Talk to most people and ask them about the OTCBB markets, and you’ll likely get either a story about someone who made it big or someone who lost it all. Like Las Vegas, investors can always tell you a story. The question for you is simple: is this a place to invest your hard-earned money.

The answer is yes and no. The key is in recognizing the risk involved. Keep risk to a minimum by identifying which penny stocks have potential, and which is a trap, and you may find yourself in the staring role of one of those stories about the guy who made it big. If you fail to take heed of the warning signs, you’ll find your money, hopes and dreams fade just as quickly as gamblers in Las Vegas.

The very fact that penny stocks trade at such low volumes increases the risks involved in investing in them. The recommends potential investors in penny stocks to be aware of the fact that the low trading volume of these stocks makes it likely that in times of needs buyers will be rare if not impossible to find. Finding accurate quotes for prices is also difficult which increases the possibility of the investor losing his entire investment.

Despite the risks involved, micro cap stocks are often attractive investments to investors for various reasons. If you are new to investing and looking for the chance to return a high yield for a relatively low investment you are likely to come across some penny stocks. It’s not surprising that investors are attracted to penny stocks. A move of a few hundreds of a penny can mean big returns for you. For a $0.10 stock to move up 20% requires a move of only $0.02. If the stock moves to $0.20, you have doubled your money. If the stock starts to move, you can double or triple your money within days. You won’t find that kind of return on the major stock exchanges.

the price of penny stocks can drop just as drastically and equally fast. Those who are inexperienced investors would do well to avoid penny stocks until they have a better understanding of how things work. It is also important to note that because of the relatively low ‘worth’ of the companies that are often listed on the OTC they are often considered questionable investments. Stocks that are listed on the Pink Sheets do not have to follow the same stringent reporting to shareholders that securities on the major exchanges have to follow. Some of these companies have such a limited financial history that no accurate determination of their actual value can be made. Many of these companies are either very new or dangerously close to bankruptcy.

There is also a strong potential for fraud with some buyers artificially ‘enhancing’ or driving the costs by buying large amounts of shares and raising the perceived value of essentially worthless stocks. Most investors who fall for this lose many when it comes time to sell.

A common definition for micro cap stocks is any stock that trades below $5.00 per share.

Penny stocks are not for everyone. Consider speaking to a financial advisor to see if trading penny stocks fit in with your risk tolerance.

Before you decide to avoid penny stocks, remember, that not all of them are ripe for fraud and manipulation. Many companies seek to expand the growth of their business by seeking out investors who are willing to fund that growth, in exchange for shares in future success. Many of these companies will find themselves in OTC listing and move onto larger exchanges.

Decreasing your risk is easy. Take the time to learn about the companies you are looking to invest in. If they know how to make money, you are buying a growing company. If you are looking at buying an idea, you may find your shares are not worth the paper they are written on. You need to be careful.

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By: Christopher Smith

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Monday, October 11th, 2010

A company that has shares that are listed for sale at a price less than $5.00 per share is categorized as a penny stock and there are plenty of micro cap stocks going cheap! You can start investing in micro cap shares without needing a lot of cash to start with and that can make investing in penny stocks a great way to learn about the stock market.

Small cap stock investing is associated with a lot of hype because investors are attracted to the promise of making large returns with a small initial outlay. But do many stocks start at 10 cents and go to $5.00? Although it is easier to own a shares in a company that can double i.e. go from 20 cents to 40 cents than it is for a stock that is $20.00 to double to $40.00 the cheaper entry price comes associated with higher risks. Penny stocks are generally very illiquid which means their shares can often trade infrequently and they have in general less shareholders.. Shares can drop very quickly and you could find in a very short time that you have ended up losing your entire investment. If this sounds too risky to you then you will do much better investing your money into other, safer investments.

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So if investing in penny shares fits your risk profile you need to know where to locate them.. You wont find micro cap stocks listed on the NASDAQ or the NYSE or any of the other large exchanges, instead you must look for them at ‘over the counter’ exchanges such as the pink sheets or the OTCBB. Penny stocks do not fall under the same regulatory procedures as other more conventional stocks, so even though they are legal they are still risky.

Small cap stocks are inexpensive to buy and that makes them attract to investors however you should refrain from investing all your money into the one stock but instead diversify into a number of stocks to spread out your risk.

A micro cap stock may be cheap to buy but that doesn’t always mean that it will be an investment that will perform well. Due to the nature of micro cap shares, investors can become a victim of fraud so it is crucial that you always check out the stocks before you buy.

After you have found some companies you like the look of you can watch their progress for a while and then decide if you want to buy some shares in them. Never just follow someone else’s tip blindly, but investigate the company yourself and then watch the stock to see how it tracks before investing..

You can reap the rewards from investing in the small cap stock market as long as you set yourself aside some time to learn all you can about what you are looking to invest in. You can apply what you learn by selecting some cheap, good value companies and the more you learn the better you will become and the more money you will make!

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If you haven’t heard of penny stocks, maybe you should stop and read this. penny stocks, as odd as it may seem, are responsible for the vast majority of stock trading in the US each day, accounting for over three-fifths of the NASDAQ stocks traded and over three-quarters of the stocks traded on the NYSE. But what are penny stocks, really?

Penny stocks, as their name implies, are stocks with a low share price, often under a dollar. But this does not mean much in terms of their trading, because they are most often traded in lots of at least a thousand, and more often tens of thousands, of shares.

What are penny stocks when seen by entrepreneurs? Suppose you have a company selling widgets, and everyone who buys your widgets raves about them. You’d like to sell your widgets to the entire world, which really needs good widgets, but you don’t have the money to manufacture them in sufficient numbers. So you decide to raise money by taking your company public. You need a million dollars, and you can sell your stock at any initial price you like.

But the chances of your being to sell a million shares of stock at $1 each are much better than your being able to sell 100,000 shares at $10 each, because more people will be willing take a chance on an unproven widget company for $1 than for $10. Same company, same amount of money, but cheaper stock. In your case, the question ?What are penny stocks?? can be answered with ?The way to get my company public.?

But for stock traders, the question ?What are penny stocks?? can produce multiple answers. Some will say that any stock which trades for less than $1 is a penny stock. Others say that a stock can be classified as a penny stock depending on the total market value of the company issuing it. Others have specific categories into which a stock must fit before being classified as a penny stock.

But all traders on the buy side of a penny stock trade will agree that penny stocks are the ones most likely to rapidly escalate in price and bring them substantial profits. And for those holding them, the question ?What are penny stocks?? can be answered with the statement that penny stocks are the ones you sell as soon as they are in profit, because they are simply too volatile to hold long term. In the penny stock world, the best time to take profits is as son as you have them.

And for the investment industry, the question,? What are penny stocks?? is answered with the single word,? Opportunity.? For the traders, they are an opportunity to make returns unheard of in other investments: for brokerage houses, they are a major source of trading commissions. For startup companies, they are the opportunity to grow. Penny stocks, for all their volatility, are an essential part of the American economic landscape.

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By: Wade Robins

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When you decide to participate in stock exchange, you want to understand clearly, what you are bidding on. When you have a comprehensive understanding, it will reduce your risks.

When joining stocks you want to consider the type of stocks first. You have the Forex Market Exchange, penny stocks, stock market, etc to consider. When you participate in stocks, you have to consider shares also. Shares generally are traded in some instances as small percentages factors into current market trends.

With penny stocks, these shares can increase as much as five bucks, which produces fewer risks than common stock market exchanges. The diminutive traders however could turn rewarding yet your stakes may rise.

You can usually invest in companies or orgs that invest in stock markets. This is important, since you can reduce risks by understanding what companies present the best outlook for investment.

In addition, if you choose penny stocks you want to know when the right moment is to invest. If the market is high, you could generate a few thou…yet when the market is low, you could come out with a dollar. This is not true in stock market exchange. At what time the risks are higher if the market is low. Therefore, you do not want to invest at this time unless you know what you are doing.

On the other hand, Forex markets, when the market is low it is sometimes the best time to wager.

Traders that invest in the penny stocks often familiarize self with the greater North Stock Markets. With any stock, you can reduce your risks by understanding these markets. stock investments often shift, and quickly change. You want to keep pace with these shifts and swift changes.

With any stock, you must open an account to participate. If you are joining in penny stock, you may want to review the BC accounts, which is commonly referred in the stock world as the Broker Accounts, or brokerage.

Brokers play a large part in stock market. Brokers generally charge clients a small fee, which pays the buy/sell fees. Brokers will not tell you how to invest in stock marketing, so know this. You should never expect a broker to inform you about bids/asks, lows/highs, buy/sells, etc.

It is your responsibility to keep up with stock market changes. For this reason, you want to understand when is the ripe time to sell and buy stocks. Does this before you open an account?

The risks in Forex, penny stocks, or the stock market exchange are steep at times. For this reason, you want to read stock news, newsletters, ads, books, and other great resources to reduce your risks when participating in stocks.

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When looking at what are the best penny stocks to buy right now in a down economy one needs to consider the most effective way to play the penny stock markets.

If you are new to micro-cap stocks then you should understand that these types of stocks are best suited to short term buys and sells rather than long term investments like big board stocks.

The penny stocks market is a fast moving market but there are always bargains to be had like any other investments. If you are plugged in to a good program then all you need to do is understand that setting buy and sell limits is going to be the most stress free way of trading.

Many of the top players in micro-cap markets are day traders that will watch the markets continually in order to move fast when an opportunity occurs. The problem is that most of us do not have all day to sit and watch the markets. I know I certainly do not have the time.

This is way I have learned to set up my sell prices to make sure I get the profit desired as well as cut loses if things start to go south. This has allowed me to play the penny stocks game pretty much daily without having to be glued to my computer all day.

Getting good penny stock advice allows me to get into a stock at the right point in a cycle as many of the micro-caps will go through these cycles on a regular basis.

In reality the types of companies you look for when trying to figure out what are the best penny stocks to buy right now in a down economy are not always the same as what you would pick in blue chip stocks.

Looking into what types of industries are going to be hot in the coming year is a good start but not always a winning formula for micro-caps. This is because, as stated, these are not traditionally long term investments but short term trades and industry does not always tell the tale.

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Despite the ominous warnings by the Securities and Exchange Commission cautioning investors against the controversial yet potentially lucrative business of day trading, people attempt to try and attain day trading skills, and a day trading stock tip is literally worth it’s weight in either gold, or dross! Below is some information on learning trading techniques, the risk you may incur, and techniques for becoming a successful trader.

Just what is day trading and how do individuals gain day trading skill? Day trading is the act of quickly buying and selling stock throughout the day in the hopes to profit from the marginal changes in the market for that specific day. Ideally, day trading strategies allow investors to garner profits from the fractional increases in the market.

Day traders observe a particular set of indicators when figuring out whether a stock is suitable for day trading. First, the stock must have high liquidity. This means that the stock in question has a large number of buyers and sellers. The liquidity allows day traders to rapidly buy and then sell stock. Liquidity is created by the volume of transactions on the market, the number of outstanding shares, the total number of shareholders and the number of market makers. Many stocks on the NYSE and NASDAQ have a high degree of liquidity.

A day trader also looks at volume individually, in addition to using it as criteria for liquidity. To qualify for day trading, a stock should trade at least 500,000 shares a day. Stocks with 500,000 trades a day or more enable the day trader to buy or sell a large amount of stock without greatly affecting the price of the stock. Volatility is another factor in evaluating a stock for day trading. The phrase refers to the actual or expected price movement of the stock. This movement is up or down over a period of time. Day traders look at the pattern and volatility of stocks over an individual day. Stocks that change price several times over one trading day are good candidates for day trading. A fluctuation of at least $2.00 per day is recommended.

Finally, a day trader looks at the price transparency of stock. This term refers to the ability to collect information on the order flow of a stock. Also called market depth, price transparency helps the day trader determine just how much money there is to be made on a certain stock. The NASDAQ II quote system offers data on all bids. Day traders who arrange to access the NASDAQ level II quote screens can assess the performance of a stock and determine its swing in price.

While these trading techniques are totally legal and totally ethical, they are highly risky. Day traders generally buy on borrowed money with the hope that they will realize higher profits through their acquisitions and sales. People who are called “pattern day traders” by the NASDAQ and NYSE must have at least $25,000 in their accounts and can only trade in margin accounts. Margin accounts are brokerage accounts in which the broker lends the investor cash to purchase securities. If the value of the stock drops dramatically, the investor is required to deposit more cash to cover the margin or sell the stock. The SEC warns against day trading and acting on a day trading stock tip, and has taken many steps to inform people of the corresponding risks.

The first few months, a huge majority of day traders have massive financial losses and only a few make it through to become profit-making day traders. For this reason, day traders should only invest cash that they can afford to lose. They should never invest money reserved for necessities like living expenses or education funds.

Bear in mind that day traders do not own stocks for longer than a few minutes at most. Stocks are never kept overnight because of extreme hazards of prices changing to the detriment of the trader. Day traders do not invest, rather, they hypothesize on the movement in price of a stock throughout the day.

There are numerous websites whose sole purpose is to make money from those who seek a day trading stock tip. These websites promise quick results and sell hot tips to their members for a fee. The sources are generally paid to make these recommendations and should be avoided. Seek the advice of a proven professional, and take plenty of time to discover trading strategies for longer term success. Remember, there is no quick money, and day trading skill is often paid for with debilitating stress and cataclysmic losses.

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By: ron king

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Private sector schools are stepping in to meet the growing demand for higher education. This is leading to more opportunities for investing in an education stock.

Going back to school is certainly not a new trend. For many years adults have been trading in 9 to 5 schedules for text books and classrooms. Others have opted to continue working regular jobs and taking on classes at night or on the weekends.

Today, the going back to school is more popular than ever as unemployment rates continue to remain high. Some are going back to school for the same reasons as always, to move further up the career ladder, to pick up specific skills or knowledge that will benefit their current career or for personal enrichment.

Lately, a new movement has taken shape in the higher education arena. Individuals who hadn’t considered going back to school are doing so mainly because they were laid off and have had no luck finding work in today’s economy of 10% unemployment.

That is not the only new observable fact in higher education. Private sector schools like DeVry (DV – Analyst Report) and Lincoln Educational Services Corporation (LINC – Snapshot Report) are stepping in to meet the growing demand for higher education as colleges and universities struggle amid an environment of shrinking state budgets and endowments.

In DeVry’s recent fiscal second-quarter report, President and CEO Daniel Hamburger said, ?At a time when state budget cuts and shrinking endowments are making it difficult for colleges and universities to meet the increasing demand for quality education in this country, the private sector is playing an important role in helping to educate our country’s workforce and ensuring that we remain competitive in the global marketplace.?

Because of the increasing demand for higher education in the private sector and in light of the stellar second-quarter results delivered by DeVry, I decided to delve into a few education stocks.

In addition to DeVry (DV – Analyst Report), the education stocks I looked at are Strayer Education Inc. (STRA – Analyst Report), Lincoln Educational Services Corporation (LINC – Snapshot Report) and Apollo Group Inc. (APOL – Analyst Report).

Setting the Stage for Other Education Stocks

Lets start with the education stock that has already reported. DeVry (DV – Analyst Report) turned in a robust second quarter.

Earnings of $1.00 per share topped the previous year’s 59 cents and exceeded the Zacks Consensus Estimate by 20.5%. DeVry boasts a solid track record of beating the Zacks Consensus Estimate, missing forecasts only once since 2007.

The company’s second-quarter revenues of $904.1 million were up 34% year-over-year.

Shares of DV spiked 13% on the strong results. As the market sold off in recent sessions, shares have declined a bit. The recent dip can be a great buying opportunity as DeVry’s fundamentals point to continued strength going forward.

The Zacks Consensus Estimate advanced on the strong quarter. For the fiscal year ending June 2010, projections of $3.44 per share are up from $3.23 over the past week. For the following year, forecasts of $4.16 were increased from $3.93 over the past week.

The company’s valuation is decent as evidenced by a forward P/E of 17.5. DeVry’s balance sheet shows no debt. As an added bonus, DeVry rewards shareholders with a dividend yield of 0.33%, while most education stocks pay no dividend.

3 Education Stocks That Could Make You a Smart Investor

If DeVry’s results are any indication, investing in the following 3 education stocks before they report may prove to be very lucrative, especially when taking into account their strong fundamentals.

While all the education stocks featured in this article have a solid record of exceeding earnings expectations, Strayer Education Inc. (STRA – Analyst Report) stands out as it has consistently topped the Zacks Consensus Estimate dating back to April 2005.

Strayer is scheduled to report fourth-quarter results on Feb 11.

The company saw third-quarter earnings of $1.21 per share, outpacing the previous year’s 83 cents and surpassing the Zacks Consensus Estimate by 4%.

In comparison to the other education stocks in this article, STRA does have the highest valuation with a forward P/E of 21.9, which is not cheap but also not overly expensive.

Strayer also has no debt on its balance sheet. The company’s return on equity (ROE) of 59% is pretty much in line with where other education stocks stand as the industry average is 58%. This education stock also pays a dividend. Yielding 1.3%, it offers the highest dividend among the education stocks in this investment idea.

Analysts polled by Zacks have held full-year 2009 earnings estimates steady at $7.58 per share over the past 3 months. For the following year, the Zacks Consensus Estimate of $9.50 is up a penny from the 3 months-ago level.

Lincoln Educational Services Corporation (LINC – Snapshot Report), which is scheduled to announce fourth-quarter results on Mar 3, is seeing a bullish Zacks Consensus Estimate. Current full-year earnings forecasts of $1.69 per share were increased from $1.47 over the past 3 months. For 2010, estimates of $2.07 climbed from $1.82 over the same time period.

The company posted third-quarter earnings of 50 cents per share more than doubling the year-prior 22 cents and eclipsing the Zacks Consensus Estimate by 35%. Since Oct 2005, Lincoln’s earnings came in below the Zacks Consensus Estimate only once, matched 3 times and exceeded expectations in all the other quarters.

Earnings per share are expected to grow 22% over the next 3 – 5 years, which in line with the industry projections for other education stocks.

Lincoln’s forward P/E of 10 gives it the most attractive valuation among the education stocks covered in this article.

Apollo Group Inc. (APOL – Analyst Report) is scheduled to release its fiscal second-quarter report on Apr 6.

The company recently posted first-quarter earnings of $1.47 per share, beating last year’s $1.12 and outpacing the Zacks Consensus Estimate of $1.45. Since April 2005, Apollo has missed the Zacks Consensus Estimate only 3 times, matched once and surpassed forecasts during all the other quarters.

Unlike the aforementioned education stocks, Apollo has seen a slight decline in the Zacks Consensus Estimate for the current and following fiscal years. However, other fundamentals are attractive, such as its forward P/E of 11.7 and a return on equity (ROE) of 58% with very little debt on the balance sheet.

However, the stock is currently a Zacks #3 Rank (Hold), while the other education stocks discussed in this article hold either a Zacks #1 Rank (Strong Buy) or a Zacks #2 Rank (Buy). Thus, Apollo may be one to watch for a little while, especially since the earnings announcement is a couple months away.

By: RJ Camposagrado

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4 Education Stocks for the Smart Investor by Alex Kolb

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