10 Top Penny Stocks to Watch This Week, and One Small-Cap Stock to Buy

Our list of the 10 top penny stocks to watch this week included a 288% gainer, which shows you the power of owning penny stocks.

You see, penny stocks are perfect for investors looking for quick, strong returns without the expensive initial investments that come with larger stocks or options.

Blink Charging Co. (Nasdaq: BLNK), this week's top earner, is a perfect example. Last Friday (May 11), Blink stock surged after the company announced a partnership with the city of Miami, Fla., to install its electric vehicle-charging ports in city garages.

Top penny stocks

Blink's Miami deal came on the heels of a deal with Whole Foods Inc. earlier this month to install similar chargers in store parking lots. Blink's surge shows just how lucrative a small company's stock can be once it signs a major partnership agreement.

And after taking a look at our 10 top penny stocks to watch, we'll show you a small-cap stock that just signed a deal with Facebook Inc. (Nasdaq: FB)...

Penny Stock Current Share Price Law Week's Gain
Blink Charging Co. (Nasdaq: BLNK) $6.00 288.51%
Enterprise GP Holdings LP (NYSE: EPE) $2.94 44.00%
Opko Health Inc. (Nasdaq: OPK) $4.79 43.49%
MYnd Analytics Inc. (Nasdaq: MYND) $3.15 38.84%
Arrowhead Pharmaceuticals Inc. (Nasdaq: ARWR) $0.52 37.80%
Mid-Con Energy Partners LP (Nasdaq: MCEP) $2.08 36.81%
VAALCO Energy (NYSE: EGY) $1.49 36.04%
Cel-Sci Corp. (NYSE: CVM) $3.16 35.04%
WideOpenWest Inc. (NYSE: WOW) $8.41 34.52%
Legacy Reserves LP (Nasdaq: LGCY) $8.43 33.61%

While these gains are certainly exciting, it's important to recognize that investing in penny stocks is also a risky investment strategy.

While a few penny stocks have spectacular growth potential that can easily grow your initial investment, many penny stocks lack the solid underlying financials necessary to generate a significant return.

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To make sure we protect ourselves from any substantial losses from investing in penny stocks, we follow five rules for penny stock investing. Take look at them on the right.

Rules for Safely Trading Penny Stocks

  • No more than 2% of your overall stock portfolio should consist of penny stocks.
  • Avoid stocks with average daily trading volume of less than 500,000 shares.
  • Avoid penny stocks being aggressively promoted on public discussion forums or websites not focused on investing.

Here are the top three warning signs of a shell company scam, according to the SEC and FINRA...

  • If a company has been dormant for many years and then brought back to life.
  • If a company has changed its name and, especially, business focus multiple times.
  • Check for massive reverse stock splits like 1-for-20,000 or 1-for-50,000.

We also look for companies with the kind of robust financials that are likely to generate strong returns over time. These are normally companies that have developed a moderate level of market capitalization between $300 million and $2 billion.

Our favorite small cap to buy this week is part of the growing semiconductor industry and is on the frontline of one of the industry's most exciting technologies.

This stock also has Money Morning Stock VQScore™ of 4 - indicating that it has strong growth potential in addition to solid financials.

Plus, analysts are projecting a 75% gain for this stock's share price...

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Applied Optoelectronics Inc. Is Our Favorite Semiconductor Stock to Buy

Based in Sugarland, Texas, Applied Optoelectronics Inc. (Nasdaq: AAOI) is a semiconductor manufacturer that develops fiber optic networks.

The highlight of AAOI's product lineup is a series of high-speed optical transceivers that run on AAOI's semiconductors. These transceivers allow data to travel through fiber optic cables at higher rates, increasing digital traffic and encouraging smoother data processing.

AAOI's transceivers are popular with data centers that need to process large amounts of information quickly and effectively - the company's two largest customers are Facebook Inc. (Nasdaq: FB) and Amazon.com Inc. (Nasdaq: AMZN) - two of the largest data-processing companies in the United States.

And demand is likely to continue growing. According to Data Center Knowledge, global IP traffic channeled through data centers is projected grow nearly 200% in just the next five years.

Thanks to the company's focus on building semiconductors that can help data centers facilitate the processing of massive amount of data, AAOI is uniquely positioned to take advantage of this market as it continues to grow.

AAOI currently trades for $32. However, with demand for its semiconductors growing, analysts see the company's stock heading to $55 - an increase of 75%.

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