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When penny stocks cross each new dollar level, speculators and investors generally take a look at what they are holding and decide if there is a reason to keep on holding on or whether they should move on down the road. When you add in that this is SIRIUS XM Radio Inc. (NASDAQ: SIRI), you could have a serious review by this same investment community. SIRIUS XM did print a new high of $2.00 today and its new adjusted 52-week trading range is $0.86 to $2.00.
SmarTrend over the weekend pointed out that SIRIUS XM has the highest EV/Sales (enterprise value to sales) ratio of all cable and satellite providers at 3.6-times enterprise value. If you go back to our “10 Hidden Gems” from the SIRIUS XM 2010 Annual report, we would caution against this sole enterprise value note as the real market cap is based on about 3.93 billion shares outstanding. The company actually has 9,000,000,000 shares authorized at December 31, 2010 and 3,933,195,112 of those are what makes up the free float. Liberty Media Corporation holds preferred stock that is convertible into 2,586,976,000 shares of common stock and the company cannot issue equity or debt securities without the consent of Liberty Media.
Penny Stocks are stocks traded for under $2 and they represent the small cap companies. They trade on the OTCBB so you will not find them on the major stock exchanges. They are very cheap stocks and normally come for businesses needing capital. They are a very risky investment as the business can go under and leave you with a stock worth nothing. However that being said penny stock trading can be a great money maker, and there are numerous traders who make 6 figures and more from them each year.
The best reasons to trade in penny stocks are the fact that they do not require a large initial investment, meaning that they are an affordable investment for many. Penny stocks are cheap. For example if you were to buy 1000 shares in a company with shares at 10 cents, you would only require an investment of $100, whereas if the shares cost $5 you would require an investment of $5000. Penny stocks also have the potential of huge gains, and have been known to rise as much as 1000% daily. Therefore your $100 investment can be worth $1000. This is very unlikely to happen to other stocks from large cap businesses.