Over-the-counter (OTC) penny stocks have been overlooked on lists of hot penny stocks to watch. That's because OTC penny stocks are volatile, illiquid investments that aren't subject to the same financial standards as stocks on the larger exchanges.
But the recent, cumulative success of several OTC stocks has put some pressure on these former barriers. Investors paying attention to the trend are drawn to the massive upside OTC stocks can generate in profits, but many are scared to pull the trigger.
That's why we've broken down how OTC penny stocks work - plus highlighted five hot penny stocks to watch right now to help get you started...
Over-the-Counter Penny Stocks 101
An OTC penny stock is a security traded by means other than traditional, formal exchange mediums like the NYSE, TSX, AMEX, and other exchanges. Often, an OTC penny stock is traded through a dealer network, since the company offering the stock is typically too small to meet the requirements for a more formal exchange listing.
Although OTC penny stocks have recently been performing consistently well, they are at risk for volatility. Additionally, the limited regulation of OTC penny stocks makes dealer networks vulnerable to scammers.
Generally speaking, OTC penny stocks will come with higher risks than other cheap stocks, but there are some companies that are clearly outshining others when it comes to recent growth. (For more on risk management in penny stock investing, check out our how-to guide on buying penny stocks here...)
Here are details on five hot penny stocks to watch on the market right now.
List of 5 Hot Penny Stocks to Watch
GreenGro Technologies Inc. (OTCMKTS: GRNH)
Given the recent boom of pot penny stocks, investors are clamoring to get their hands on one in OTC markets and beyond. GRNH is the real deal, and it has the numbers to prove it.
The company has a year-to-date growth of 615.91.95%, with a 52-week range of $0.02 to $1.20. GRNH shares traded at $0.308 on Monday, June 2.
That said, make sure to be mindful of current events that affect the still-burgeoning pot penny stock market. The U.S. Securities & Exchange Commission (SEC) recently temporarily halted eight pot stocks over regulatory concerns. It noted "manipulative transactions" and "unlawful distribution of securities." Some of the companies saw their shares temporarily halted among the most popularly traded pot stocks. And in early May, the SEC issued an investor alert "warning about possible scams involving marijuana-related investment" and noting that "fraudsters often exploit the latest growth industry to lure investors with the promise of high returns."
Pot penny stocks could have among the highest upside potential for profits, but are still hot penny stocks to watch - before making a jump to buy - due to these evolving market influences.
Terra Tech Corp. (OTCMKTS: TRTC)
Terra Tech Corp. is a holding company that specializes in controlled agricultural technologies ranging from indoor cultivation to retail agricultural products. Its year-to-date growth comes in at 391.85%, with market capitalization of $155.24 million. And TRTC is up a whopping 621.74% over the past 12 months, making it one of the top hot penny stocks to watch right now.
Alternative Energy Partners Inc. (OTCBB: AEGY)
Alternative Energy Partners Inc. provides support services for medical marijuana. For instance, it has a "Simple Prepay" system that it developed to offer dispensaries, collectives, and delivery services for medial cannabis. AEGY is up 33.33% in 12 months and 366.67% year to date and traded at $0.0028 per share on Monday.
Tranzbyte Corp. (OTCMKTS: ERBB)
Tranzbyte Corp. is in the business of helping established and early-growth companies find resources from essential capital for growth to public relations outlets. Although ERBB is less consistent compared with other hot penny stocks to watch on our list, its unbeatable 920.69% year-to-date growth can't be overlooked. ERBB traded at $0.0297 per share on Monday.
Orckit Communications Ltd. (OTCBB: ORCT)
Orckit facilitates the transmission of broadband services with the design, development, manufacture, and marketing of telecommunication equipment. ORCT shot up 61.29% on May 28 alone. On the same day its two biggest competitors, IDO Security Inc. (OTCBB: IDOI) and eOn Communications Corp. (Nasdaq: EONC), dropped 16.67% and 7.57%, respectively, suggesting an edge that lands ORCT on our list of hot penny stocks to watch. The company has a comparatively low market cap of $7.6 million and is up 7.82% in 2014.
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