Black Friday – The Best Penny Stock Deals!

| November 21, 2014

bargainThe Best Penny Stock Deals On Black Friday!

It’s official…

We’re a whopping seven days away from the biggest shopping day of the year.  It’s called Black Friday, and the world whips out their credit card and buys to their heart’s content.

The problem is some people over-spend.

They get into the store and they see deal after deal… markdown after markdown… and the budget goes out the window.

I see the same thing happen to penny stock investors all the time.

Remember, there’s a very big difference between being a penny stock trader and a penny stock investor.

The Truth About Penny Stock Investors

Remember, a trader is in the market for a short term trade… they don’t really care what a company does or how they make money… they just want to see the stock move.

A true penny stock investor buys penny stocks for the long term.

They buy and hold.

They care about the business, the management team, and how the company makes money.  They’ll study the numbers – and no I don’t mean the stock price – they study the financials.

But at the heart of every investment you make in penny stocks, you need to be sure you’re getting the best possible deal.

You want to buy cheap.

You’re looking for hidden value and you want to find that value before anyone else does!

Finding The BEST Penny Stock Deals

So measuring future value is all in the eye of the beholder…

But let me share with you one measurement many professionals use over and over again…

Now I know what you’re thinking… you’re thinking it is P/E or the price to earnings ratio…

Or maybe it’s the:

  • Peg Ratio
  • Or the Price to Sales
  • Or Price to Book

No, no, and no.  What I want you to look at is the ROA… Return On Assets.

You’re not going to hear a lot of people on CNBC spouting off on ROA numbers.

They stick to the easy stuff.

This type of valuation hunting gets a bit mental.  ROA is a measurement of earnings vs assets in the business.

Think of it in the most simple manner.

You buy a machine that makes cookies – and that machine cost you $1,000.  Now pretend you can sell those cookies and over the year you’ll make $100 profit.

Your return on assets is 10%.

The $100 profit divided by the $1,000 cost.

Why look at a business this way?

Because it shows you how effective management is at using their capital.  Are they using the equipment, assets, and cash they are given to produce solid returns?

Now this analysis can get really complicated…

You can model in different leverage… do you borrow money to buy the equipment?  And you can model out future profits by looking at variable costs and things like that.

Regardless of how complicated you make things, remember it’s best to compare companies in the same industry… a consulting company will have very different ROA numbers than an automotive manufacturing company!

Just remember when you’re looking at a penny stock to buy, give the ROA number a quick look… you might see something (like a great penny stock deal) others don’t!

Profitably Yours,

Penny Stock Research

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Category: Investing in Penny Stocks

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