You should have heard of Penny stocks, which are low-priced stocks with incredible returns as many people have a stock market investment, while penny stocks are quite risky but have the potential for high returns.
Some investors invest into a fortune with the right penny stocks at the right time and make huge wealth that changes their life.
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Understanding the Penny Stocks.
Penny stocks are the stocks that are for publicly traded companies that are listed on the stock exchange at a price lower than Rs 50. These stocks are not for frequent trading; it open to determine the market volatility and return of the investor can make them. It is known for its multi-bagger returns with fewer trading sessions.
Penny stocks have a low market capitalization, and it is mostly liquid. While investing in Penny stocks, an investor must remember that they must do research and invest in a diversified manner so that there should not be any risk that comes with higher returns.
It analyzed the top 20 penny stocks listed on the Bombay Stock Exchange and National Stock Exchange, and investors should choose the stocks that build their wealth. They artificially inflate the Price and volume to attract innocent people to participate and offload their holdings.
Why are Penny Stocks called Penny?
It is called so because the stock trade is low that this is because the trader buys penny stocks and doesn’t even care for the returns much. These stocks in India don’t comply with the exchange regulation and are transparent in their reporting.
People who generally buy penny stocks want to trade and are a retail investor who does not want to keep the portfolio approach; Investors keep in Mind how to invest $100 and get $1,000,000.
Success Story of an Investor who turned Pennies into Millions.
The Delhi Trader who made his fortune from penny stocks, Ashish Chugh, is known as India’s leading penny stock picker. Based in Delhi, the trader has seen failure many times, but after a few bets, he got on the right side, which helped him to make more money as he invested.
“It is easy to buy such stocks that have problems existing in them” Chugh shares his wisdom in trading and investing in penny stocks; multi-baggers are the new generation of India Stock Traders with the majority of people who entered the share market that has raised the hope of wealth in stocks.
He invested in Avanti Feeds -50X bagger and invested worthy, namely high dividend payout of 25%, P/E of 3..5%, CAGR of 70%, and a Dividend yield of 6%.
As Avanti Feeds quoted Rs 5,500 crore, he has pocketed massive gains of 50x. It also enhances Ashish Chugh portfolio.
Some tips from which Ashish Chugh made his fortune:
Growth and Value
Earnings growth is an important factor for the small-cap and microcap stocks that will be multi-baggers.
A company growth with potential is the real growth; chances of temporary setbacks are optionable, in which case you might get the stocks at a reasonable valuation.
Selecting Stocks
In the Indian market, stocks show values but go down as they have debt loans over time, hence selecting stocks with knowing the external and internal details.
Don’t rely on the short term.
One must have a higher vision to invest and make a millionaire; it is important to bet right and keep track of the stocks.
Identify Price Multipliers
Successful investors know that the company’s quality is reporting a healthy finance ratio and good management in the stock trading range.
When the promoters are not interested in talking to the analysts or the investors, there may be radars of brokers and investors. Still, when the company is doing the work that leads to growing at a certain size, and the Price gets multiplied, it sees multiplier effects, then big money flows in, and if you manage the business before it gets buzz, then the wealth is yours.
Management Quality
Ashish Chugh discusses good management as the most important thing in the stock investment in penny stocks.
Over time, he looked for a well-managed business where growth, internal accruals, sales, and profitability rise yearly.
Criteria for Identifying Promising Penny Stocks.
As an investor, you must choose promising stocks to make millions, but to identify them; you must know the following criteria.
- Understand the Condition of the Market
- Research the company
- Valuation and Price of the Company
- Practice Day Trading with paper trading
Understand the Condition of the Market: The Price of penny stocks varies, so it is important to follow the financial specialist or the stock advisor you would choose and understand the stocks.
Research the company: In this investment, there will be many advertisements to distract or mislead you; proper and deep research into the company is very important.
Valuation and Price of the Company: As you invest in company stocks, you must check the company’s current value in the market. The financial statements should be determined, which helps you to know about the company’s situation.
Practice Day Trading with paper trading: Before entering penny stocks, one should know more about trading and practices. Paper trading is a way to understand trading strategies and check whether the stocks will pay you.
Best technical analysis Methods for Penny Stocks
There are patterns to know before trading in penny stocks:
- Bottoming Out Pattern
- Price Dips
- Topping Out Pattern
- Candlestick Chart Pattern
Bottoming Out Pattern: This pattern shows up after a long steady slide in share price. Its trend goes down over the months to sideways and the same for a couple of weeks. As time passes, there is a sudden increase in trading volume, which means that the shares may enter the long, steady, and recovering Price.
Price dip: It is the way to buy order or a thinly traded penny stock that is below the recent or current Price; you can catch shares that fall through the cracks.
Topping out pattern: In this pattern, it is the reverse of the bottoming-out pattern.
Candlestick Chart Patterns: It is most common, unlike line graphs with open high low, close trading charts with certain patterns and trends to reverse the Price, which may fall or rise in the coming weeks and days. You will learn the candlestick patterns: dark cloud cover, outside reversal pattern, Doji, Harami, Engulfing, piercing, and hammers.
Key factors Before Buying Penny stocks.
- As an investor, you want to make more money while investing in small.
- The investor should remember that the capital invested in penny stocks should not exceed 2 to 3% of the investor portfolio.
- A person should not invest in them but buy the stocks and not be emotionally attached.
- Investors should not follow the buy-and-hold approach if they get good returns because it’s over time, neither they can generate the shareholders nor report.
- Investors must do in-depth research about the stocks in the public domain.
- The transaction cost of penny stocks is higher, and some have the brokerage charge as per the shared basis.
Best Penny Stocks that could turn from $100 to $ 1,000,000.
- South Indian Bank
- Suzlon Energy
- Vodafone Idea
- Reliance Power
- Bank Of Maharashtra
- Morepen Laboratories
- Ircon International Limited
South Indian Bank: The bank is a strong competitor in penny stocks. The private bank sector has two factors that can lower the net non-performing assets to 2.51% as of September 2022, down from 3.85% in the last year.
As in the first three months of 2023, the banks plan to reduce the net NPAs to 2% and gross NPAs to 5%. Bank reported a profit after the tax of Rs 223. 28 crores compared to a loss of Rs 187.09 crores.
If the bank clients expand the non-Indian resident, it is projected to improve the trading stocks.
Suzlon Energy: It is an attractive stock for 2023; its quarterly profit after tax of Rs 56.47 crore vs. Rs 13.34 crore loss, and it received an order from Adani Green Energy in October 2022.
It has the possibility of the stock to create the profits for the investment and determination to lower company debt and the Indian government’s efforts to change the climate by embracing more renewable energy technologies.
Vodafone Idea: Vodafone Idea is a penny stock whose firm can obtain the capital needed to continue operating and its debts; the stock might provide high returns. The market is fully credited, which needs investment from the company promoters or the government weighing on the stocks.
The corporation is a loss-making telecom company that will produce substantial profits in 2023, and its substantial market value of Rs 317.3 billion is collapsing.
Reliance Power: Reliance Power has Rs 303.91 crore as thhttps://timesoftoday.com/?p=781&preview=truee loss, which has the tax in September that includes a Rs 390 crore loan repayment as
Reliance Power remains a penny stock for 2023.
It has solid ground with its debt repay Rs 1500 in the fiscal year 2023, for which the business obtained up to Rs 1200 crore in loan capital in October 2022.
It includes the BlackRock ETF fund purchasing the stake in the firm and Piramal Capital and Housing Finance Limited dropping bankruptcy against the company.
Bank Of Maharashtra: The stock in Bank of Maharashtra is the lending and deposit growth and the security that comes with the guarantee. Its NPAs have been decreasing, which works in its favor.
Morepen Laboratories: It is a pharmaceutical company that has grown from a single product to a multi-activity company with a global vision and satisfied customers. As the three states of art manufacturing plants in the northern state of Himachal Pradesh in India
The main plant at Parwanoo, inspected and approved by the United States Food and Drug Administration (USFDA) for the production of Loratadine, is selling an anti-allergy drug globally.
It has made over 90% of the market share of the generic Loratadine as the top class.
This company has a good debt-to-equity ratio of 0.03 and profits of CAGR of 18% and 17%, respectively. The stock price has a return of 25% during the same period.
Ircon International Limited: Ircon International Limited (IRCON) has business in a railway construction company which has an engineering and construction PSU specializing in large and technology as complex infrastructure projects in various such as railways, highways, etc.
It has a book with more than 10x capitalization, providing a strong revenue that has visibility to the company.
It includes the financial, including dividend yield, debt to equity, and profit growth; stocks have been long-term uptrend that has become multi-bagger in the future.
Tools and Tips for Trading in Penny Stocks
As there are many online tools available to improve the trading results, such as the Relative Strength Index (RSI), there are many other options. Here are the tools and Tips you should use.
Beware of Confirmation Bias: As a trader or investor, you don’t have to believe in any other information confirming your beliefs.
Limit Orders: Use the limit order rather than market orders with the stocks. Buying and selling a share in the company is thinly added to resulted Price in your trade. If you buy, then its share temporarily and artificially increases.
Stop loss Orders: You can have the most important investing tactic for the investment, which is stop loss orders, and it can commit early on immediately to sell the share if the price dips.
Common Mistakes to Avoid when Investing in Penny Stocks.
- Be Patience, don’t think of the quick profits.
- Do proper and deep research on the company you want to invest in.
- Be real, set the right goal do not keep more expectations.
Conclusion
Penny stocks can turn a small investment into substantial wealth. Investors have a go through deep research, assess the risks and make informed decisions before investing in stocks. Everyone has the potential to turn penny stocks from rags into riches.
