Today, we're showing Money Morning the five top penny stocks to buy for February 2018.
All five of these stocks have tremendous upside, and three of them could bring triple-digit gains this year…
Penny stocks are attractive to new investors because of their affordable share prices below $5.
At these prices, just a modest increase in trading volume can send a stock soaring.
For example, VaporBrands International Inc. (OTCMKTS: VAPR) is an e-cigarette maker targeting the medical marijuana niche that was trading for just $0.01 on Jan. 22.
By Jan. 29, it climbed to $0.08, for a 700% gain. Even after pulling back to $0.05 on Jan. 31, the stock still had a total gain of 400% in just nine days.
Those are, without a doubt, incredible returns. Enough to turn a $1,000 stake into $5,000 even if you missed selling at the top – which most investors are not able to do, since it's statistically improbable.
But would you have invested $1,000 of your hard-earned savings into a stock ranging in price from fractions of a penny to $0.01 from November 2015 to November 2017? I know I sure wouldn't.
Yet this is the reality of penny stock investing. It's a sea of worthless stones with a few diamonds hidden among them.
VAPR stock is not one of them. A day later (Feb. 1), VAPR shares fell to $0.04. Investors still holding the shares from $0.01 still made a 300% return in 11 days.
But other hopeful VAPR investors who bought at $0.08 are sitting on a massive 50% loss, and those who bought at $0.05 lost 20% of their investment in a day.
That's why it's important to invest in only the most promising penny stocks. Fortunately, we've done the research for you today and will reveal only qualified penny stocks to our subscribers.
An easy way to get started is by focusing on penny stocks that meet the requirements to be listed on the Nasdaq stock exchange.
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But at Money Morning, we make sure any prospective penny stock passes through three more screens before we share them with our readers…
How We Choose the Most Promising Penny Stocks
To find you the best penny stock opportunities out there, we have to run a rigorous screen of all stocks trading under $5.
Here are the three rules we use to find the best penny stocks to buy.
- We only look at penny stocks that are actively receiving analyst coverage and have ratings of "hold" or better, according to data collected by S&P Capital IQ.
- We make sure that 12-month price targets are above the stock's current price.
- We look for signs of fundamental strength, including growing sales, profits, cash flow from operations, as well as a compelling business model within a growing industry.
By applying these rules (and more) to penny stocks, we're able to find the most promising companies with major growth potential.
Now that you know how we screen for the best opportunities, here are the five best penny stocks that currently fit our rules…
Best Penny Stocks to Buy for February, No. 5: Superior Drilling Products Inc.
Utah-based Superior Drilling Products Inc. (NYSE: SDPI) makes drilling equipment for the oil, natural gas, and mining services industries. SDPI shares are currently trading at $1.43 as of Feb. 1.
This stock is a modern twist on the classic "pick-and-shovel" play on the drilling and extraction industries.
"Pick and shovel" refers to the mid-1800s California Gold Rush, where a massive influx of gold-seekers brought massive growth to California. It's said that those who sold picks and shovels to the gold-seekers made more money than them, too.
Now, in the 21st century, picks and shovels have been replaced with SDPI's "Drill-N-Ream" patented horizontal drilling tools. (Click here for a cool, three-minute video on it from the company.)
Shares of SDPI are covered by two firms, with an average price target of $1.80 and a high target of $2.00 from analyst Jason Wangler, of Imperial Capital. Those price targets represent upside of 26.7% and 40.85%, respectively.
I like companies like this with an easy-to-understand product. If the Drill-N-Ream is an improvement over previous drilling technology, then the company should be able to continue to grow its sales and profits as demand for the product increases.
Since Q4 2016, Superior Drilling has beaten revenue and earnings expectations for four consecutive quarters, according to data from S&P Capital IQ.
Next up is a company leading a $12 billion home healthcare industry…
Best Penny Stocks to Buy for February, No. 4: BioScrip Inc.
BioScrip Inc. (Nasdaq: BIOS) provides intravenous, subcutaneous, intramuscular, and intra-spinal pharmaceutical treatments to patients. The company offers these services to patients at home, clinics, and physician's offices.
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In the company's recent Q3 2017 earnings call on Nov. 2, CEO Daniel Greenleaf said BioScrip is the largest independent pure-play home infusion company in the United States.
According to Greenleaf, the home infusion industry is worth an estimated $12 billion in the United States, with 5% to 7% annual growth.
And according to the Population Reference Bureau, the number of Americans ages 65 and older is projected to more than double, from 46 million in 2016 to 98 million by 2060.
The confluence of these two trends makes for a compelling growth story for BioScrip.
In addition, its largest customer, Aetna Inc. (NYSE: AET), was recently acquired by CVS Health Corp. (NYSE: CVS). This could lead BioScrip to be acquired by CVS if the home infusion business becomes a significant portion of future healthcare demand. But that's purely speculation at this point.
BIOS stock currently trades at $2.82 and is covered by six firms, with an average price target of $3.75 and a high target of $4.50 by Gregory O'Neil, of Lake Street Capital Markets LLC. Those targets represent upside of 33% and 59.6%, respectively.