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New Penny Stock Issues on the OTCBB Provide Investors with Big Profits
Who can forget the go-go days of 1999 when every day a hot Internet IPO would open up and trade double its offering price? Although most of those IPO's have long since crashed and burned, some of today's best performing stocks, including Cisco, Ebay, and Wal-Mart, all had big debuts when they first started to trade.
Anyone who bought those stocks after their opening and held them has made a fortune. It wasn't a one day pop. Most of those profits didn't come until after the first month of trading.
The penny stock IPO market has made more millionaires than any other sector of the stock market. However, it is only a small number of IPOs that make all of the money. The Nasdaq isn't the only place where the action is at. Every month hundreds of new penny stock companies begin trading on the OTCBB. The trick is in knowing which ones to buy.
A lot of money can be made by identifying penny stock companies that are going to move over to the Nasdaq or the American Stock Exchange. One investor who has had success doing this is Mike Swanson, a hedge fund manager and newsletter writer. According to Swanson, "Wall Street and the press ignores OTCBB companies. But when those companies grow enough to move over to one of the big exchanges they pay attention and buy the stock. Investors can make a lot of money by finding stocks that are about to make that move. They can literally get in before the big boys and the public catch on."
"Out of every 100 penny stocks only 1 is worth buying. But that one company can make you a fortune. I look for simple things like the quality of management, earnings growth, share structure, and who the company's backers are to find that one company," Swanson says.
Once these stocks list on a larger exchange they usually continue to do well. "Opportunities in these companies are just as great as IPO's, because they usually have great growth stories and are usually in sectors that are in favor on Wall Street." Swanson says.
Last year Swanson bought several gold stocks that started to trade on the American Stock Exchange that doubled in price. "These were new issues and gold was red hot at the time, there are still some attractive mining companies that just listed in the past year," he says.
One of his favorite companies is Yamana Gold(AMEX: AUY), a producing gold company that owns several mining operations in Brazil. Yamana's gold production will more than double by 2006.
According to Swanson, "the earnings per share for Yamana is going to increase exponentially year by year as the company transforms itself from being a small junior mining company into a mid-tier producer."
These type of growth stories are what makes the new issues market so profitable and what attracts successful investors like Mike Swanson to them.
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