | Welcome to FSPInvest

Note that FSP Invest, a division of Fleet Street Publications (Pty) Ltd, is a research house and not a registered broker, financial advisor or financial service provider. Our editors and customer services teams also do not give personal investment advice. The advice in this website is general advice only and may not be appropriate to your particular investment objectives, financial situation or particular needs, so before investing or if in any doubt about your personal situation, you should seek professional advice from a stockbroker or independent financial adviser authorised by the Financial Services Board. 
We research our recommendations and articles thoroughly, but disclaim all liability for any inaccuracies or omissions found in this publication.
Remember: Never invest more than you can afford to spare and that the value of any investment, and the income derived from it, can go down as well as up. The past is not necessarily a guide to future performance.
Editors or contributors may have an interest in investments commented on in this newsletter. However they have signed restraints to prevent the abuse of their position as contributors to this publication.
© Copyright 2016 Fleet Street Publications (Pty) Ltd. Registered in SA No: 1999/019170/07, Vat No: 4430185282
powered by
Fokus Digital Services