Pink Sheet, OTC and Microcap Stocks: Are They Really Worth It?

International stocks or microcap investments without a home on major U.S. stock
exchanges typically are called "pink sheet" stocks or "over the counter"
investments. The terms are from a bygone era on Wall Street when the physical
elements of investing and the trading floor were much more prominent than in
today's digital age. Pink sheet stocks got their name because their quotes
actually were printed on pink paper, and OTC stocks were referred to as such
because of a decentralized trading network with no physical stock exchange or
meeting place for the deal just a middleman with a counter and a telephone
making the deals. So what's the big deal now that it's the 21st century? Why
should you care whether a stock is faithfully represented on the floor of the
New York Stock Exchange or not? The Upside of Pink Sheets and OTC Stocks The
truth is that many pink sheet stocks indeed trade just like regular investments,
with some OTC picks actually dwarfing conventional NYSE or Nasdaq stocks. Take
food products giant Nestle (PINK: NSRGY ), one of the biggest consumer brands in
the world that trades as a pink sheet, or car-maker Nissan (PINK: NSANY ). These
companies are listed as pink sheets because they primarily are listed on a
foreign exchange the SIX Swiss Exchange for Nestle and Tokyo Stock Exchange in
the case of Nissan and the companies didn't feel like listing officially with
a U.S. exchange in addition to their countries of origin. Clearly Nestle and
Nissan are established companies you can bank on and have faith in just like
domestic blue chips. What's more, pink sheet stocks also can pay you dividends
just like any other company. Sometimes there is a small exchange fee for foreign
companies cutting dividend checks in a different currency, but this also often
is true for NYSE-listed companies known as American Depositary Receipts
companies like Britain's BP (NYSE: BP ) or Finland's Nokia (NYSE: NOK ), for
example. Simply put: OTC or pink sheet stocks have their dividends treated the
same way as any other stock. The Downside of Pink Sheets and OTC Stocks Pink
sheet and OTC investments have plenty of potential. However, they also have
decided risks. Almost all OTC stocks, domestic or foreign,