Limited Regulation of Penny Stocks
- The federal government's Penny Stock Reform Act of 1990 defined penny stocks as stocks not traded on an exchange and selling for less than $5. Stocks listed on one of the two penny stock listing services, the Pink Sheet, have no regulatory requirements. Stocks listed on the over the counter bulletin board (OTCBB) have a regulated obligation to file reports with the Securities and Exchange Commission. However, no government agency checks any statement made by the promoters. A stock analysis program that helps you identify good penny stocks may reduce risk and improve results but only if you can verify the reliability of the data input.
Penny Stock Programs
- Identifying promising penny stock companies by means of software analysis has two requirements. The buyer needs to analyze the provided data to determine the value of the stock. The buyer also needs to confirm the reliability of that data. Because penny stocks lack robust oversight, the buyer has no easy way of confirming the company's representations. That critical limitation aside, stock analysis programs exist that will subject the given data to analyses of the data. Before placing too much confidence in these programs, confirm that those offering the program do not have a vested interest in the results obtained.
Objective Data Analysis
- Programs like VectorVest provide daily analyses of thousands of stocks. VectorVest specifically provides fundamental valuations based on such criteria as current price-to-earnings ratios and forward looking earnings. It also ranks the stocks based on a variety of technical evaluations that you can choose. Programs like VectorVest present credible results because the developers of the software do not sell stocks.
Penny Stock Analysis Programs
- The "Penny Stock List Builder" uses price-to-earnings and similar criteria to create a list of high ranking penny stocks. The program's publisher, Pennycents, also sells a magazine that makes specific penny stock recommendations. This presents no clear conflict of interest but begins to blur the line between analysis and advocacy. PennyGold also offers penny stock analysis software, which the program's owners claim will allow you to "double or triple" your money "over and over again." The claims made come close to those of pump and dump operators -- unscrupulous traders who trade a tiny company's stock back and forth among themselves, pumping up the price and advertising the results before dumping the stock again, leaving unwary investors with the losses. A number of online penny stock software reviews also merge evaluation with advocacy. Many sites propose to evaluate penny stock software programs but quickly move from a purported analysis to a fairly hard sell,