Posted on 25 November 2013.
Penny stocks on major exchanges (such as the NYSE, AMEX, and NASDAQ) have to adhere to strict guidelines set forth by the SEC. There are reporting standards, accountability, and regulations a company MUST follow to be listed on one of these exchanges. Due to these tough regulations there is often not many companies with low market caps trading on these exchanges. It costs a great deal of money for companies to meet the strict standards set forth by the SEC.
Due to these strict standards there can be some solace for penny stock investors who are worried about being scammed. Any business that trades on over-the-counter markets does not have the strict reporting policies that businesses on major exchanges have to adhere to. This does not mean that it is impossible to be scammed, but the chances and frequency of scams are greatly reduced when trading on major exchanges.
Today, I am going to look at each major exchange and pick some penny stocks I think have the potential to explode over the rest of this year and moving forward into 2014. The NYSE (New York Stock Exchange) has approximately 2,800 companies listed on its exchange. Of these 1,250 only about 148 (actively traded) are considered penny stocks (stocks trading at $5.00 per share or less).
Hecla Mining Company (HL) Helca Mining Company engages in the discovery, mining, production, and marketing of gold, silver, lead and zinc. I know a lot of people are down on gold miners right now, because the price of gold has fallen sharply over the past few months. However, there are two reasons (in particular) as to why this company is a great penny stock investment. The current price of HL is $2.92. The company also has enough volume where penny stock investors won’t have an impact on market prices when they are buying or selling the stock.
1. HL is in great financial shape considering how much the price of gold has fallen. The company has the assets and cash to make it through these rough times. HL also does not have a large % of Long-term debt compared to its assets. The company has enough current assets to wait out the storm and remain in business while the price of gold stabilizes.
2. HL suffered operating losses for the 3 months ending March 31, 2013 and June 30, 2013, but has returned to a positive operating margin for the 3 months ending September 30, 2013. The company has found a way to make its operations profitable despite gold being at such a low price. If the price of gold returns to previous levels the company could become immensely profitable.
The NASDAQ Stock Exchange has approximately 2,800 companies listed on its exchange. Of these 2,800 roughly 600 companies (actively traded) are considered penny stocks (stocks trading at $5.00 per share or less).
Electro-Sensors, Inc. (ELSE) engages in the manufacturing and distribution of industrial production monitoring systems. The company produces a line of products used for industrial machinery. The products are used to monitor speed and control industrial equipment. The current price of ELSE is $4.14 per share. The average daily volume for ELSE is just under 100,000 shares. With such a high daily volume (compared to most penny stocks) this investment will be easy to liquidate. There are two reasons why I believe ELSE is a great investment for penny stock investors:
1. The companies has no long-term debt and an excellent current ratio (current assets divided by current liabilities). While the stock market as a whole is no longer in turmoil this company is not inhibited by its debt (like most penny stocks) and has significant assets that it can use to grow over the next few years.
2. Since 2009 the company’s operating income has grown 97.7% and has improved steadily each year. During this time the company was able to reduce its research and development costs and maintain its selling and administrative costs at the same level. If the company continues to grow at this pace it will prove to be a solid investment for penny stock investors for years to come.
Due to easier regulations the AMEX tends to have smaller companies on it compared to the NYSE and NASDAQ. This stock exchange gives us a great pool of businesses to choose from for potential penny stocks that cold become great companies trading at well over $5.00 per share in the next year.
Samson Oil & Gas Limited (ADR) engages in the exploration and development of natural gas properties. The company was not always a penny stock and has experienced a sharp decline in share price over the past few years. However, during the last quarter the company has begun to turn around its operations and has returned to profitability. Here are 3 reasons why I like Samson Oil & Gas:
1. Natural gas is becoming an increasingly important resource for meeting the global power demands. As we move further into the 21st century this commodity is only going to become more important.
2. SSN has very little long-term and current debt. This proved to be a great strategy during the company’s recent turmoils. Companies that have a significantly more assets then debt are able to withstand long periods of turmoil. While they do not take advantage of leverage, they don’t get burned when prices of commodities drop or demand lessens. The balance sheet of SSN is particularly strong for a penny stock company.
3. SSN has returned to profitability for the three months ending September 30, 2013. In fact, revenue has grown over 150% from the previous quarter. During this time the company was also able to reduce its total operating expenses by 11.2%. This company may still have a long way to go, but it is definitely heading in the right direction for now. With a current trading price of $0.44 per share it is a very affordable option for any penny stock investor.
Penny stocks on major exchanges are reputable companies that have to adhere to strict reporting standards. Due to these regulations the opportunities for fraud are significantly less then OTC markets. Investors looking for safer penny stocks can invest in companies on these exchanges. While the reward will not be as great as OTC penny stocks the risk is greatly reduced.
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