Penny Stocks, Pink Sheets, Or Micro Caps What's the Difference?
Its extremely important that investors know how to distinguish between terms like pink sheet and penny stock, bulletin board and micro cap. The differences can mean making a winning or losing trade.
Though its likely you know the true definition of at least a couple of these terms, its worth spending a couple of minutes planting a simple " and unique " explanation in the back of your mind for each one. Doing so may mean the difference between making a profitable investment or not at some point in the future.
Penny Stocks " As a general rule of thumb, any stock priced under $5.00 is considered a penny stock, though many traders dont consider a stock to be a penny stock unless its priced under $1.00. Either is acceptable, though one definition clearly expands the number of stocks that could qualify as penny stocks.
If you want to short or buy a penny stock on margin, make sure you know whom youre doing business with. Some brokerages will not allow shorting of any stock under $5; others dont place a limit. So, choose wisely.
Its also generally true that penny stocks tend to be a pink sheet or a bulletin board stock (see below), though its imperative to understand that many exchange-listed stocks are also penny stocks. These low-priced exchange-listed stocks have at some point met the same requirements as some of the worlds highest-priced stocks. The low share price may be a temporary situation, not to mention an incredible investment opportunity. The size of the company (market cap) or its exchange has nothing to do with determining whether its a penny stock or not.
Pink Sheet " A pink sheet stock is an equity that trades on the over-the-counter quotation system maintained by Pink OTC Markets Inc. Though this is generally considered to be the least desirable " and most dangerous " market to delve into, the stigma isnt always deserved.
Some foreign stocks choose to list their equities in the U.S. market, but for technical or logistic reasons cant list their stock with one of the exchanges or the bulletin board system. That doesnt make the investment any less credible though. The size of the company (or market cap) is irrelevant.
If viewing weekly financial statements of a company is a deal breaker for you, then stay away from pink sheet stocks. The majority of them dont disclose audited accounting statements because they arent required to do so.
On the other hand, if a stock trades on the OTC market, or as an OTCBB stock, you can be assured that these companies have met SEC requirements.
This may come as a surprise, but the bulletin board system is not the only over-the-counter game in town. Both pink sheet and NASDAQ markets are OTC markets.
When it comes to determining if an equity should be listed as a bulletin board stock or an exchange-listed stock, share price doesnt come into play. Specific market caps may be required, however.
Dont judge a bulletin board stock by its cover. Dig a little deeper because some can be stronger and more productive than exchange-listed stocks.
When it comes to determining is a company is considered a micro cap, share price doesnt matter, but it usually has a market cap of $250 million or lessgive or take a few million.
A micro cap status also has nothing to do with where or how a stock trades. The New York Stock Exchanges minimum market cap requirement is only $25 million, so qualifying for an NYSE listing isnt necessarily a sign of great size or strength.
In A Nutshell
As you can see, penny stocks, pink sheets, bulletin boards and micro caps all serve different purposes and play the trading game uniquely. In this instance, semantics do matter. Becoming knowledgeable about specific definitions will go a long way in making profitable investments.
Whether youre looking for top stock picks and trading ideas among the penny stock world, bulletin board equities, or micro caps, youll find them at www.smallcapnetwork.com. We explore the information that really matters to find you the best of the best stocks, and to offer highly meaningful market commentary. Sign up for the free e-newsletter today. - 23221
Though its likely you know the true definition of at least a couple of these terms, its worth spending a couple of minutes planting a simple " and unique " explanation in the back of your mind for each one. Doing so may mean the difference between making a profitable investment or not at some point in the future.
Penny Stocks " As a general rule of thumb, any stock priced under $5.00 is considered a penny stock, though many traders dont consider a stock to be a penny stock unless its priced under $1.00. Either is acceptable, though one definition clearly expands the number of stocks that could qualify as penny stocks.
If you want to short or buy a penny stock on margin, make sure you know whom youre doing business with. Some brokerages will not allow shorting of any stock under $5; others dont place a limit. So, choose wisely.
Its also generally true that penny stocks tend to be a pink sheet or a bulletin board stock (see below), though its imperative to understand that many exchange-listed stocks are also penny stocks. These low-priced exchange-listed stocks have at some point met the same requirements as some of the worlds highest-priced stocks. The low share price may be a temporary situation, not to mention an incredible investment opportunity. The size of the company (market cap) or its exchange has nothing to do with determining whether its a penny stock or not.
Pink Sheet " A pink sheet stock is an equity that trades on the over-the-counter quotation system maintained by Pink OTC Markets Inc. Though this is generally considered to be the least desirable " and most dangerous " market to delve into, the stigma isnt always deserved.
Some foreign stocks choose to list their equities in the U.S. market, but for technical or logistic reasons cant list their stock with one of the exchanges or the bulletin board system. That doesnt make the investment any less credible though. The size of the company (or market cap) is irrelevant.
If viewing weekly financial statements of a company is a deal breaker for you, then stay away from pink sheet stocks. The majority of them dont disclose audited accounting statements because they arent required to do so.
On the other hand, if a stock trades on the OTC market, or as an OTCBB stock, you can be assured that these companies have met SEC requirements.
This may come as a surprise, but the bulletin board system is not the only over-the-counter game in town. Both pink sheet and NASDAQ markets are OTC markets.
When it comes to determining if an equity should be listed as a bulletin board stock or an exchange-listed stock, share price doesnt come into play. Specific market caps may be required, however.
Dont judge a bulletin board stock by its cover. Dig a little deeper because some can be stronger and more productive than exchange-listed stocks.
When it comes to determining is a company is considered a micro cap, share price doesnt matter, but it usually has a market cap of $250 million or lessgive or take a few million.
A micro cap status also has nothing to do with where or how a stock trades. The New York Stock Exchanges minimum market cap requirement is only $25 million, so qualifying for an NYSE listing isnt necessarily a sign of great size or strength.
In A Nutshell
As you can see, penny stocks, pink sheets, bulletin boards and micro caps all serve different purposes and play the trading game uniquely. In this instance, semantics do matter. Becoming knowledgeable about specific definitions will go a long way in making profitable investments.
Whether youre looking for top stock picks and trading ideas among the penny stock world, bulletin board equities, or micro caps, youll find them at www.smallcapnetwork.com. We explore the information that really matters to find you the best of the best stocks, and to offer highly meaningful market commentary. Sign up for the free e-newsletter today. - 23221
About the Author:
James Brumley is an expert in the small stock arena covering penny stocks and small cap stocks for over 10 years now. Investors with an appetite for high risk/reward investment ideas should consider getting his free newsletter publication by visiting www.smallcapnetwork.com and subscribing.
posted by X - Men @ 4:07 AM
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