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How to find penny stocks: Find evidence of these two factors and you could be onto something big…

by , 12 November 2014

Investing successfully in penny stocks isn't an easy task. There are a lot of little companies listed on the stock market that fall into the penny stock realm.

So how can you uncover the penny stocks with the best potential?

Read on to find out…

Check out who the big shareholders are in a potential penny stock investment

If you find a penny stock that looks good, you need to start digging a little deeper.

One of the first things to check is who the big shareholders are in the company. If a penny stock has managed to attract a fund manager or other significant company to buy shares in its business, this is a very positive sign.

If there are a few big fund managers and companies with decent stakes in a penny stock that means that management has convinced many fund managers of the potential of the business.

These fund managers have obviously done their homework before parting with a cent.

Not only is this a good sign for you thinking about investing in the penny stock, but it makes life easier for the business too. The company will also find it easier to raise funds to grow the business, David Thornton in Penny Sleuth explains.

Check out how many shares directors of the penny stock own too

It’s not just the shareholdings of fund managers and other investment companies you should be interested in. You also want to see directors on the board of the company holding a decent amount of stock too.

See what a director’s holding is in comparison to his salary to weigh this up. You want to see a meaningful holding on shares.

If directors don’t own shares, or own insignificant amounts of shares, then you should be wary. If they’re not interested in the company’s share price performance, why should you?

So there you have it. Find evidence of these factors and you could be onto something big.

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How to find penny stocks: Find evidence of these two factors and you could be onto something big…
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