3 Top Penny Stocks to Watch in 2018

Investors searching for the top penny stocks to watch in 2018 will want to take a close look at the three stocks we have on our list today, one of which is the top-performing penny stock of the year, with shares up 513.87% year to date.

But while penny stocks can bring triple-digit returns in a matter of weeks, they are also speculative investments that can see big pullbacks after making large gains.

For instance, VistaGen Therapeutics Inc. (Nasdaq: VTGN) shot up from $0.92 to $2.55 on Dec. 6. Since then, the stock pulled back to $1.02. Investors who bought at $2.55 are sitting on a 60% loss today (Dec. 18).

Now that you know the risks and potential rewards, here are three of the top penny stocks so far this year.

But for investors looking for a stock with future potential, we'll also show you our pick for the best small-cap stock to own right now...

Top Penny Stocks to Watch in 2018, No. 3: Pieris Pharmaceuticals Inc.

Pieris Pharmaceuticals Inc. (Nasdaq: PIRS) is our other top-performing penny stock for 2017.

This pharmaceutical company's share price has skyrocketed 219.68% so far in 2017. PIRS shares are up 68.82% since May 1, which is when the company announced that it was entering a collaboration agreement with AstraZeneca Plc. (NYSE: AZN).

The new partnership is developing a treatment for respiratory disease. According to the agreement's terms, PIRS will receive $45 million upfront and will work on an asthma treatment called PRS-060. Once that treatment goes into a phase 1 trial for asthma, PIRS will receive another $12.5 million payment from AstraZeneca.

Provided the treatments are successful, there is an additional $2.1 billion available for future milestones and royalties.

Shares of PIRS are currently trading at $6.01.

URGENT: The Night Trader Is Up to 908% Total Gains

Top Penny Stocks to Watch in 2018, No. 2: AVEO Pharmaceuticals Inc.

AVEO Pharmaceuticals Inc. (Nasdaq: AVEO) is another top performer to put on your penny stocks to watch list.

The company's share price has soared 468.5% so far this year, with 321.8% of those gains accumulating since June 23. On that date, AVEO received approval in Europe for its cancer drug called Tivozanib.

Tivozanib is a drug that treats advanced renal cell carcinoma, which is the fastest-growing type of kidney cancer. The drug failed to receive FDA approval in 2013, but it was recommended for European approval this summer. The drug's phase 3 trial results are expected in Q1 2018.

AVEO is currently trading at $2.90 per share.

Top Penny Stocks to Watch in 2018, No. 1: Marinus Pharmaceuticals Inc.

The performance of Marinus Pharmaceuticals Inc. (Nasdaq: MRNS) in 2017 is testament that you can certainly make money with penny stocks.

On June 30, MRNS shares traded for $1.37; today, they trade at $8.41, for a gain of 513.87% over little more than five months.

In fact, this pharmaceutical company's share price is up 205.45% since Aug. 21 alone, which is the date that it announced successful clinical trials of its epilepsy treatment, Ganaxolone. The new drug treats the CDKL5 disorder, which is a rare, severe genetic form of epilepsy that results in early onset seizures and disabling behavioral issues.

In addition to CDLK5 disorder, MRNS plans to develop a treatment for patients suffering from Lennox-Gastaut syndrome (LGS), another severe form of epilepsy.

Shares of MRNS are currently trading at $8.41.

Even though these biotech penny stocks have returned some explosive gains to their investors, we aren't recommending them as stocks to buy now, since their gains are in the rearview mirror.

The true money to be earned lies in finding a stock that is poised for growth in a strong or resilient market. This is where Money Morning Small-Cap Specialist Sid Riggs comes in.

Sid picked a company called Neurocrine Biosciences Inc. (Nasdaq: NBIX) in December 2013, while it was trading at a share price of $9. Since then, it has exploded to $74.43, for a 727% gain.

Sid's pick today is also a medical company that has bested earnings estimates by an average of 40.5% since Q4 2016.

This company was the first to create an at-home HIV test kit. This gives it a competitive edge in the testing sector, which is forecast for 56.7% growth, from $2.17 billion in 2016 to $3.4 billion, within the next three years.

Here is Sid's pick for the best medical small-cap stock to own in the coming year...

The Best Medical Small-Cap Stock to Own Now