How to find best penny stocks is a true million dollar question. Usually when people or media talks about penny stock trading or investing, it’s always in a negative way. There are good reasons for this bias. Lots of cheap penny stocks lack of sound business model or realistic business plan. It’s no wonder new investors might doubt that are there any good penny stocks or are they all cheap for a good reason. While bad apples are never the news in penny stock market, the best penny stocks do exist but great efforts needed to find them. People tend to overlook that sometimes even great companies have a hard time, and forget it takes time for a great company to grow. It’s unwise to blindly buy any stock just because it has a cheap price. It’s equally unwise to abandon it without a thorough consideration. The following are two examples how best penny stock trading could benefit your portfolio.

GEICO Used to be a Penny Stock

People might be surprised that GEICO used to be a penny stock as well. In 1976, GEICO collapsed from its all time high $61 down to $2. It’s believed that GEICO soon would file bankruptcy (GEICO at the Brink - Time). At exact the same time, Warren Buffett stepped up and got fully loaded with an average price per share just over $3. History proved that no mistake was made. Geico, Inc. is a wholly-owned subsidiary of Berkshire Hathaway now. How did Buffett know GEICO would be a successful turnaround? Since Buffett is a disciple of Benjamin Graham – the father of value investing, and a die hard value investing practitioner. The answer could be found in the bible of value investing – The Intelligent Investor.

Best Penny Stock Pick Example with Forty-fold Return

Another more recent example is just after the dot-com crash. Millions of investors got burned during the crisis. After witnessed so many flash in the pan dot-com companies, investors just lost interests and confidence. Many good internet companies were dragged down to some ridiculous levels as well. Sohu.com Inc. (SOHU) was an outstanding example. Although SOHU is a leading internet company operating in China, its stock price dropped to nadir, $0.72 per share in April, 2001. In the next two years, SOHU made a rather substantial comeback, and by July, 2003, SOHU was traded at $40 per share. That’s a forty-fold return in just over two years. If savvy investors could find and buy this penny stock, they would be rewarded very handsomely.

So how to find best penny stocks? The shortest answer is The Warren Buffett Way – value investing. Before starting the search, the first thing is to know How to Avoid Penny Stock Trading Pitfalls. Serious investors should do their own homework and generate a penny stock list to watch while cherry picking only the best.