The most crucial aspect of penny stock investing is doing your homework right. You do that, and you win; you neglect to do your research thoroughly, you lose money. As more investors get into penny stocks, it has become important to learn how to do proper research. Things are not helped by the fact that unlike large-cap and mid-cap companies that dominate the financial media, there is very little coverage on companies in this universe. However, if you look at certain sectors minutely, finding winners will become relatively easier.

Although you can find penny stocks in almost every sector, there are some industry groups where there is more likelihood of finding winners. Some of these include;

Biotechnology Penny Stocks- Biotechnology has gone on to become one of the hottest sectors and there are some sure winners that you can find there. Most biotechnology companies are small and in the development stage. Many are in the process of creating potential blockbuster drugs. The best part is that most of these companies’ stocks trade for pennies.

Renewable Energy Penny Stocks- The past few years have seen the price of crude oil appreciate considerably. At one stage, crude oil prices touched $140 a barrel mark. The volatile crude oil prices have led to calls for finding alternative sources of energy that are not only renewable but also environmental friendly.

This has led to the Renewable Energy becoming a very widely followed sector, with companies that have the potential to become huge in the future. Investors can find some real gems in the Renewable Energy sector that trade in the penny region. While it’s not suggested to focus on these two specific sectors exclusively, they may represent a starting point, where newer traders can get a better feel for the ebbs and flows of the markets.

When considering where to look for winning penny stocks, we should also address where NOT to look for them. Under no circumstances should you ever follow any picks that come from free websites, newsletters, or e-mails.

Most penny stocks presented by free services are simply paid shills, or pump and dump artists. They aren’t giving you good advice, and generally they simply want to make money off your back, whether that’s by selling shares as you buy, or by misleading you about the company’s outlook as they cash the checks that same company is sending them. It is becoming increasingly important to know where to look for investments, and also what information sources to avoid. Taking into account the discussion above, you will be off to a good start.

Peter Leeds is an expert on penny stocks. Visit his stock market website and benefit from low priced shares.

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