Despite all of the problems with penny stocks and
penny stocks the millions of dollars of loss involved with them,
there are legitimate companies whose securities
trade in the pink sheets at very low prices. Struggling
young companies just starting out are perfect
examples. Investment in such a company, held
through the company’s formative years, can pay
off well. Such an astute investment requires three
things: the ability to choose the right company, the
capital to invest and hold the investment, and luck.
In order to choose the right company, you must
know something about the business in which the
company engages. You must be able to evaluate
the feasibility of the company’s business plan and
the company’s ability to compete in its field of endeavor.
You must be able to evaluate the ability of
the company’s management to run the company.
Finally, you must be able to evaluate the capitalization
and cash flow of the company.