Some Stocks are Hot - Some IPO"s are Not
While penny stock investors are accustomed to the daily volatility of the markets, most investors are not.
Wall Street declined for a fourth straight session Thursday after new data fed investors' belief that the economy is moderating faster than the Federal Reserve anticipated.
In general, it seems, volatile-shy investors are hyper-sensitive to signs of either a slowing economy or rising inflation, amid hopes that the Federal Reserve won't have to restart its recently paused rate hike.
And it's not just investors that are playing it cautiously.
A lot of companies are too.
Last week three major IPOs (initial public offerings) were withdrawn from the market.
There are $23 billion worth of stock issues lined up for a fall debut.
But thanks to an unstable market, many are wondering how well received their IPO's will be by investors; who have steered clear of new offerings for the last few months.
Rising interest rates, more volatile stock markets and a view that the economy will slow down by the end of the year are making investors more cautious about taking on new stock issues.
Analysts noted that this is especially true in the riskier corners of the technology and biotech sectors.
To IPO or not to IPO...
that may be the question corporate suits are asking themselves.
But don't let their apprehension and market volatility steer you clear of unearthing some uncut gems.
A recent study from Citigroup looked at the past five runs of Fed rate hikes and examined how stocks performed in the 12 months following each final rate increase.
What they found was that classic defensive plays like pharmaceuticals, financials, utilities and consumer staples (juggernauts such as Coca Cola and Procter & Gamble) have historically gained twice as much as the S&P 500 once the Fed stops raising rates.
Why?Because consumers continue buying medicine, drinking pop, pumping gas, and paying their electric bill regardless of the state of the economy.
So...
what sectors look the most promising?As mentioned above, pharmaceuticals, financials, utilities and consumer staples; for starters.
And a little due diligence will show you that there are a large number of penny stocks that fall under those categories.
But where to begin looking?It's no surprise to learn that oil and gas remains a hot sector.
But it may be difficult to find a decent resource play that's sitting in your price range.
Instead of pumping your money into a potentially over inflated sector, you may want to look for a penny stock company that compliments a larger organization.
For example, I was reading recently that one analyst sees "substantial growth potential" for undersea equipment makers and construction firms.
With an estimated 176 billion barrels of petroleum and 920 trillion cubic feet of natural gas still undiscovered in the oceans, the worldwide drilling fleet "should underpin demand for deepwater infrastructure well past 2010," noted one analyst.
Unfortunately, publicly traded undersea drilling companies do not fall under the domain of penny stocks.
But remember, no company is an island...
even publicly traded behemoths look to their penny stock companions for support.
Is there a penny stock company that supplies undersea drilling companies?Maybe...
maybe not...
but the search will at least get the ball rolling.
And you never know what you'll turn up when you're least expecting it.
Wall Street declined for a fourth straight session Thursday after new data fed investors' belief that the economy is moderating faster than the Federal Reserve anticipated.
In general, it seems, volatile-shy investors are hyper-sensitive to signs of either a slowing economy or rising inflation, amid hopes that the Federal Reserve won't have to restart its recently paused rate hike.
And it's not just investors that are playing it cautiously.
A lot of companies are too.
Last week three major IPOs (initial public offerings) were withdrawn from the market.
There are $23 billion worth of stock issues lined up for a fall debut.
But thanks to an unstable market, many are wondering how well received their IPO's will be by investors; who have steered clear of new offerings for the last few months.
Rising interest rates, more volatile stock markets and a view that the economy will slow down by the end of the year are making investors more cautious about taking on new stock issues.
Analysts noted that this is especially true in the riskier corners of the technology and biotech sectors.
To IPO or not to IPO...
that may be the question corporate suits are asking themselves.
But don't let their apprehension and market volatility steer you clear of unearthing some uncut gems.
A recent study from Citigroup looked at the past five runs of Fed rate hikes and examined how stocks performed in the 12 months following each final rate increase.
What they found was that classic defensive plays like pharmaceuticals, financials, utilities and consumer staples (juggernauts such as Coca Cola and Procter & Gamble) have historically gained twice as much as the S&P 500 once the Fed stops raising rates.
Why?Because consumers continue buying medicine, drinking pop, pumping gas, and paying their electric bill regardless of the state of the economy.
So...
what sectors look the most promising?As mentioned above, pharmaceuticals, financials, utilities and consumer staples; for starters.
And a little due diligence will show you that there are a large number of penny stocks that fall under those categories.
But where to begin looking?It's no surprise to learn that oil and gas remains a hot sector.
But it may be difficult to find a decent resource play that's sitting in your price range.
Instead of pumping your money into a potentially over inflated sector, you may want to look for a penny stock company that compliments a larger organization.
For example, I was reading recently that one analyst sees "substantial growth potential" for undersea equipment makers and construction firms.
With an estimated 176 billion barrels of petroleum and 920 trillion cubic feet of natural gas still undiscovered in the oceans, the worldwide drilling fleet "should underpin demand for deepwater infrastructure well past 2010," noted one analyst.
Unfortunately, publicly traded undersea drilling companies do not fall under the domain of penny stocks.
But remember, no company is an island...
even publicly traded behemoths look to their penny stock companions for support.
Is there a penny stock company that supplies undersea drilling companies?Maybe...
maybe not...
but the search will at least get the ball rolling.
And you never know what you'll turn up when you're least expecting it.
Source...