Depending on what group a person talks to an array of explanations become given for ‘penny stocks.’ Some say that no penny stocks exist on the Toronto Stock Exchange (TSX). While chasing the elusive snipe bird in a forest waiting for it just to show up, a little homework shows that the bird and penny stocks do exist.
The Toronto Stock Exchange also has a well-labeled Venture stock exchange with a junior listing for developing companies. Better than the snipe hunt game, a real ground floor stock for those who have the knowledge can become caught. Whatever a person wants to call it startup companies, companies with potential and those with ideas needing backing have shares of stock for sale for less than five dollars.
Why look at penny stock?
Most veteran investors will tell people that the speculation of it excites. A person must have access to an amount of money they do not mind losing. Many of the small value stocks come from small companies. They may have a well-run organization. Small companies do become subject to forces they have no control over. They do not have the resources to take moderate to extreme level of forces for long such as changes in policies, leaders who do not like small business or natural disasters.
The low price on the stock does not necessarily indicate failure or bad organization. The low cost means a startup or a small company that has developed to the next level and has a possibility of growing with some investment money. If a veteran investor finds a viable penny stock and if it can navigate economic storms well, the pennies may grow into double digit dollars and once in a blue moon triple-digit dollar stock. Now the allurement becomes apparent. Like Sherlock Holmes says if all other factors have been ruled out then the probable becomes possible.
Discovery
Among the class of stocks less than five dollars understand the shares have a speculative nature, are high risk and unproven. Legitimate markets have a set of values in place that minimizes interference from the ravages of lawsuits, fraud or bad business practices. In other words, with each step up in level regulation kicks in and molds a company to mainstream practices. Discovering companies in those junior listings that have mainstream practices in place and just need the investment capital to move into the larger exchanges may make good penny stock investments.
Other companies may have a bit of disorganization but a fabulous protocol or idea. With a good set of investors and a board can become molded into a path that sends the stock sailing higher. Be aware no matter how grand the technology, product or idea if they do not make money they will not progress. The money runs out. If they do black hat tactics eventually one of the larger companies that know how to handle that will take control if it’s a worthy project. Or others do tactics to run the small black hat firm out of business and then buy their idea or prototype for a fair price. The larger company turns around with all its resources and makes millions on it. Some firms get larger and the capital by acquisitions and appear to be more developed than what they are. The rules of engagement in the TSX market weeds those companies out or molds them to better practices.
A stock less than five dollars
In October 2018 Smallcap Power classified RELIQ Health Technologies Inc.(TSX: RHT) at $0.32 and a penny stock. A home health care firm it has an iUGO Care platform serving about 20,000 with a plan in place to serve 300,000 by 2021. It partners with other healthcare organizations to receive patients for its software technology platform. The stock fell due to an investigation by an investor law firm that had to do with misleading statements to the public. So, the core business of the place runs well and has alliances with other firms.
When the stock fell further because of the recent market correction than normal, it may have been a penny stock probable. If the firm can survive the lawsuit, the stock will most likely rebound. Home health care has phenomenal growth and most likely will continue that growth for at least 12 years due to the number of senior citizens increasing who will need help. Once the auditors have finished with better practices in documenting money the company may soar. High risk, speculation on the path the company will take, and a favorable growth market for their services make it a typical penny stock. The stock today stayed around $0.2494 down from $0.2755 opening. So not sure paths just possible ones based on the decisions its board makes in response to issues.
Conclusion
Just like the snipe hunt mentioned earlier, it remains exciting and possibly a little dangerous that RELIQ company presently is. Can an investor bag that stock and make money? Only time and the ticking of the stock market numbers will tell. Set a budget for those wild rides, root for those little companies, shoot a dollar or two there to see if they can compete in the bigger markets after some lessons. As an investor do the homework to even have a chance.