Four of the Best Penny Stocks for 2014

Best Penny Stocks

Penny stock investing is so attractive to investors because these small-cap stocks can bring huge gains in a short period of time.

Whether these small-cap companies are industry leaders in a burgeoning market, are primed for a takeover, or are developing new pharmaceutical patents, the best penny stocks of 2014 offer investors huge profit potential at affordable prices.

While there are often wild price fluctuations associated with penny stocks, investors on the right side of price swings can bank huge gains.

Take a look at the four best penny stocks with huge profit potential in 2014...

Best Penny Stocks for 2014: Big Potential for These Four Small-Cap Stocks

Best Penny Stocks for 2014 No. 1: The world's leading developer of control network platforms, Echelon Corp. (Nasdaq: ELON) provides interconnectivity between commonly used devices like air conditioners, electricity meters, light switches, thermostats, and valves.

Interconnectivity is at the heart of the "Internet of Things" (IoT) revolution, which is a movement to connect commonly used devices through the Internet. It was behind Google Inc.'s (Nasdaq: GOOG) $3.2 billion purchase of Nest Lab Inc., a developer of "smart" thermostats and smoke detectors.

That acquisition and the growth of the Internet of Things movement have big ramifications for ELON stock. Following the Nest purchase in January, Bloomberg wrote that it might "jump start a multibillion dollar race to acquire companies that are powering the rise of Web connected devices across homes, cities and workplaces."

In early 2014, Echelon debuted the FT 6050 system-on chip (SoC), which is designed to provide cost-effective and reliable wired IP connectivity for various devices. Because it's an industry leader, Echelon is positioned perfectly in the IoT market.

ELON stock has climbed 25% in 2014, compared to a 1% drop for the Nasdaq. At $2.69 per share, ELON is an affordable stock with room to run.

This next penny stock has a price target 423% higher than where it's trading now...

Best Penny Stocks for 2014 No. 2: Dynavax Technologies Corp. (Nasdaq: DVAX) is a clinical-stage biopharmaceutical company that develops treatments for infectious and inflammatory diseases. The company is best known for its phase III candidate HEPLISAV, which is designed to treat hepatitis B. According to the company, HEPLISAV provides earlier and higher protection with fewer doses than other licensed vaccines.

Additionally, Dyvanax has a product portfolio of 18 U.S.-issued patents. It also has a market cap of just $402 million and has established partnerships with GlaxoSmithKline plc (NYSE: GSK) and AstraZeneca plc (NYSE ADR: PLC).

Its robust portfolio, phase III hepatitis treatment, small market cap, and established partnerships all make DVAX a potential takeover target for major pharmaceutical companies. Large pharmaceutical companies will frequently add small-cap firms with deep portfolios when their own patents run out.

Back in January, the investment bank Cowen Group set a price target of $8 for the stock, which is 423% higher than its current price of $1.53.

Best Penny Stocks for 2014 No. 3: Biopharmaceutical company Idenix Pharmaceuticals Inc. (Nasdaq: IDIX) develops treatments for viral and infectious diseases like hepatitis B, hepatitis C, and HIV. Like other small biotech companies, IDIX stock is attractive to investors because it could potentially be bought out by larger pharmaceutical companies.

In early April, IDIX announced that one of its drug candidates, IDX21437, had shown potent antiviral activity for patients with the hepatitis C virus. While passing all three phases of FDA approval is a difficult task, drugs that do so typically reward the company's shareholders handsomely.

One sign that pointed to a potential takeover of IDIX was the January purchase of 16 million shares by the hedge fund Baupost Group. Following the purchase, the fund owned more than 35% of the company's shares. Firms and activist investors only increase their already huge position in a share when they are confident the stock has room to grow.

IDIX shares are on the expensive end of the penny stock range at $5.59 per share. The stock has gained 43% in the last year, and any further indications of a takeover would send the stock higher.

Best Penny Stocks for 2014 No. 4: The semiconductor company QuickLogic Corp. (Nasdaq: QUIK) develops customizable semiconductor solutions for mobile and portable electronic devices like tablets, smartphones, and secure access data cards.

The company's semiconductors are used to preserve power in electronic devices and also enhance the visual display on these devices when they are in sunlight. QuickLogic unveiled a new sunlight display technology at the International Consumer Electronics Show in Las Vegas this year, as well as a new battery-saving chip. These products are in high demand as mobile devices become increasingly popular.

In 2014, shares of QUIK have climbed more than 30%. QUICK stock is up nearly 120% in the last 12 months. Despite the huge gains, it trades at just $5.14 per share, making it an affordable stock to buy now.

Do you invest in penny stocks? Which penny stocks have you been tracking? Join the conversation on Twitter @moneymorning using #PennyStocks.

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