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Look for this key piece of information to help you uncover promising penny stocks

by , 07 November 2014

When you're trying to find penny stocks to invest in, there are literally hundreds of things you can look at.

There's an abundance of data in a company's financial statements, including profit margins, growth rates and balance sheet ratios.

You can also look at what the share price has been up to.

But there are some other factors that you should look at too. These can give you clues about a company's future.

So what type of factors are these?

Read on to find out…

Check who the major shareholders are in a penny stock

This may not be something you’ve looked at before. But you can tell an awful lot about a company by checking who the current major shareholders are.

This type of data isn’t as clear cut as certain ratios or other financial events. So you need to use some of your own judgement to interpret the information.

So the first thing you need to do is look at the financial statements of a penny stock. Any shareholder with a significant stake in the company, usually over 3%, will appear in the financial statements.

You may also find this information on the company’s website, David Thornton in Penny Sleuth explains.

When these shareholders make any significant buy or sells in their stock, the company will also notify the market on the Johannesburg Stock Exchange’s SENS (Stock Exchange News Service).

Certain shareholders can be a very positive sign for a penny stock

You can tell a lot from the big shareholders in a company. If you find that a big fund manager or a big company is one of the major shareholders in the penny stock you’re looking at, this is generally a good sign.

It can show that this big company has a lot of faith and belief in the potential of this penny stock.

So there you have it, look for this key piece of information to help you uncover promising penny stocks.

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Look for this key piece of information to help you uncover promising penny stocks
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