| One analytical tool to help in uncovering the best | | | | of the float and promote the stock through bulletin |
| penny stocks is the "float". The float of a company is | | | | boards, message boards and newsletters. When a |
| the outstanding stock minus any restricted stock. | | | | group is in this position of holding most of the float, |
| Outstanding stock shares are the number of shares | | | | and individuals try to buy the stock during heavy |
| that have already been issued on the open market | | | | promotion, the group has the potential to dump their |
| and are considered to be freely traded. Restricted | | | | shares on unsuspecting investors. A good rule of |
| stock shares are shares not freely traded and are | | | | thumb is to not buy stocks with small floats when |
| usually given to an insider or used in an acquisition. | | | | you see heavy promotion on message boards and |
| Restricted stock shares, usually held by company | | | | such. The most potential is when you buy a stock |
| management or consultants who have been | | | | that the majority of investors are not aware of. |
| compensated with stock, are usually vested over a | | | | Lastly, the size of the float is relative to the price of |
| period of time. | | | | the share. A stock with a float of 500,000 is not |
| When contemplating buying a stock in a company, | | | | small if the price of each share is $25. A float of |
| often investors focus on companies with a low float. | | | | 10,000,000 shares is considered small if the share |
| Lower floats mean that there is less of a supply of | | | | price is.05. Keep in mind most penny stock investors |
| the stock. Like any product that is sold in the open | | | | will only invest a few thousand dollars in a stock. So if |
| market, the rules of supply and demand hold true. A | | | | 100 investors, who averaged $2000, become |
| limited supply will dictate a higher price when the | | | | interested in a company, their buying power is |
| demand picks up. By focusing on stocks with small | | | | $200,000. The closer the value of the float is to |
| floats, an investor can buy a larger percentage of | | | | $200,000, the easier it will be for investors to buy up |
| the float and reap the reward when new buyers | | | | the entire float. The price will rise dramatically if |
| come pouring in. Keep in mind that a stock with a | | | | investors try to buy up the entire float. |
| smaller float will also suffer in price when the selling | | | | To uncover the best penny stocks, a good technique |
| starts. | | | | is to concentrate on stocks with small floats or floats |
| Penny stocks with smaller floats are susceptible to | | | | with a low dollar value. The rules of supply and |
| manipulation so you need to beware. It's easy and | | | | demand figure into the equation much more in these |
| common for a group of investors to buy a majority | | | | stocks. |