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Which Penny Stocks to Buy Today

What assessment do you make before investing in stocks?

Some general and broad rules which investors should follow are:

Looking for these traits in a stock is easy when it comes to midcap stocks, largecap stocks or smallcap stocks for that matter.

But what about penny stocks? Penny stocks are illiquid in nature and most of them don’t have a decent track record.

Penny stocks are shares of listed companies with low market capitalisation. These stocks usually have low share prices, typically less than Rs 100 and often less than Rs 50.

Well-chosen fundamentally strong penny stocks have the potential to deliver profits greater than 1,000% within 1-3 years.

If you’re on the lookout for which penny stocks to buy today, here are some points you need to evaluate:

  • Strong balance sheet: Look for low debt, high cash balance, & a current ratio greater than 1 i.e. current assets greater than current liabilities. Equitymaster’s stock screener can help you find debt free companies.
  • High promoter holding: The higher the better. It shows the promoter has skin in the game. Promoters buying shares from the market is a good sign. Use Equitymaster’s stock screener to find stocks where promoters are increasing stake.
  • Quality of the business: Ask these questions. Is it a good business? Are the fundamentals strong? Will it be around after a few years? Is it making profits?

To find which penny stocks to buy today, first you should screen for the fundamentally strongest penny shares. You can do this with the help of Equitymaster's Stock Screener for penny stocks.

Also read Equitymaster's Ultimate Guide on Penny Stock Investing.

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