Making Waves: Investors Focusing on Shares of Neothetics, Inc. (NASDAQ:NEOT)

Penny stock investors have been taking a closer look at shares of Neothetics, Inc. (NASDAQ:NEOT) after the price moved 2.69% following the conclusion of a recent trading day, reaching a price of $0.36 in the process.

Neothetics, Inc. (NASDAQ:NEOT)‘s stock has performed at -67.59%. Breaking that down further, it has performed 8.46% for the week, 1.40% for the month, -81.09% over the last quarter, -74.26% for the past half-year and -65.43% for this last year.

A big advantage of investing in small-cap stocks is that there is an opportunity to beat the institutional investors.  Mutual funds have restrictions limiting their power to buy up large portions of any one company’s outstanding shares.  The stock is 4.00% away from the 20-Day Simple Moving Average. Their 50-Day Simple Moving Average is a difference of -15.92% from current levels. Further back, their 200-Day Simple Moving Average is -72.04% difference from today’s price.  As we stand today, the stock is -43.17% from its 50-Day High and 21.00% from the 50-day low.

The SEC considers a penny stock to be any stock under $5.  Though there are sub $5 stocks trading on the big exchanges like NYSE and NASDAQ, most investors won’t think of these when describing a penny stock. 

Individual investors consider penny stocks to be Wall Street’s Wild West, an untamed world of investing apart from all the media coverage and attention that comes with stocks that are traded on the major exchanges.  While the ups and downs can be pretty impressive within the penny stock world, they’re not often heard about on the outside.

Though you don’t often see coverage of penny stocks every day on CNBC, it doesn’t mean that penny stocks are without drama or interest.  Unfortunately, penny stocks have earned a reputation as a shady game filled with scams and corruption. 

If penny stocks aren’t traded on normal exchanges, where can one buy them?  Like any other stock you would buy, you can purchase shares of a penny stock through your normal stockbroker — regardless of whether or not it’s listed on a major exchange.

The cheap stocks listed on major markets like NYSE and NASDAQ aren’t typically considered “penny stocks” in the strictest sense, they can take on the characteristics of the benefits of penny stocks without as much risk.  The reason is that these exchanges have strict listing requirements, and though these stocks might not allow for as much of an upside as “true” penny stocks can, they are usually more reliable.  

True penny stocks can be found on the Over-the-Counter Bulletin Board OTCBB), which is a quotation.  As opposed to Pink Sheets, which is just a quotation publisher, OTCBB does maintain listing requirements (though they’re less strict than those of an exchange).  It’s for this reason that OTCBB has some added legitimacy.

Pink Sheets is a quotation system that provides information to investors on stocks that are registered with it.  Pink Sheets isn’t registered with the SEC and doesn’t enforce listing requirements, making them riskier.

Though penny stocks are riskier than regular stocks, it’s their volatility that makes them attractive to investors.  It’s not impossible for, say, a stock to jump from $0.05 to $5 in two weeks.  Though companies that successfully jump from penny stock to power stock are rare, the ones that do can make their investors wealthy.  The trick, of course, is finding the right stock.    

Companies that can successfully make the jump from penny stock to power stock are rare, but when you find them they pay out in spades. Numbers vary quite a bit in the penny stock world, but investors have raked in gains over 1,000% in a couple weeks’ time. The real trick is finding the right stock.

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