10 Penny Stock Gainers to Watch Closely in July 2017

The following list shows the top penny stock gainers of the first three sessions of July so far, which we'll be following closely throughout the month. We'll also show you one of the best small-cap stocks to buy in 2017 after the chart...

The top penny stock of July has been Monster Digital, whose stock has surged 152.1% to $1.23 since Monday, July 3. Those gains came after Monster Digital and private firm Innovate Biopharmaceuticals announced a reverse merger...

A reverse merger lets a private company go public without raising funding for an IPO, which can be an expensive and laborious process. Because it's not raising capital through outside investors, the reverse merger process doesn't depend entirely on how much investors and traders are willing to pay for shares of the company. It's used solely to convert a private firm into a public firm by getting help from an already public firm.

For Monster Digital and Innovate's reverse merger, the new public company will retain the name of Innovate Biopharmaceuticals, with analysts saying Innovate's pre-existing business will be valued at $60 million and Monster's at $6 million. The deal also gives Innovate a new stock ticker, and private individuals already invested in Innovate will hold 90.9% of the combined company.

Since MSDI stock will be reduced to 9.1% of the newly merged firm, the short supply of MSDI shares has boosted buying interest. That's why shares have rocketed 152.1% in just three days.

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Despite the double- and triple-digit returns reaped by MSDI and the other firms listed in the chart above, we don't advise buying them right now. Because they've seen those gains already, now might not be the best time to invest since they currently trade at higher prices.

Buying soaring penny stocks like these can be very risky for investors who haven't done any research. When searching for the best penny stocks to buy, digging into financial documents like 10-K filings and recent earnings reports is essential.

These reports will indicate if a firm is legitimate and if a firm's profitability is growing. If it doesn't meet those standards, it's likely not worth your money.

But Money Morning Small-Cap Specialist Sid Riggs prefers to conduct this arduous research for our readers. While many of his recommendations cost more than $5 per share, these companies boast bigger market caps, anywhere from $300 million to $2 billion. That shows they attract more investors because they're often more financially stable than regular penny stocks.

Today, Sid - whose recent pick has given Money Morning Members a 19.7% profit since he first recommended it on April 19 - just recommended another small-cap stock pick. It's a pharmaceutical company that has a strong track record of FDA approval for its products, including one that will be the first of its kind sold over the counter.

But the most impressive aspect of this firm is its astonishing earnings record. It has crushed earnings expectations by an average of 57.6% over the last four quarters.

According to Sid, that's a sign Wall Street underestimates how much this company could grow in 2017, making now the perfect time to buy shares.

Here's Sid's newest small-cap stock pick for double-digit growth in 2017...

One of the Best Small-Cap Stocks to Buy in 2017