Penny Stocks में कैसे Invest करें ? All information

 Penny Stocks में कैसे Invest करें ?

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Penny Stocks - You might have heard about this term that lets you invest in penny stocks because those are stocks of less value and chances of investing in them and making huge money if the stock goes up.

Typically our notion of penny stocks is like a stock of 7-8 or 10 that if it goes well then it will be 25-30-40 or even 100 resulting in great income generation. There is a misconception.

Penny stock doesn't mean that the rate of the stock is less. Penny stock means it's value is less. Now it is important to understand what is the difference between rate and value.

Rate means market price which if you are thinking then it's right that stock of 7-8 or 10 But when we see the overall value of the company which we reflect as market capitalisation

I will show you what market capitalisation is and how you should see it. When you see the value of any stock and that value is more then you cannot say it as penny stock.

For example, let's take a stock YES BANK. So it is 13.50 on today's date. So you will feel it's a penny stock. But if I see its value, where to see the value? Market cap.

Which I can see from the fundamental tab. So, it's value is approximately 34,000 crore. Now how can anything be a penny stock if it is of 34,000 crore.

That is because it's not a coin. Penny means coin. In the outside world it's called penny. So it's not a coin. Let's see for one more stock, Vodafone. What is its price? It's around 11

So we will think it's cheap. Equal to the value of puffed rice. And if we see it's fundamentals, then it's value is approximately 31,500 crores. So this is not a penny stock.

No one has defined penny stocks, everyone has defined it on its own. I feel that penny stock means any company whose market cap is below 100crore.

If we broadly decide the Indian market on the basis of market cap then we should divide on the following category wise. Some companies that are worth more than 10,000 crore

Some companies are between 1,000 & 10,000 crore. Some companies are between 100 & 1000 crore. And the companies that are below 100 crore.

We can call the companies above 10,000 crore as large cap. From 1000 - 10,000 crore companies can be termed as mid cap. From 100 - 1000 companies can be termed as small cap.

And below the 100 crore companies can be called penny stock companies. So I have defined this classification. I think it's more or less a fair classification, taking into the mind the Indian market structure.

Classification for the US and that of the European market would be different. SEBI has not defined the penny stocks, it has defined it in a negative way.

The stocks that don't have fundamental reasons to grow, the stocks in which there is no liquidity they increase. So there are certain actions/orders by SEBI that define penny stock.

But contextually it is not a definition for us. Whenever we talk about penny stocks we think that these stocks should be the ones in which huge money could be made.

Like let's take a classic classification, TTML. If we see it's history of 5 years then this company was approximately 6. So we thought that it was a cheap company.

And it has made its high of approximately 280 and if we see it's today value then 35,000 crore. This means that the company was a small one. This became a huge one.

Any reason happened due to which it was formed. So we all should see that we invest in these types of companies which are available in coins but have the potential to become huge one.

Well everyone has the urge to earn more from the share market. But for the love of it you make actions due to that love becomes better. Penny stock is a high risk, high reward category.

From 100 companies it can be possible that you find 3-4 companies like that which might give you returns like this but the remaining 90-95 companies remain there themselves or will again fall down.

So according to me investing in penny stock means almost to invest in any startup. Repeating it. If you want to invest in penny stocks, then you will have to mentally assume that you are a startup investor.

What does a startup investor do? It will invest in 100 stocks. Only 5 will become a huge one. But 95 will be demolished. Become 0. But the 5 that will become huge will generate so much returns,

That if we calculate the ROE of the investment of 100 startups or IRR. ROE means Return on Equity over a period of time. IRR means annualized return. Both mean the same.

If we calculate the IRR then it will become very high. So something similar works in penny stock investments. Now the question comes to why are penny stocks penny?

Why are they less valued? Not less priced but less value. Why does it come below 100 crore? There are many times when the company had performed better.

But as the market structure has changed, maybe the management of the company has changed or its vision or the company couldn't perform. For whatever reason.

Company goes below. Reasons can be anything. Like if we talk about reliance communications. So if we see it then this stock 5 years back was value at 41

Actually, before that it was priced more. But on today's date its price is 3.5 Why? Because it has problems in its management. Somewhere or other they didn't work well.

Sector was even problematic. And the new players have worked better and the old companies have over leveraged itself. Typically leverage plays a big role in becoming a penny company.

That if someone has taken a big loan then that company becomes a penny. So from again the business shows recovery and the business recovery can be of two types.

Either the sector is recovering due to which this business is recovering. Secondly, due to a change in the management. I made a video on Elearnmarkets YouTube channel.

Turnaround stocks. With Chetan Bhai. So I will give the link to that video, do watch it. In that he is trying to find out the turnaround stocks just by looking at the price behaviour.

But it's not necessary that penny stocks are turned around. Turnaround stocks can be a part of the penny stocks basket. But penny stock means the company whose value is less.

Now we as an investor should we Invest in penny stocks or not? There is no correct answer to it. If your risk appetite is high then you invest in penny stocks.

But identify the penny stocks in which you can see some moon shots. Moon shots meaning you can see some difference in their business due to which that can actually become,

A small cap from penny, and from small cap to mid cap and from mid cap to large cap. To understand this journey is very important. Now how are moon shots?

Typically price behavior is a way to judge whether the price is becoming strong. Secondly, the one which is most relevant in penny stocks.

Only the price behaviour should not be seen. What are the changes in the business? Is the company doing an expansion? Or has the management changed? Or revenue has come?

So the impact of all these things can be seen on performance. So if we find out companies around the performance of its business that is a penny and anytype of recovery can be seen.

So according to me, this is the correct way to identify a penny stock. So see, there are two ways. One is when someone says you invest in any stock.

If someone has said that then the first thing you have to do is find out whether the company's value is below 100 crore? So it's simple that you go to fundamentals in the StockEdge.

Over there you will see market cap. See, reliance communication is of 960 crore market value meaning it's small cap. It should be seen. Is this company below 100 crore?

If any company is of less than 100 crore then be extremely careful because it must have something excellent then only it will give you money.

If something nominal is happening then the company won't give you money. Let's do one thing, let's identify some stocks and let's use the scan feature of StockEdge

Specially fundamental, because when you talk about penny stocks the fundamentals play a huge role. Let's check the profitability scan under the fundamental scan.

And under that lets see the Quarterly EBITDA growth. Why am I seeing it? Because it can help me find out which is performing better in this quarter compared to the last one.

So I have done quarterly EBITDA growth. After going here let me remove the major stocks. This means all these stocks come. And I filter and in market cap I will do below 100 crore.

Apply. So over here the list of companies will come that are below 100 crore and the ones who have given a better quarterly EBITDA. Like Simplex Castings, RR Metalmakers,

Alexander Stamps, Octa Credit, Garg Furnance, You might not have heard the name of the companies because these are small companies.

But somewhere or other they have given a better performance. So let's talk about simplex casting. This has come according to the financial results of  September.

Let's remove September and do it for the current period meaning let's do it for the December quarter. So if I see the performance for the December quarter,

Then ADCON Capital Service, California Software, ADVIK Capital, Gujarat Hotel's. You might not have heard about their names even, and these companies are coming,

The December quarter is performing better than the previous year's December quarter. Let's take any company, ADCON Capital Service, now if you see it's sales.

It is a flat sale. And it's sales have increased in the last quarter only. So should I focus on it? Let's see it. Nothing to reject it. Let's see. Secondly if you see in the shareholding pattern,

There is no promoter, this is an old company, it's completely with the non-institutions. If we see the name of shareholders, some names are such that you might not have heard.

So you might not have excitement seeing these names. If I see the value of these companies, then it's only 5 crore market cap. It's of a very small market cap.

If I see its shareholding then there are no institutions, only retail. Largely 100% of the shares are with retail. So this company does not have any individual which you can say that this is the one who is running the company.

So I will tend to stay away from these companies. Let's see another company, California Software. Now what is it's track record?

35 lac 30 lac, 35 lac 40 15 3.5 crore 3.5 4 crores. This means that if the company is doing something then only there can be seen a revenue of 4 crore.

If we do it's overview then it's on information technology, an IT software company. It's market cap is approximately 67 crore. Not bad. If we go into shareholding pattern then there is a promoter

But the promoter has decreased its stake from the stake that was 10 years ago and that of now. But these days it has kept it static, in public there is no institution.

There are very limited institutions, mostly there are individuals that have taken stake in this company. Okay it's fine that in penny stocks there are generally individuals, institutions are generally not there.

Although there are no mutual funds in it. Let's see cash from operations from which the company is generating it's business, so in the previous quarter the company generated cash from operations.

So this company is not for somewhat discarding it. We should do more research on it. And the first action point to it is the company's website.

So if you click here then it will take you to the company's website and if you study the company's website a little bit then you will have an idea whether the company is genuine or is it a sham company?

Sham company meaning it's not a company. It is only making feel about its presence. So apparently it can be seen that the company's website is decent enough.

This means that the company is doing something or the other. After that who we are? It says that it was made in 1992 in China and it is doing some cloud base services.

So it's coming to mind that it's a technology world and many things are happening around tech and this company is even doing something in tech.

Looking at the management I will try to take a judgement on what is in the management. See, welcome to my site, meaning the management has not made its website so properly,

So the biggest criteria for me is that any company which is not saying the details about its management. They have revealed the names but they are not saying the details.

Typically, good management has a LinkedIn profile on the page. If there is no LinkedIn here, then I will have a doubt. These are minute things.

Because if you see, penny stock is meant to get trapped.  And in that you will have to see the vision of the management only that how well the management is.

And till the time the management is not saying anything on its own, not sharing much about its profile then a red flag comes that how should I track these companies?

So the selection process can be more data oriented. I have shown you the basic one. And evaluation, soft aspects like the validation that takes place should be seen much.

Whether the management is correct or not? What is it saying? A guy feeling should be developed looking at the profile of the management that this company is worth watching.

If it's worth watching, then we will put in the tracker, look at the price actions for someday. And after that only take decisions to whether to participate in this price decision or not.

Let's go back. Let's see the second one, Gujarat Hotel's. What has its sale been? Before it used to be 90 lacs. In between it came down And again came back to 80 lacs.

So it's possible that this company is on a path of recovery. If we see it's technical parameters, then it's on +. If we see it's shareholding then the stake of the promoter is static.

And largely owned by non-institutional. Generally the companies below 100 crore institutions don't participate. Over there if you enter the right company then it's cream.

Because when you enter the price increases, more people are entering, and the institutions come to a higher value. Generally institutions invest in mid caps. Not on penny stocks.

Invest in a small cap a little bit. Depending on their feedback on a particular stock/sector. So this was a way to identify. Second way is, generally the leverage is high on penny stocks.

So if I go to solvency scans, and look at those companies that are reducing its leverage. Then let's see, consistently decreasing leverage.

Meaning I am looking for those companies that are decreasing it's leverage. So if you see we can see a company here, ATAM Valves. If you see it's graph then you can see that it's reducing its leverage.

So I will select it and if we see its leverage then it has reduced very well. If we see the results and do study, then it's data is not much available so I think if we see its price behaviour

So it was released on October 20. Possible that it's a re listing candidate, we don't have much data available. If we see it's delivery data, then it's only 6000 shares.

The company having Delivery of only 6000 shares on a daily basis, we don't have to focus on that company. So see, we would have to make some parameters.

Firstly, what is the market cap of the company? If it's below 100 crore then you will have to assume that it's risky. Secondly, how is the share holding pattern?

Whether there is a stake of the promoter in the company or the promoter has shared it? And thirdly what is the delivery data saying? What is the basic delivery taking place?

If it happens, then the basics should be like there should be liquidity. That if some time you have to exit then you can exit. What did I do? I made a combination scan in StockEdge and named it Penny stocks.

And in this scan I put the quarterly EBITDA growth, put the consistent sales growth, put the consistent decreasing leverage, put the consistent cash from operation.

Due to this, I could find out that any company that is fundamentally okay will come or else won't come. So when I see the list of stocks below 100 crores, Lehar Footwears - a perfect match.

Let's go under it. There is no recommendation from my friends. I'm just trying to figure out the process. If we see the delivery then it's share is approximately 9000 shares.

So it's not much liquid. It's thinly liquid and obviously 100 crore market cap companies won't be much liquid. So if you see the work is going around 9000-10,000 shares

And if we fundamentally study it more, then this company is worth 56 crore market cap. And if we study its results then see there are consistent sales

And it is not so that the sales have de-growth in the previous 2-3 years. So they have done reasonably well in terms of maintaining the sales. And if we see the annual then a good annual sales

So this company does not seem to be a fraud one. There is something or the other in this company. Maybe due to situations it couldn't grow.

So more or less I think it's a positive mindset. Management is even increasing its stake slowly. So I have to work in this company with a positive view.

I will see it's chart. You can see the charts of small duration for these companies, you have to see charts for a longer duration. So if you see the overall trend, Higher low, higher highs.

So overall a positive trend. Super trend that I am showing here is showing sales.  Compared to the market performance it's relative performance is positive.

So this company is a company on which I will do more research. I will not judge looking at this much data only. Will visit their website and see about their management,

What have they said? Track the management and I feel from within that this company has made its business, management is with it. Then it's possible that I might take an attempt on this company.

And how much attempt should I take? Invest that much money only which will not impact you if it's lost. Meaning invest small capital. Because all these are similar to a lottery ticket,

If it goes well then you will earn a lot. And if it didn't go well then it's fine, a little bit of money gets used, then used. So this is a process to identify penny stocks and to invest in it using small capital.

Let me summarize this discussion friends that penny stock is a high risk category. Companies below 100 crores can be assumed as penny. Firstly, be mentally prepared that you want to go into that risk?

How much capital do you want to invest? Many people will tell you to invest in penny stocks. Or in any stock. If that stocks market cap is below 100

And you mentally don't feel that you have to go into that so you don't invest in it. Companies above 100 crore, which is basically small cap oriented.

Attempts can be made into them because there are chances that you will get participation from institutions. Let's do one thing and filter change in this.

Let's make this filter from 100 crore to 1000 crore which is a small cap. Over here there are many companies whose names might be familiar to you.

Like Antony Waste - whose IPO came. Saksoft Limited, Uni Abex, Bajaj Steel. All these companies are the one having some values. If you see the value then the market cap is around 900 crore.

Like Antony Waste - whose IPO came. Saksoft Limited,-, Bajaj Steel. All these companies are the one having some values. If you see the value then the market cap is around 900 crore.

It's not so that this is a zero risk zone. But at least our risk is calculated, controlled. In penny stocks the risk becomes wild. So I hope you are able to understand this whole concept.

What is penny stock? How do we generally track them? And how you have to identify good penny stocks.  I have explained this whole process. I hope you liked this.

And if you liked it then do share this video with friends and inside StockEdge there are different types of Scans from which you can make combinations

And make your identification of penny stocks a different one. No requirement of depending on someone else. Thank you friends for watching this video.

I hope you are liking my channel and my work. Keep on motivating like this only. Bye bye. Take care.