New Penny Stocks – How To Use Stock Screeners To Choose The Best Penny Stocks
Till a few years ago for most investors, the thought that various online stock tools, techniques and technologies will replace the manual methods was almost inconceivable. These days a lot of investors rely on these online tools to make better, faster and easier decisions regarding the best stocks to invest in at a particular period of time as well as when to unload it for maximum profits and minimal losses.
Nowadays when you are looking for new penny stocks or come across a new micro cap stock how do you go about it? One effective method to screen out the bad stocks and quickly analyze the good ones is through the use of stock screeners.
Role Of Stock Screeners
Stock screeners are available through most online brokerage sites as well as sites like Yahoo! Finance and MSN Money. These tools make the work of the trader and investor on the lookout for the most profitable stocks so much easier. Since people differ on their criteria of picking profitable micro cap shares you have the option of plugging in your own different thresholds or minimums/maximums for various measures such as Earnings Per Share, Growth Rate etc.
Through stock screening, companies and their stocks that fit into predetermined criteria are identified for further research. There are three components to a standard stock screener, namely:
• Database of listed companies usually found on the Pink Sheets, OTCBB and Nasdaq SmallCap Markets
• Set of measurable variables including ratios, trends and other financial aspects of the stocks
• Screening engine that matches the variables with the companies that meet said factors
Using the Stock Screener
As can be implied, the use of a stock screener is easy once the measurable variables have been established beforehand. The trader or investor will answer the following questions that will separate the desirable from the undesirable companies where the trader’s investment goals are concerned:
• Listing venue – OTCBB, Pink Sheets or Nasdaq
• Industry – Telecommunications, biotechnology, oil and gas, etc.
• Financial factors – Price to earning ration, debt to equity ratio, market capitalization, profit margins, annual revenues, and stock volume and movement, to name a few
These are tangible factors that can be easily measured given a few set of data provided by the companies, the stock exchanges and even by the industry. The tedious work of manual screening before the advent of online stock screeners is then significantly, if not completely, eliminated with just a few clicks of the mouse.
Take note that qualitative factors like management composition, technological advances and political changes affecting the company are mot included in the stock screening variables. As such, it is still necessary to perform additional analysis of the companies provided by the stock screener as meeting the abovementioned quantitative criteria.
For more advanced traders and investors that demand more from stock screeners, there are also advanced versions of this all-important tool. Just like the standard version, the sophisticated screener has three parts, namely, the criterion (given quantitative metric), the value (numerical constraint) and the condition (comparison with the value).
There are free standard stock screeners in online sites including those from Yahoo, MSN and Morningstar. But if it is advanced stock screeners that you desire, then the best way to go is through a subscription service. When used correctly, both types of stock screeners will assist you in finding the best possible penny stocks.