How Penny Stocks Made $300,000 for One Young Investor

penny stocksPenny stocks trade at extremely low prices, hence their name. Often traded for fractions of a cent, these stocks are frequently targeted by stock promoters and market manipulators looking to scam investors out of a quick buck.

That's why the social media world - Reddit, specifically - is buzzing right now about 16-year-old Connor Bruggeman, who turned $10,000 (his life savings) into $300,000 trading penny stocks.

According to The Verge, Connor's father, a former Wall Street trader, couldn't decide if he should be proud of his son, or if he should ground him for life.

Connor had, after all, earned all the money himself. At the age of 14, he'd worked as a busboy at a local restaurant, putting every dollar he'd earned into a savings account. But he found the interest return measly and disappointing. So, at the behest of his grandfather, Connor turned to the stock market. With his hesitant father acting as custodian, he opened an Etrade account and began trading.

Right away, Connor - who is also known for his uncanny capacity for numbers and attention to extreme detail - loved the high-risk and hefty reward possibilities the penny stock market offered. And he was as careful as he possibly could have been. He knew that, like gambling, trading penny stocks meant the odds were always stacked against the investor. And he knew that, like gambling, the volatile nature of penny stock trading made it difficult, if not impossible, for him to predict movement.

Still, with all this in mind, Connor invested in American Community Development Group Inc., manufacturers of industrial-grade wireless equipment for municipal Wi-Fi systems. At the time of Connor's purchase, the stock sold for $0.003 a share. Using just his iPhone and home computer, he managed to turn $10,000 into $300,000.

Here's how...

Connor listened to a conference call during which the chief executive officer of American Community Development Group announced the company would soon be buying back shares to trigger movement upward, toward $0.01 per share. Connor accumulated a position of several million shares at $0.003 each.

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Four days later, the company announced its buyback program and the price began to climb. At first the shares hit a little over a penny each. This was enough, however, to alter the value of Connor's portfolio to roughly $50,000. A month or so later, American Community shares rose to $0.06, bumping Connor's portfolio up to 20 times what he'd originally paid, or $200,000. However, he sold off most of that position a couple months later, for $0.04 a share. Still, he profited nicely. American Community stock is now down to $0.0036. Connor was smart to get out when he did.

Keep in mind, the total $300,000 that Connor managed to amass came from his American Community Development Group trade plus hundreds of penny stock trades that accumulated much smaller amounts.

More on Making Money with Penny Stocks: Penny stocks across a variety of sectors have logged impressive gains year to date. Not all big gainers are good investments, but there are penny stocks that represent legitimate companies that generate revenue and have healthy prospects. The key is finding those engaged in niche businesses offering a product that will serve many. And the following three hot penny stocks to watch deliver just that...