I think there should be a differentiation between penny stocks and low-priced stocks. The latter are those that are of fundamentally sound companies but are available at prices ranging between about 6 bucks to 20 bucks or so, for various reasons. With penny stocks (<Rs 5), the risk is more than gain most of the times whereas with low-priced stocks the risk is much lower and the likelihood of gain is real.
Some examples of low-priced stocks that I have profited from during the past few months are Facor Steels, Shiva Cements, Assam Tea, Cybermate Infotech, Bellary Steels, Kaashyap Technologies, Vijay Textiles and Harig Crankshafts.
I usually buy 500 to 1000 of these shares, keeping my total investment to ~15000 bucks. I have gained 60K in one week on just two lots of RCom and then lost all that and more the next week on other futures so 10 - 15K is not a great amount. I invest only after doing some research at sites like moneycontrol, stocksbuddy etc. and also searching for news items in financial periodicals.
Once invested, I keep a watch on the price everyday. As soon as the price doubles, I sell off 50% of my holding so my investment is safe. Anything more that comes is pure profit. Or if the price aprreciates fast and then slows down or starts coming down, I sell off the whole lot. (This is not always the right decision and I have bought Shiva Cements again at 19 after originally buying at 12 and selling at 18.) In some cases (like with Assam Tea, which has gone up to 55 from 20 in three months, and is tipped to reach 100 levels in a year because of discovery of oil in the area and drilling going on) some definite good news comes out and so I hold on to the stock. I am currently having Kaashyap Technologies, Cybermate Infotech, Bellary Steels and Shiva Cements. Sold off Facor Steels, Nandan Exim and Vijay Textiles at fair to good profits but am regretting it now. There are others that I am not able to get even though I keep placing orders everyday at last traded price + 5% or during market hours at currently traded prices.
I take care to buy only those shares that are traded in volumes of lakhs so that I do not find myself left holding a lot of duds.
My advice to all friends here is to do a little research on the fundamentals, financials and market movements of low-priced stocks or even penny stocks before investing and then exiting as soon as you get adequate returns. (I keep my target at 50% gain on an annualized basis.)
There are plenty of fish in the sea and one can have one's fill with the minnows and anchovies as much as with the sharks and marlins and whales.
