Penny stocks are lottery tickets that you can buy with your broker account. Although occasionally few – very few! – It may turn out that this is record operator. The vast majority live on life-sustaining support between the rare pump-and-dump scams that drive up their stock price, but only for a short time.
If you took a random generator You would probably end up with a company that has been involved in the last 10 years, from pharmaceuticals to mining gold, lists an order on Box as the address for its headquarters and has just bothered to submit some annual reports.
OK, that may be a bit too hard, but the fact is that scams, scams and sketchy companies have a disproportionate share of penny stocks.
Below, three Motley Fool contributors explain why Berkshire Hathaway (NYSE: BRK-A) [NYSE: BRK-B] Goldman Sachs (NYSE: GS) and Twitter (NYSE: TWTR) are better stocks to buy.
The Other End of the Investing Spectrum of Penny Stocks
Dan Caplinger (Berkshire Hathaway): If you had to find the ultimate opposite of a penny stock, Berkshire Hathaway should be your first choice. With a price tag of currently $ 300,000 per share for its Class A stock, Berkshire is as far from penny status as you can get. In addition, CEO Warren Buffett is the categorical opposite of a pump-and-dump penny stock shyster that focuses on capitalization rather than stock price hype and focuses on long-term prospects.
Fortunately, you do not have to be a millionaire to buy more than a few shares of Berkshire Hathaway. The company has created a second class of shares, Class B shares, which has a much lower price for investors familiarizing themselves with the company. With every Class B stock currently trading just over $ 210, Berkshire is within reach of most investors.
The stock got hit recently when Berkshire announced its first share buybacks in several years. Buffett is not aggressive about buybacks and prefers to use capital to buy from other companies. However, the buyback signals that Buffett believes to be Berkshire's intrinsic value are well above the current price of the stock. Do not fool yourself: Berkshire will not give you a chance to win 1,000% within weeks. But you do not have to worry about losing your money in as short a time, and Berkshire's fundamental prospects are stronger than ever.
bank on Wall Street
Matt Frankel, CFP (Goldman Sachs): [19459005BuffettundseinStockpicking-TeambautenaufBankaktienaufunderhöhtenmehrereBankinvestitionenvonBerkshireHathawayMiteinemAnstiegderBeteiligungum38%warderinvestmentbankingRieseGoldmanSachsdieBankaktiedieBuffettimdrittenQuartal(prozentualzurErhöhung)amstärkstenaddierteDiesfolgteinemweiterenKaufAnfang2018
Despite the positive mood of Buffett and some pretty strong business results was Goldman 2018 strong underperformer. The stock has lost more than 21% this year and has lagged well behind the S & P 500 (2%).
There are a few reasons for the poor performance. The trading volume of Goldman, the Bank's largest division, has historically been strong and has been rather weak over recent quarters. It has recently become known that Malaysia is trying to reclaim $ 600 million in fees that Goldman had paid in connection with an invalidated pension fund.
However, it is important to emphasize that this is a temporary headwind. Revenues from trading are far less predictable than fees. So I'm not very worried that the bank has missed estimates. And the legal risk is just part of the banking business, and there's no way to know if Goldman actually has anything left to pay.
Goldman still has tremendous untapped potential in its fast-growing consumer banking business, and it's one of the lowest ratings among major US banks. In addition, you can now get into Goldman cheaper than Buffett. The stock is down about 10% below its lowest price in the third quarter when the oracle of Omaha bought more than $ 1 billion in additional stock.
The other social media company
Jordan Wathen (Twitter): If you are looking for high-risk, high-earning stakes, you do not have to dig through penny stick scams to get them Find. Twitter is one such stock I believe has an all-or-nothing return profile: either the company succeeds and investors get rich rewards, or it slowly goes down in history and wishes they never heard of it ,
If You Care About It Twitter is the place to read news, celebrity gossip, sports and even just shares. Information flows quickly into 280 characters characters. And unlike, for example, Facebook (NASDAQ: FB) nobody cares if you post 20 times a day. In fact, overlapping is almost encouraged. When Facebook makes you addicted to baby pictures and wedding announcements, Twitter lifts you for a drink tube with information about what matters most to you. Twitter posted sales of approximately $ 5.19 per month of active US users in the last quarter, down from $ 27.55 per month active users in the US and Canada compared to Facebook. Converting monthly active users into daily active users is one way to close the gap. Daily active users increased 9% in the last quarter, although monthly active users decreased 1%.
Meanwhile, some cost efficiencies are expected, as the company has little to offer for robust spending on research and development (R & D). By the end of this fiscal year, more than $ 3.25 billion is likely to have been spent on research and development over the last five years, though you would never know that as a user.
Twitter is not a blue chip stock. It is not for the faint of heart. However, with incremental revenue and cost reductions almost entirely reflected in profit before tax, even slight improvements in revenues and expenses could drive up revenues. So maybe it pays off to look for people who are looking for an all-or-nothing bet.