Penny Stock Fortunes' Frequently Asked Questions

What is a small-cap or "penny" stock?

We define a small-cap as an equity trading in a company that has a market valuation of $1.5 billion or less. Market value is determined by the current price of all outstanding shares that are available for trading. We consider penny stocks to be small-caps that trade for less than $10 per share.

Does the small-cap market have its own index?

Yes, the Russell 2000 is our benchmark small-cap index. Other small-cap indexes include the S&P 600 and the Wilshire 1750.

How much of my portfolio should I have in penny stocks?

There are several formulas for determining the level of risk in a stock portfolio. One standard rule is that the closer you are to retirement, the more conservative the portfolio. That said, the returns on penny stocks have historically been much higher than large-cap stocks. Your portfolio should always be adequately diversified between risk and return.

What is the CXS Money Multiplier System?

It's a system that screens public company in the penny stock universe. It's a system that helps our team find businesses that are primed for explosive growth using five major criteria to break down each company. We assign a score of 0-2 for each of the five criteria giving us a total CXS score somewhere between 0-10.

What are the 5 Criteria of the CXS System:

• Top-Line Power: Many great, undiscovered penny stocks probably won't be making steady profits yet, but they should still be growing revenues like wildfire. Ideally, better margins and profits should follow as the business strengthens. The more a company grows its revenue, the closer we'll watch it. And when it comes to stocks that trade for less than $4 and $5 a share, it's not totally uncommon to see 25%, 35% or even 50% revenue growth over the course of a year.
     
• Profit Fortress: It's always a good idea to find unique companies that possess some type of "unfair advantage" over the competition. Any business that churns out an ordinary product will eventually lose out to a company that can do it better, faster and cheaper. The most successful companies operate businesses that may have some type of government protection or products and services that aren't easily duplicated.
      
• Black Cloud Factor: Sometimes, one or two problems weighing down a company's stock can help you scoop up shares cheaply. Other times, it's uncertainty about the outcome of a lawsuit or regulatory issue that drags the share price down. However, if the company's underlying business is solid, the share price should go up once Wall Street's uncertainty is resolved. 
      
• Profit Catapult: A profit catapult is a future event that will drive a company's growth.
  Everyone hears about future prospects for many of the blue chip companies, but many times, investors ignore potential good news for penny stocks. A profit catapult for a small biotechnology company could be an action date by the FDA to approve a new drug. An approval of a company's first drug is a major step on the company's way to becoming profitable - and its first step toward making shareholders big profits.
     
• Business Shock Factor: Business shock is simply how revolutionary a company's product or service could be. The great businesses of our time will possess "disruptive technologies" that could potentially change the marketplace as we know it. These new technologies will be patented or very difficult for other businesses to duplicate, giving our technologically advanced penny stock yet another unfair advantage.

How should I invest in the Penny Stock Fortunes' recommendations?

Some readers prefer to invest only in one or two stocks a year, while others try to spread out their investments equally among the recommendations. There is no right way to invest. But as a general rule, it is better to spread your capital out among several positions, versus one or two. Not only do you give yourself more chances to hit that home run, you also mitigate your risk if one stock loses value.

How much should I invest in each?

Investing is a personal matter, and there is no way we can know your individual financial situation. As a general rule, you should never invest more than you can afford to lose. Consult your personal investment advisor if you have specific investing questions.

When will I receive my email alerts?

Typically, we send out an alert every Thursday. But, as the market changes day to day, we sometimes will have to send an extra one, or one on a different day. While we invest for the long term, it's important to stay on top of investments. We also send out flash buy and sell alerts from time to time. There's no way to predict when the next great penny stock will come along. So be prepared for these flash alerts to come at anytime.

What is a stop loss and how do I apply it?

A stop loss is a way to mitigate risk. Except in special cases, we set the stop loss for any stock we recommend at around 35%.  What this means is simple: if a recommended stock falls by 35%, you may sell at the stop loss point to protect your remaining investment.

However, it is important to note that we are not financial advisors. It's impossible for us to know your individual situation, or for that matter, how much risk you're willing to take.

That's why we continue to follow these stocks and update you on all of our recommendations. Unless something happens that changes how we feel about a particular business, we will continue to cover the company and update you on the stock. If you feel like you can handle the bumps down the road in this bear market, then you should hold on to your shares.