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Today, we're bringing Money Morning readers the two top penny stocks to watch in June 2018.
Penny stocks can give investors tremendous gains with very little upfront investment. However, while a select few penny stocks have tremendous growth potential, many penny stocks lack the strong financials necessary for growth. These penny stocks pose a risk to investors.
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.
In order to protect our investments, we follow five rules for investing in penny stocks – take a look at them on the right.
We've scoured the markets for penny stocks with the greatest growth potential and have found two that are on track to provide spectacular gains.
Our first penny stock trades on the higher end of the cheap stock spectrum, but its price remains incredibly low compared to its serious profit potential. This stock has a high VQScore™ of 3.75, indicating that it has plenty of room to run.
Here are our top penny stocks for June…
Top Penny Stock to Watch, No. 2: Cleveland-Cliffs Inc.
Cleveland-Cliffs Inc. (NYSE: CLF) is a mining company that specializes in the mining and refinement of iron ore.
In the United States, the company operates five iron ore mines in Michigan and Minnesota. Located near the Great Lakes, these mines produce 32.9 million gross tons of iron ore annually.
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Much of the company's recent growth is the result of widespread anticipation over growing domestic steel demand.
According to the World Steel Association, North American steel demand is expected to rise by 3% in 2018 and an additional 1.9% in 2019.
While the United States only produces 5% of the global steel supply, that figure is expected to rise as domestic demand continues to grow.
Cleveland Cliffs is expecting to make substantial profits off of this boom – in its 2018 outlook summary, the company sees ore-pellet prices jumping from $97 per ton to $107 – a 10% increase.
And it may already be starting to benefit. Cleveland's earnings per share were recently up to $1.23 from $0.89 – an increase of 38%.
Cleveland currently trades for $8.92. However, analysts see the price heading 34% higher to $12 a share over the next year.
Cleveland Cliffs has some excellent profit prospects. But our favorite penny stock to watch blows it out of the water.
This company is looking at possible returns of 480%.
Here it is…
CLF does not produce 32 million ton but guides for 20.5 million ton. If Empire mine is brought back on line then they have 27 million ton capacity.