Make Money 101: Why Our Penny Stock Picks Work

Penny Stocks are EXPLODING in 2012: the tinier the stock, the greater the gain compared to a mere 12% gain in the Russell 2000 index YTD, likened to an 8% gain in the S&P 500. What a sigh of relief after a dismal 2011 for most investors who weren’t trading penny stocks. The U.S. stock market overall was like betting on the “Bad News Bears” last year, literally…but not for AimHighProfits Stock Alerts Subscribers who followed their top stock picks and booked profits of triple-digit returns since subscribing while the S&P 500 performed lethargically.

Friends, colleagues and business associates have always asked since the 90‘s how we accomplish picking winning stocks. The answer is simple: we merely pay attention to what works. Since there thousands of good stocks to buy now that qualify as penny stocks on the major exchanges in the U.S., you need a way to pick the good ones. Making good stock picks is simple when you apply what works vs. throwing darts at the Wall Street Journal (we actually used to do that in 1998). You find what works and you will be able to both pick winning penny stocks and finding profitable penny stocks consistently.

That is the real key to success in picking stocks; not just having, but owning a method to find profitable stocks, over and over and over again.

Liars can figure but figures don’t lie! When the market plunged in the late ’08, fear took over investors like an uncontrollable virus. We studied the damage and surveyed the wreckage looking to pick small-cap stocks that had some quality to them; Sales and Profits that were growing faster than their counterparts.

Here’s a small recap of the winning stock picks in the last five (5) months and the returns through today, February 21, 2012:

AimHighProfits Winning Stock Picks: Last 5 Months
TIC Company Price Date Gain
 FIO Fusion-io, Inc. $15.78 9/23 +79%
 SPPI Spectrum Pharmaceuticals $7.63 9/30 +78%
 ANDS Anadys Pharmaceuticals* $0.89 10/04 +315%
 BDCO Blue Dolphin Energy $2.47 10/17 +317%
 AEN Adeona Pharmaceuticals** $0.59 10/26 +329%
 COCO Corinthian Colleges $2.40 11/2 +106%
 LF Leapfrog Enterprises $4.23 11/2 +73%
 INHX Inhibitex*** $3.96 11/3 +556%
 PEIX Pacific Ethanol $0.565 11/8 +93%
 RAM Ram Energy**** $1.04 11/8 +261%
 BAC Bank of America $5.60 11/20 +43%
 YMI YM Biosciences $1.16 11/29 +95%
 APP American Apparel $0.53 12/14 +34%
 NSRS North Springs Resources $0.07 12/16 +686%
 AAMRQ AMR $0.24 1/4 +124%
 GMXR GMX Resources $1.15 1/20 +63%
 GLTC GelTech Solutions $0.60 1/30 +62%
 DRYS DryShips $3.00 2/10 +23%

*ANDS was acquired by Roche for $3.70 per share, **AEN changed company name and symbol to Synthetic Biologics (SYN), ***INHX was acquired by Bristol Myers Squibb (BMY) for $26 per share, ****RAM was renamed to Halcon Resources (HK) and issued a 1:3 Reverse Split

And these are just the stock picks still being held by some subscribers since the alert, not the peak and not the ones bought and sold in the last five (5) months!

We analyze numerous individual strategies but we always go through a checklist on all our stock picks before we issue an alert. 

Our Checklist:

Virtually each and every stock pick screening we run begins with a Momentum rank of 9 or more. Strong-buys and Buys, especially recently upgraded or coverage initiated stocks, and have consistently outperformed the market over the last 2-3 years. After that we look at Outperform and Market Perform rankings where we tend to find the majority of great candidates for stock picks. Whenever we’re in a bullish market, this is a great group to pick from.

One thing we like to see is if a stock ranks within the top 50% of industries. Half of a stock’s momentum can be credited to the group it’s in. So we look for to see the percentage of stocks in the group that are trading within 10% of 52-week highs which puts the odds for success greatly in our favor.

Revised Earnings Estimates: We look at these in detail to see revisions for the earnings estimates rising.

Positive EPS and Sales Shockers: A stock that has surprised previously is likely to surprise again. “Beating the Street” with positive EPS and sales are two great measures that a stock is headed in the right direction, upwards.

Positive Growth Rates: It doesn’t have to be double or triple growth, just that the current growth rate for the year is positive and forecasts for next year even better. You’re a stock picker so ask yourself: Are the stocks you pick going to have decreasing or increasing growth?

Valuations: Profitable results in stock picks have proven to be most favorable when Price to Sales ratio is less than1 or equal to 1. You can beat the market with a 2 or equal to 2. Regardless of 2 or less, we compare it to the industry looking for the stock valuations to be less than or equal to their industry mean. Any Price to Sales ratio over 4 is out the door; stocks above 4 usually underperform or worse, go down.

Return on Equity: This has to be above the industry mean, preferably increasing over last year and/or the 5 year average. An increasing ROE shows management is doing a good job and being efficient.

In addition to those factors above, we look to see margins increasing. Increasing margins shows that for each cent in sales the stock makes, additional profits are being created.

Stock picks that work may sound like it’s all about the numbers but we look at charts as well. We look for volume rising together with price. A rising stock price coupled with rising volume sets off sirens as a hot stock pick because it simply shows strength. While it could be institutional buying, it is a fantastic indicator of demand increasing which usually results in a higher stock price.

Moving Averages: You would love for all stock picks to be trading above the 50 and 200-day moving average. We check the 5, 10 and 20-day since a lot could have happened during the last 50 or 200 days. Being anywhere above the 50-day and 200-day indicates bullish sentiment on the stock.

Chart patterns: Is today’s stock chart bullish or bearish. What about the week, the month, the YTD? If a stock has a bearish chart pattern, it’s a mess. If it’s bullish, it’s a yes. If it’s flat in the middle like peanut butter in a sandwich, it’s a maybe only if it hit on each of the other checklist items above. Let us repeat: If it is bearish, it’s hit the bricks.

Fact: It’s difficult to make big profits in stocks of companies that have already outgrown themselves and need to feast on the smaller companies to grow. When you broaden your investigative lens and dive into the abyss for investment bargains, you can milk profits. Just like buying stock in Monster Beverage Corp. (Nasdaq: MNST) at under $3 a couple years ago, you could be holding the next $110 stock for the pennies in your pocket.

This is what the AimHighProfits Stock Alerts is all about.

Subscribe today. It’s FREE for crying out loud. And stick to the basics outlined above for your stock picks. They are a set of proven criteria which have proven results. We know we have one of the highest probabilities for success in picking winning stocks. And hey, if it doesn’t work out, don’t freak out and panic trying to make changes wondering if our system works. That’s the kiss of death.

Consistently picking winning stocks, our basic building blocks for financial success in the stock market, comes down to a set of rules. We look at loads of others also, but these make up our basic checklist.

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