Penny Stock Pick - IMH

Which is the best place to find penny stocks? Years ago technology and biotech startup would probably the place for penny stocks. It is hard to imagine a supposedly "stable" industry like financial - especially the mortage sector would be filled with penny stocks. However the waves of foreclosure and default caused many company either going bankrupt or massive layoffs. So now we are left with mortgage penny stocks such as Impac Mortgage Holdings(IMH). Although this sector may seem dangerous, the aggresive fed rate cut and rising mortgage applications may indicate this sector is ready for comeback. So will this stock be back?

Technical
Although the moving average still shows weakness as 50 day moving average is below 200 day moving average, positive momentum seems to be back as the stock is back above 50 day moving average. In addition MACD is also back above 0 indicating the stock is back in bull market.

Insider
Although for the past year most insider transactions were sales, this year all the transactions have been purchases of the stocks from Ashmore William, the director and president of the company. Watch and see if more insider other than William start buying. From the institution side there is no activity for the past quarter.

Financial
In the latest quarter the company posted a huge net loss which is expected from most of the mortgage related company. The balance sheet shows dangerous sign as the stockholder equity is negative which happens when total liabilities exceeds total assets. We will probably not seeing any institution buying in the stock until the financial situation improves.

Conclusion
If the financial situation improves, this is a Strong Buy stock.

Penny Stock Score (1~5) 5 is highest
1. News: 5
2. Industry (mortgage investment): 2
3. Technical: 4
4. Insider: 3.5
5. Financial: 1
Recommendation: Accumulate

Penny Stock Pick - SCA

The roof has collapsed on global equity market as fears of US recession send global stock markets tumble and trigger the 0.75% emergency interest rate cut from the fed. The center of the turnmoil - the mortgage industry the stocks are basically in ruins. However as investors are running away from the mortgage related stocks, it could also be the best time to pick the dimonds in the rough. So can the Bermuda based Security Capital Assurance Ltd. (SCA) be the one? The bond insurers which saw its price plunging from $30 last July to as low as $1.5 two days ago attracted buyers today as the shares were lifted 30% in one day. Possible help from regulators ease fears of the total collapse of the industry. So will this be a good time to buy?

Technical
The technical chart shows weakness as the stock is trading below major moving averages. In addition MACD is below 0 showing the stock is in bear market. One possible positive indicator is KD where K line seems to be ready to rise above D line which could mean rebound.

Insider
The insider transactions seem positive as more than 90% of the transactions are buys. However since the current price is way below the insider purchase prices either the insider were not aware of the severness of the downturn or the stock is way undervalued. Hopefully the later is true.

Financial
The financial side looks weak as the company swung to third quarter loss of $89 million compared to profit of $28.4 million in the same quarter of previous year. The loss was due to a huge one time accounting charge of $131.7 million. The operating income without the charge was 72 cents per share which tops analysts estimate.

Penny Stock Score (1~5) 5 is highest
1. News: 5
2. Industry (bond insurance): 1
3. Technical: 2
4. Insider: 5
5. Financial: 2
Recommendation: Accumulate

Penny Stock Pick - XNL

This is the penny stock in the right industry. As the oil has surged to $100 per barrel, investors are scrambling to find stocks in alternative energy. One of the hottest sector to put the money in is probably ethanol as goverment sign energy bill in early December of 2007 that will boost ethanol production. Here fortunatley we found a penny stock which is in the ethanol industry called Xethanol (XNL) which surged 27% today to 87 cents per share as the company extends research agreement with National Renewable Energy Laboratory. Let's take a look at the detail of the stock and see if it is worth putting the money.

Technical
Although the stock didn't perform well last year, we should see a rebound this year as the technical chart now shows positive momentum is back as MACD is now back above 0. In addition 20 day moving average recently crossed on top over 50 day moving average which is a very positive sign.

Insider
The insider has been buying the stock aggresively in August and September last year at $1 per share. This is a really good sign considering the current price is below that. Although there as been no transaction from the institution last year, looking at the major holder and you'll see top player like Goldman Sach still holds about 888,899 shares.

Financial
In 2006 the company had major improvement in revenue from 4 million in 2005 to 11 million. The company should probably generate similar result in 2007 as the revenue so far is about 8.4 million. However the net loss is still high so in another two quarters financing is needed again.

Penny Stock Score (1~5) 5 is highest
1. News: 5
2. Industry (alternative energy): 5
3. Technical: 4
4. Insider: 4
5. Financial: 3
Recommendation: Buy