The Peter Leeds Approach to Penny Stocks

By Peter Leeds

For the Peter Leeds Stock Picks newsletter, they start their analysis with the full universe of penny stocks and then eliminate huge chunks of them very quickly by imposing the following strict parameters:

  • 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.

This first level of screening is actually quite simple and not at all time intensive. The team then screens the remaining stocks to determine whether they warrant a full Leeds Analysis review. Only stocks that pass their full review are profiled for the subscribers.

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.