Penny stocks are referred to those whose share prices are less than $5/share. Most investors avoid penny stocks for some reasons. First, penny stocks have low-quality financials. They are more inclined to resort to bankruptcy. Apparently this is too risky. One example is MIR who filed for Chapter 11 protection this summer. I remember one reader on MITBBS stock board gambled before the announcement and harvested nothing.

Second, traditionally analysts don't follow. But I've noticed after the burst of .com bubble Wall Street has been changing. For example, an OTC BB stock I swing traded in August 2003, COVD, was rated "Buy" and given a 12-month price target $8 when it was traded less than $2/share. It finally went above $5/share.

However, there are still some investors, including fund managers, looking for gems from pennies day after day. Can you imagine how high your return could be if investing a real gem? How about the legendary Cloudice MM? She made big bucks by investing pennies.

But where and how do we find the next possible high-flier? My investment strategies may not suit you, but I'd love to share some with you here. There are several factors I wish you would take into account:

1. Turned to profitable already or predicted profitable in the near future? Good if yes;
2. Insider buying? Good if yes;
3. High volume recently? Good if yes;
4. Upgrade by analysts recently? Good if yes;
5. If not profitable yet, price/book value low, compared to peers? Good if yes;
6. Enough cash reserve to survive or low debt? Good if yes;
7. Following market trend? Good if yes;
etc.

No pain, no gain. Do your hard work, and you'll be rewarded.

¶ 11:37 PM

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