Stocks & Commodities V. 25:2 (57): Websites For Traders: Pinksheets.com by David Penn
Many is the successful broker who, although currently trading blue chips, got his or her start patrolling the market for over-the-counter stocks known as the “pink sheets,” looking to find that elusive three-dollar (or even three-cent) stock primed to go gangbusters.
As you might imagine, three-cent stocks tend not to be the most investment grade of equities, which is one
reason why a stock might find itself delisted from the exchanges and making a home for itself in the pink sheets (so-called because the publication in which these stocks were listed was printed on pink paper, not unlike the Financial Times). And because those stocks do not report to the Securities and Exchange Commission as do “listed” or exchange-based stocks,
speculation often surrounds them. I get several emails a day from advisory services telling me about the great move in XYZ—a steal at seven cents!—that I just missed, and how I’ve only got a few days before that seven-cent number goes careening toward the value of a dollar or more.
Part of the lure of pink sheet stocks, obviously, is their low price. Beginning traders, greedy traders, and traders making their way back from ruin are often
attracted to the idea of being able to buy 1,000 shares of stock — even if the shares can be had for some double-digit divisor of a penny each. Another lure is the potential for huge gains should one of these undiscovered, left behind, overlooked, and discounted stocks do well. After all, from an optimistic perspective,
there’s plenty of room to the upside for a seven-cent stock. Of course, there’s nothing stopping a seven-cent
stock from becoming a two-cent stock or less.