What is Penny Stock or “Saham Gorengan”?
If we look on Cambridge Dictionary, Penny Stock is a share with a very low value because it is considered a high-risk investment, for example in a company that is small, little known, or not very successful. In Indonesia, fritter or “Gorengan” is a really famous and delicious food, but it leads to several negative effects, such as high of cholesterol. So, in a simple definition, penny stock is analogous to Gorengan, because to make Gorengan, we just need a cheap raw material, and then we fry for a while, and it can be sold with a pretty high value. But the most important part is Gorengan is not good for our health, especially if we consume a high amount of it. The explanation of Gorengan is very similar to Penny Stock, several people with the power to control the stock or “bandar” buy the Prices per Shares with cheap price, and then they exaggerate issues regarding that particular company to increase the Price per Shares, so that they are able to sell the Shares in high price to get a high return. Also, this Penny Stock is not good also for our health, maybe it can make us heart attach if we buy such a Penny Stock, especially for amateur player.
Penny stocks are more suitable for investors with a high tolerance for risk. Typically, penny stocks have a higher level of volatility, resulting in a higher potential reward and a higher level of risk. Considering the heightened risk levels associated with investing in penny stocks, investors should take particular precautions.
Although penny stocks can have explosive moves, it is important to have realistic expectations. Typically, gains in the stock market take months and years to materialize. An investor who buys penny stocks with the intention of turning IDR 100 into IDR 1,000 over a week is likely to be deeply disappointed. Penny stocks are often growing companies with limited cash and resources. In other words, most penny stocks are high-risk investments with low trading volumes.
Some characteristics of Saham Gorengan, such:
1. Has a Small Market Capitalization
Saham Gorengan generally has a relatively small market capitalization, usually below IDR 1 Trillion. With a small market capitalization, the “bandar” can easily drive the price.
2. Unstable Transaction Volume
The next characteristic of Saham Gorengan is having an unstable transaction volume. This can be seen in the following graph, where only at certain price spikes the volume increases.
3. Irregular Volatility in Prices
This is about the price, can be suddenly low, and can be suddenly high. For example, the price of shares is IDR 50, tomorrow the price can be IDR 100, and the day after tomorrow the price suddenly drop in IDR 50 again.
4. Price Movements are not Supported Company Fundamentals
The stock price, naturally, follows the growth of the company’s fundamentals. If the company makes a profit, naturally the stock price rises. However, this can’t be applied to Saham Gorengan. Often, the price movements are not similar with their fundamental performance.
Reference:
- Cambridge Dictionary: Penny Stock
- www.financialku.com
- www.investopedia.com
About Post Author
Inspiring insight mr Fadhil. in reality penny stock hard to define . reading your article give me more knowledge about it. fundamental company and historical data stock price must be important thing when we decide to invest.