Find the Best Penny Stocks to Buy Today with 1 Simple Method

We're going to show you one easy way to find the best penny stocks to buy today.

Investors interested in penny stocks need to have a strong risk tolerance. But if you can afford some risk, penny stocks can be an extremely lucrative asset class.

For instance, cancer biotech ITUS Corp. (Nasdaq: ITUS) saw its stock surge from $0.67 to $2.90 in September. That's a whopping 292% gain in just one month. Those returns came after the company announced a new patent on its unique tumor-detection platform, called Cchek.

But penny stock investing can be dangerous if you don't research the company. Some of these firms may be conducting pump-and-dump scams meant to cheat investors out of their money.

A recent example is Cynk Technology Corp. (OTCMKTS: CYNK), a so-called social media company whose stock rocketed 24,900% between May and July 2014. But by September 2014, the stock had crashed all the way back to $0.20.

The SEC investigated this strange rise and fall, eventually finding Cynk to be just a shell company with zero revenue and zero assets. CYNK stock's mind-blowing rally was just a pump-and-dump scheme set up by Gregg Mulholland, a stock promoter with a history of financial fraud. He was sentenced to 12 years in prison earlier this year for spearheading the entire scam.

Scams like Cynk prove that it's important to do your homework and research a penny stock's financials. And there's one simple way to see if a firm is safe and worth your investment...

1 Easy Way to Identify the Best Penny Stocks to Buy Today

One of the best ways to determine a penny stock's safety is by checking out the company's 10-K filings.

A 10-K filing is an extensive financial report submitted to the SEC each year. It lays out a company's revenue, earnings, losses, shares outstanding, and more.

While all of that information is important, one of the most essential elements for penny stock research is the "Executive Compensation" section. This is often located under Part III of the filing, and it discloses whether the CEO and other top executives are paid in cash or stock options.

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If you see that the executives are paid entirely in cash, it may signal that the stock is unsafe to own. Cash-only compensation could mean the executives are trying to cash in on the company before it goes bankrupt. After all, if they were actually invested in the company's long-term growth, they would own stock options that would appreciate over time.

But executives paid in stock options have a commitment to the company's growth. The firm's stock has to grow over the long term for stock options to be worth anything. That makes maintaining the company's financial health actually worth something to the CEO and other top executives.

Our general rule here at Money Morning is that it's a bad idea to invest in a firm whose own executives aren't invested in its success.

And if you're looking for a penny stock that meets this criteria, we've got you covered...

Money Morning Small-Cap Specialist Sid Riggs knows exactly which stocks are worth your investment today. He's known for picking big, triple-digit winners, including biotech Neurocrine Biosciences Inc. (Nasdaq: NBIX). Shares of this stock have surged a stunning 572% since he first recommended it to readers back in December 2013.

Now, he wants to show you another winner that could soar thanks to the fast-growing Chinese auto market...

Chinese auto sales have been outpacing other countries, and sales growth is expected to continue in 2018. Car sales in China grew 45% from 2013 to 2016, crushing the U.S. and EU's 12.5% and 22.9 growth rates, respectively.

An even more stunning statistic is China's total car ownership. In 2015, the country's car ownership reached 172 million - more than half the total U.S. population of 320.9 million that year.

According to Sid, the big catalyst for this small-cap stock will be how the Chinese auto market undergoes a change in how customers pay for their vehicles.

And this payment method is just now starting to get popular in China. Here's how to play it before it really takes off...

Here's a Small-Cap Stock That Could Surge from China's Growing Auto Market