How to Spot a Superior Penny Stock or Micro Cap Newsletter

Penny Stocks
Information is cheaply available on the web today, yet the issue continues to be that how do you distinguish between the good, the ugly, and the bad. Especially when it comes to investing in the micro cap or penny stocks, there are way too many advertisements of self-professed gurus in hot stocks.
When you search the web there are so many sites claiming to have returned triple digit returns in a matter of weeks if not days through the use of penny stocks. The reality is that some of these sites have indeed helped their newsletter subscribers attain the said gains. But the voice and reason of the astute stock picker that grabs on early to an emerging opportunity and creates out-sized gain is often lost in the noise of scam artists. You will find in this article some objective ways to evaluate the valid sites and its micro cap stock newsletters from those who are spurious.
Firstly, focus on return attribution, just like the institutional evaluators of money managers do before they hand over their funds to a money manager. Simply put, this means that can the returns that the money manager has gained be attributed to his or her skills? In the case of a penny stock newsletter, you should seek a consistency in the recommendations of the micro cap stocks. Is the newsletter recommending a stock today because of technical reasons and another stock because of the strength of management? Read between the lines and ensure that the newsletter has a consistent method in picking the best small stocks and that it is not being done randomly. (Indeed, a newsletter can use both technical and fundamental analysis, but ensure that it is done with a certain methodology.)
Secondly, go through the list of past recommendations. Since most newsletter writers are not registered with SEC and are not expected to keep a track record of their returns (as they do not usually manage other people's money), look for the underperformers. The micro cap stock universe is abound wit opportunities that make the investor money but also there are many underperformers that quietly fold. Although not advice carved in stone, beware of the penny stock newsletter that does not have any underperformers. Akin to the portfolio of a venture capitalist, a portfolio of micro cap stocks will have losers.
Thirdly, closely connected to the preceding, also see if the site offers stock alerts on when to sell out of positions, both gaining and losing ones. It is never enough to get into a good hot stock and then follow a buy-and-hold strategy, unless on-going research warrants so. A good penny stock newsletter, like a good money manager, will alert you when it is time to exit a profitable or losing position.
Finally, pay close attention to any media endorsements, especially financial channels such as CNBC or generally news channels. Any company that has had their research recognized by these has some inherent value. Please beware not to confuse such endorsements with individual testimonials.
There are indeed many such valid sites about micro cap and small cap stocks out there in the web that match the criteria. Check out www.hypergrowthstock.com for one such example.