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Sometimes in the investing world, the higher the risk, the higher the potential gains. For investors looking for that sort of jackpot, we've uncovered five high-risk stocks to keep your eye on.
All of these stocks are penny stocks, which trade for $5.00 or less and are known for their volatility and boom-and-bust potential.
That means you shouldn't risk more than you're willing to lose on these high-risk stocks, and they should only make up a small amount of your portfolio.
But they offer explosive profit potential in a matter of days.
Look at a high-risk penny stock like Marathon Patent Group Inc. (Nasdaq: MARA), which soared 319% in late 2017, starting at $1.42 and going to $5.95 in just a four-day period.
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In order to sort through the high-risk stocks, we've screened penny stocks for the criteria we believe gives them the most potential and the least risk.
Here's how we do it, plus our five high-risk stocks for 2018...
We Screen High-Risk Stocks for Serious Business Potential
We've screened the universe of penny stocks so that we can find the top opportunities for you.
Our criteria helps us find legitimate companies with actual business growth potential. That doesn't guarantee these stocks are going to take off, but it helps weed out shell companies and pump-and-dump scams that plague the penny stock investing space.
Here are our four criteria:
- The stock must trade on a major exchange, like the Nasdaq. Not every penny stock can meet the U.S. Securities and Exchange Commission (SEC) requirements for Nasdaq listings, and that's a sign that we don't want to own those companies.
- The stock must be actively covered by analysts and receive ratings of "hold" or better ratings from S&P Capital IQ.
- The stock must have 12-month target prices above the current price of the stock.
- The company must have good fundamentals, such as increasing sales, rising profits and cash flow from operations, a strong business model, and an expanding industry.
Now that we've shown you our criteria for selecting stocks, there are the five high-risk stocks to watch in 2018...
High-Risk Stocks to Watch in 2018, No. 5: Neptune Technologies & Bioressources Inc.
Neptune Technologies & Bioressources Inc. (Nasdaq: NEPT) is based in Quebec, Canada. It manufactures nutrition products made from krill.
And NEPT is planning to move into the business of extracting oil from marijuana rather than sea products.
In late 2017, the company indicated it had successfully transitioned out of the krill oil business. It allocated money toward adapting its krill extraction facility to move into the cannabis oil extraction business.
This is an exciting development for NEPT, since the marijuana industry has so much potential. Canada will fully legalize marijuana in the summer of 2018. Marijuana Business Daily believes that yearly Canadian sales for recreational cannabis should be at a minimum of $2.3 billion by 2021.
Plus, more than 20 U.S. states, including California, have legalized medical marijuana.
Making a bold business decision to enter a hot new industry has analysts excited about Neptune's potential.
Echelon Wealth Partners Inc. has placed a target price on Neptune's shares of $5.25, over 75% above the current $2.81 share price.
And those gains could be even bigger if Neptune's marijuana oil operations are successful as the industry grows.
High-Risk Stocks to Watch in 2018, No. 4: Second Sight Medical Products Inc.
Los Angeles-based Second Sight Medical Products Inc. (Nasdaq: EYES) makes medical devices, specifically prosthetics that restore vision to the blind.
In early December 2017, EYES said it had entered the Iranian market by implanting patients with the company's Argus II Retinal Prosthesis System. Its strategy is targeting premier eye centers and distributors worldwide.
The company believes the adoption of its prosthetics in more countries will hasten acceptance of the technology, which will in turn raise demand.
EYES currently trades at $1.92 per share. The company is followed by one analyst, who has placed a $5 target price on its shares, a potential increase of 160%.
High-Risk Stocks to Watch in 2018, No. 3: Viking Therapeutics Inc.
Viking Therapeutics Inc. (Nasdaq: VKTX) is another pharmaceutical company developing medications for two conditions: fatty liver disease and hip surgery rehabilitation.
Its lead product, VK5211, is undergoing phase 2 clinical trials for post-hip surgery rehab now.
The initial results, announced in the fourth quarter of 2017, were positive, and management expects continued success.
VKTX currently trades at $4.37 a share, and S&P Capital IQ shows the five analysts covering VKTX give it an average price target of $8.50 a share, with one analyst raising their target to $11.
Those price targets represent potential gains of 95% and 150%, respectively.
High-Risk Stocks to Watch in 2018, No. 2: American Superconductor Corp.
American Superconductor Corp. (Nasdaq: AMSC), based in Massachusetts, manufacturers two-megawatt wind turbines that are sold under the brand name Windtec Solutions. AMSC also sells products that connect electricity-generating equipment to the local power grid.
With wind power being the cheapest source of electricity in the United States, the industry has incredible potential to chip into natural gas and coal's dominance in electricity generation.
That's a great position for a successful wind turbine company to be in.
The company has exceeded earnings expectations in the last eight out of nine quarters, which implies the stock might be underrated by the analysts who follow it.
AMSC currently sells for $5.82 but could gain as much as 72%, according to one analyst covering the stock.
And while the potential gains in these high-risk stocks have been impressive, our top high-risk stock has a price target showing 425% potential growth...
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