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Finding Hot Cheap Stocks


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Hot Cheap StocksWhile some may think that hot cheap stocks could possibly be misconstrued as an oxymoron, in the world of penny stocks it’s a common term. When trading penny stocks, hot cheap stocks are those that are nominally cost efficient, and can be traded for profits. The key to trading successfully is knowing the correct ways to identify the most profitable ones.

How to Find Hot Cheap Stocks

There are certain ways that you can locate hot cheap stocks. On many occasions you can find hot stocks that can be traded for hundreds in a short period of time. Hot stocks and low priced stocks differ because of the growth potential hot stocks hold. Those who take the time to learn the fundamentals in finance and investing will be able to determine good profit potential much easier than those who go in blindly.

It’s extremely important to not exclusively concentrate on stocks that trade at low nominal prices when looking for hot cheap stocks that have good profit potential. Another good resource to learn about favorable stock strategies and techniques is to look for books and articles by popular investors. Individuals like Jack Schwager, Jason Kelly, John Bogle, Jason Zweig and Benjamin Graham have authored quite a bit of material on investing. To also stay connected to what’s going on in the business world currently, you should always start your morning off by visiting websites like The Wall Street Journal, MSNBC, Bloomberg, and Reuters. This will help you find out about certain companies who are on the verge of exploding.

Easy Way to Find Hot Cheap Stocks

One of the best ways to find hot cheap stocks is to use the Price Earnings Growth (PEG) ratio. This is a formula based on the forward estimated Price Earnings Ratio (P/E Ratio) for a stock divided by the anticipated growth rate for a stock over the coming year. The lower the PEG ratio (a 1.0 level indicates a stock is fully valued), the cheaper the stock is, relative to it’s anticipated earnings growth rate. Low PEG ratio stocks can include stocks that have high nominal prices but low forward P/E Ratios and high earnings growth expectations, like Apple Inc. (AAPL). Ultimately, this is why the Price Earnings Growth ratio is so valuable for stock traders and investors.

To see the Price Earnings Growth ratio in action take a look at one of these latest articles by Zack’s.

Finding Hot Cheap Stocks to Buy

After determining the most appealing hot cheap stocks using the PEG ratio, there are many traders drawn to locating the best low priced stocks to buy right before they explode. Sometimes it’s not as easy as just using the PEG ratio as some low priced stocks have unclear forward earnings prospects. If you were to ask a trader about trading low priced stocks, they’ll be more likely to compare it to gambling in Las Vegas than trading on Wall Street. Most of the time, low priced stocks worth buying are poised for explosive growth or cheap due to financial difficulties. The big question mark that blares into investors faces are whether or not these stock picks are worth it. Many times there are unidentified variables that will only be divulged over time. This makes traders very weary when trading low priced stocks.

For an example of how many low priced hot cheap stocks that had financial difficulties during the Great Recession only to move higher in recent years, we only have to take a look at Sirius XM Radio Inc. (SIRI), which went from $.11 in early 2009 to over $2 a share in 2012.

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