Research and Confirmation

As two sides of the same coin, the practices of research and confirmation are two reliable techniques to sound penny stock investing. Without them, you are flying high above the Atlantic without lights or radar. For down here in the lower exchanges, nothing can be taken at face value. Here you will find dirty stories that sound like fiction… and sometimes they might just be that. Then there are also those instances in which you might hear little at all, and left to fill in the dots. The lack of transparency requirements and big brother watching over the shoulder of each company often results in a lesser degree of obligation to the shareholder when compared to companies on the upper exchanges. Such freedom on the company’s part leads to exploitation to some or lack of regard by others.

On the lower exchanges, every good shareholder must attempt to piece together a story that exists beyond the Press Releases. The story involves how the company has come together, what its current purpose is, and what its direction is. More importantly, it is critical to establish why it is you believe that this story is validated. External confirmation is the more supportive evidence towards a successful story. Whether this be in the form of contracts formed with other companies or a guy driving past a factory to confirm its operational, external confirmation is the glue that binds the story together.

As a reminder, it is important to remember that external confirmation by itself will typically never validate the entire story but a specific part of it. There will always be judgment call needed into believing any story. If you are not actively looking into the story of a company alongside reading the PR’s, you are setting yourself up for a more dangerous situation by numbing your investing senses.