Finding the perfect penny stock: The importance of management

Julie Brownlee, Fsp Invest, 25 Jun. 2014

Tags: penny stocks, penny shares, management, how to find penny stocks, investing in penny stocks, buying penny stocks,

On your quest to find winning penny stocks, you need to check out the management. To succeed, a penny stock needs to have a good business with good management. This is the best combination for investment success. So what do you need to look for? Let’s take a closer look…

Types of management in penny stocks

Generally there are two types of people behind penny stocks:
  • Young and ambitious people who have a good idea; or
  • People with experience who’ve worked in the industry, but want to run their own company in a better way.
Both of these types of management can be successful, but the first option is perhaps more prone to problems. Young and ambitious people who lack experience can be a bit naïve, David Thornton in Money Morning UK explains. Things might not work out as they expect.

On the other hand, people with experience have an understanding of how business works, have great contacts, know the industry well and can manage the whole stock market experience better.

A combination of the two is a great balance. For instance, a young entrepreneur who has the backing of an experienced board of directors.

What you need to find the perfect penny stock

When it comes to new companies in particular, it’s hard to value shares. With a new company you’re basing your expectations on its products and the people involved.

You have to give these new companies time. It can take a good few years before an idea can materialise into a selling product. So patience is key.

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It’s best to watch these companies from the side lines. Watch others fund the development stage, the initial marketing, staff recruitment, etc.

And once the company’s product starts to really sell, that’s when to get your slice of the action and invest.

So there you have it, the importance of management when finding the perfect penny stock.

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