If you missed the market's all-time highs last month, our pick for one of the best penny stocks to buy in May 2019 could still help you beat the market with 50% upside.
The Nasdaq and S&P 500 had record gains in April, following another round of stellar earnings reports. The Nasdaq ended the day at 8,146 for a gain of 0.3% and the S&P 500 closed out at 2,939, a gain of 0.5%.
Companies like Ford Motor Co. (NYSE: F) were among stocks that soared. Shares rose 10.3%, from $9.41 to $10.38 on April 26, the biggest single-day gain since 2009. The company beat earnings expectations, mostly thanks to strong SUV and truck sales in North America.
But penny stocks, including the one we're about to recommend, also achieved sizable gains. These are stocks trading for $5 or less, as defined by the U.S. Securities and Exchange Commission.
Whether you missed the rally or are just looking for a repeat performance, the top penny stocks to buy this month could still help you accomplish this.
With more than 2,800 penny stocks to choose from, this is no easy task. But we've narrowed them down to one most likely to get a price jump this month. And remember - just a small price move in a penny stock can return double- or triple-digit gains in the blink of an eye.
First, here are some best practices for investing in penny stocks. Then, we'll show you our pick for one of the best penny stocks now.
Use These Tips for Safely Investing in Penny Stocks
If you want to invest in penny stocks, the first rule of thumb is to use caution. These are speculative investments, and it's never a good idea to put all of your investment dollars into one basket. Money Morning recommends that you set a budget for this class and limit your overall investment in penny stocks to less than 2% of your portfolio.
One reason is that, unfortunately, there are many scams associated with penny stocks. A common one is the pump and dump scheme, where a promoter will own shares of a stock, "pump" up the share price through promotions, and then sell, or "dump," their shares before unknowing shareholders can get out.
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The best way to avoid these scams is to limit your purchases to stocks that trade on the major exchanges, such as the Nasdaq and NYSE. The smaller exchanges, such as the over-the-counter exchange and pink sheets, are less regulated.
You will also have a greater chance of profiting from penny stocks if you choose companies that are in strong industries, such as technology, energy, and biotech.
Finally, it's a good idea if the stocks you target have received attention from several Wall Street analysts. Specifically, there should be "hold" or "buy" recommendations and price targets above the current trading price.
Given these rules, our pick for one of the best penny stocks to own now is considered a "winner." This is an international semiconductor company that currently trades for around $2 per share and has an upside worth double-digit gains.
One of the Best Penny Stocks to Buy in May 2019
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United Microelectronic Corp. (NYSE: UMC) is a Taiwan-based semiconductor company and one of our top penny stocks for May.
The company, founded in 1980, is known as Taiwan's first semiconductor manufacturer. Today, it employs more than 20,000 full-time employees internationally.
UMC operates semiconductor wafer foundries in Taiwan, China, Singapore, Europe, and the United States. It designs circuits, fabricates wafers, and provides assembly and testing services. It is also involved in the research and development of products in the light-emitting diode and solar industries.
UMC is no small player. Its manufactured integrated circuits are used in the products created by companies such as Nvidia Corp. (NASDAQ: NVDA). Because the company is a key supplier for global semiconductor concerns, it is well positioned to profit from the growing demand for these products.
The rise of esports, crypto mining, and 5G technology is creating a massive demand for semiconductor products.
UMC has been capitalizing on this global market, too. In 2018 alone, it reported profits of $235 million, and these results are expected to continue.
In the first quarter of 2019, UMC reported revenue of $32.58 billion and net income of $39 million.
UMC shares currently trade at $2.17 per share. According to Wall Street analyst predictions, it has a potential upside of another 50% over the next year as the semiconductor sector continues its rise. The stock has a price/earnings ratio of 15.38, well under the industry's 71.23, indicating it's undervalued and has significant room to grow.
It also has a 5.36% dividend yield, which is impressive for a penny stock.
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