| Small cap stock picks are defined in many ways. First, | | | | However, it is not just ratios that we are looking for |
| it is defined according to the price per share. Under | | | | when choosing the best small cap stock picks. You |
| SEC rules, a share of stock is considered a penny | | | | also need to consider the financial statements. You |
| stock when it is trading for $5 or less per share. | | | | have to look for the latest financial statements in |
| Second, a penny share is traded in venues other than | | | | order to determine net profits, cash flow, liquidity and |
| the so-called Big Boards such as the New York Stock | | | | solvency, among other criteria. |
| Exchange. So, you will find small cap stocks like the | | | | You must also do your research into the company |
| Pink Sheets and the OTCC. Third, penny shares are | | | | management. After all, it is people who steer the |
| issued by a company with less than the | | | | company into better or worse grounds. If possible, |
| SEC-mandated minimum of $50 million for inclusion in | | | | you should get to know the people behind the |
| the Big Boards. | | | | management. |
| No matter the definition, there are certain things that | | | | Where to Find Penny Stocks |
| must be done in order to create a list of the best | | | | As previously mentioned, there are many venues |
| small cap stock picks. This way, you are assured of | | | | from which to trade in penny stocks. You can go to |
| profits in the short term. Also, penny stocks are best | | | | the NASDAQ SmallCap Market, which is probably the |
| traded on a short-term basis instead of becoming | | | | most reliable and safest place. |
| part of long-term investments. | | | | The shares listed at the NASDAQ SmallCap Market |
| Tips on Choosing the Best Picks | | | | are usually valued at $1 and above so that any stock |
| As previously implied, you must adopt certain criteria | | | | worth less than $1 is immediately dropped down to |
| in choosing the best small cap stock picks. You should | | | | the OTC-BB. Brokers and traders have no problem |
| calculate the Price-Earnings (PE) ratios of all the stock | | | | dealing within this market because of excellent |
| picks under consideration. Choose the penny shares | | | | investor visibility and strict reporting standards. |
| with the highest PE ratios. (PE ratio is computed as | | | | There is also the American Stock Exchange. Although |
| stock price divided by earnings per share) | | | | the shares traded in AMEX are less than those found |
| Then, you should compute the Price/Earnings/Growth | | | | at the NASDAQ SmallCap, you will still enjoy the |
| (PEG) ratio. Just divide the PE ratio with the | | | | same benefits. You can also find stock picks at the |
| projected growth rate in the next 3-5 years. You can | | | | OTC-BB and the Pink Sheets. These are less reliable |
| then trim down the selection to the stocks with the | | | | than NASDAQ and AMEX but if you exercise caution, |
| lowest PEG preferably those with less than 1.0 ratio. | | | | you can still get the best stock picks. |