FTSE AIM index - Penny Shares

intex

Is anyone here aware of any cases where the value of penny shares on the FTSE AIM index have risen sharply, say from 1p to 50p, and if so, over what timescale was this? Days? Months? Years?

Blah99

You can probably find this info using a stock screen on Digital Look or Interactive Investor. If you have access to a software package like Sharescope that should do it too.

Why are you interested in this info? Hopefully it's to demonstrate how bad an idea penny shares on the AIM are

Rolandtheroadie

I'm a rank amateur at the share dealing but the reading I have done so far says to avoid penny shares.
Woolworths were 5.3p when I bought them, sold at 4.3 (after reading thenakedtrader). Where are they now?
Thats penny shares for you.

PennyTrader

All share trading carries big risks (remember all those who thought they would be safe investing in HBOS?).

AIM shares tend to be more volatile. They are where traders often make their biggest losses AND their biggest gains.

I have been trading over the last 4 years and it is not as easy as it looks, but rewarding when you do get it right.

At the moment the things you need to look out for are the NAV (Net Asset Value per share) and the companies balance sheet. If the NAV is higher than the current share price and the company has cash in the bank, then your chances of making some money are improved. This is of course provided that you have looked at their business model and deemed it viable. Which leads me to my next point - research is everything. It is not possible to randomly pick stocks and make a profit (even more so on the AIM market).

My view above is pretty simplistic but hopefully it will get you going in the right direction.

lcharm

Agreed.

If you are going to invest in Penny Shares you need to take into account the following things

1. Are you prepared to lose most if not all your money invested if things go wrong?

2. You need a very good spread of companies over different industries in your portfolio (which are already doing well of course) to improve your chances.

My bro in law works in a dubai bank, and as well as NAV he says that Free Cash flow is important because companies that seem to be doing well can actually be in negative cashflow.

The trick is (and there's no science behind this) is to"discover" a companies potential before everyone else does, because by the time everyone else know, you'll have missed the boom!

Nothing beats being well researched..I just wish i had the spare cash to invest in the first place

But when things go right...boy do they go right!!!!

gozomark

PennyTrader wrote: »

It is not possible to randomly pick stocks and make a profit (even more so on the AIM market).

it is very possible, and about as likely as doing it via research given realistically the level of research a private investor can realistically make.

the most important thing is diversification - invest in say 10 different companies. Picking them at random is as good a way to select them as any, as you are looking for maybe 2-3 winners out of the ten, and the reason they win is down to something not known or knowable at the moment

PennyTrader

gozomark wrote: »

it is very possible, and about as likely as doing it via research given realistically the level of research a private investor can realistically make.

the most important thing is diversification - invest in say 10 different companies. Picking them at random is as good a way to select them as any, as you are looking for maybe 2-3 winners out of the ten, and the reason they win is down to something not known or knowable at the moment

I would disagree with this based on the current economic backdrop where the majority of shares are falling in value. However, this would have more potential to work if the general market trend was upwards.

I agree with your point about diversification though.

gozomark

I presume you believe that a small investor, with a few hours research of already publicly available information, can actually forecast future share prices better than the market can then.

PennyTrader

gozomark wrote: »

I presume you believe that a small investor, with a few hours research of already publicly available information, can actually forecast future share prices better than the market can then.

I was just trying to say that in a falling market a more selective approach would be needed to get a decent return (based on a short to medium term investment).

I'm by no means saying that you would beat a good investment fund, just that you can improve your odds a little by doing a bit of research. This is a strategy that has worked quite well for me.

gozomark

agree you can improve your odds a little, but chance is far more important than skill. What was last years good investment fund will struggle to beat the market the following year for the same reason. The main determininant of future price movements is the unknown and unknowable, which by definition cannot be discovered no matter how much research you carry out.

in a falling market a more selective approach would be needed to get a decent return -agree - however, are we still in a falling market ? - that is also an unknown - all we know is that it has been a falling market, not that it will continue to be so. Assuming we are in a falling market still, how do you know the particular selective approach you pick will be the right one ?

Geoffo_M

One other thing to be aware is that penny shares often have a larger spread, so, even if your share performs well, it can be a while before you break even. With me, it frequently works the other way. The share price drops a fraction and you find yourself 20%-30% down very quickly. I would avoid them, unless as previous posters have said, you have researched the company well.