- They only consider American penny stocks.
- They don't choose companies trading on the Pink Sheets and other inferior exchanges.
- They avoid companies involved in certain industries. Here are some examples, and the rationale for steering clear:
- Airlines: Too much risk from competition, worker strikes, terrorism, fuel price spikes, accidents, and shifts in travel patterns.
- "Hot" industries: Generally anything widely discussed in the media see their share valuations get driven far too high by the crowd. Marijuana stocks and Bitcoin-related investments are just two examples.
- Banking and insurance: Their financial results are reported differently than most companies and are more difficult to properly interpret and analyze.
- Holding companies: See the earlier point about banking companies.
- Lawyers and lobbyists: Litigation is typically not a good business model.
- Nonprofits: The purpose of any business is to make money.
- Unions: Not typically about making money.
- Education: Notoriously competitive and usually underperforming investments.
Consider a similar approach for your own investments, when you want to bring the full universe of penny stocks down to a handful of potentially rewarding and high-quality investments.