Our Top 5 List of Penny Stocks to Watch Before 2020

Editor's Note: Be sure to check out our free guide on trading penny stocks successfully right here.

This market is going higher, but do you own the right stocks?

By "right stocks," I'm talking about those that can power your portfolio to monster returns.

If you're looking for stocks that can gain 100% or even 1,000%, you have to be targeting penny stocks.

These small caps are the ones that can easily double in value in a very short period of time.

But what penny stocks should we buy?

I know penny stocks can be risky. That's the nature of the game. So how do we find the winners and avoid significant losses?

For starters, don't invest what you can't afford to lose. Picking the wrong penny stock can wipe you out entirely.

That said, if you are willing to take the risk, the best way to invest in penny stocks is to own many of them.

This greatly improves your chances of finding that 1,000% winner.

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And the best way to find the right penny stocks is to utilize our proprietary Money Morning Stock VQScore™ system.

One note, many people define penny stocks as those that trade under $5 per share. But that is not always accurate. Instead, we pinpoint stocks with market caps under $2 billion. These stocks may trade higher than $5 per share, but the small market cap means the company can still grow at a very quick rate. That's when investors can see those 100% (or more) gains.

Today, we're bringing you a list of the five top penny stocks to watch ahead of 2020...

Penny Stocks to Watch Now, No. 5: BrightSphere

When the market goes up, money management firms like BrightSphere Investment Group Inc. (NYSE: BSIG) tend to outperform the market.

As a penny stock, BrightSphere can be expected to do even better than most. In 2014, this was a $20 stock. It can be that again in 2020 as the stock market rises.

Analysts have a high price target of $17 for BSIG. That would be a gain of 80% from today's price.

Penny Stocks to Watch Now, No. 4: Carrizo Oil & Gas

One of the more curious moves in the market in 2019 took place in the energy sector. Oil prices are sufficiently high for oil companies like Carrizo Oil & Gas Inc. (NASDAQ: CRZO) to make money.

So why did shares in the oil patch collapse in 2019? Fears of recession had investors selling fiercely. But those recession fears are overblown.

Look for a big recovery in oil stocks in 2020. Small names like Carrizo will be the big winners next year. Analysts are projecting earnings of $2.64 for CRZO in 2020, which should be 7% higher than FY2019 earnings.

Now, here are our top three penny stocks to watch before 2020...[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]

Penny Stocks to Watch Now, No. 3: Allscripts

An aging demographic in the United States almost guarantees healthcare stocks will be big winners in 2020.

Allscripts Healthcare Solutions Inc. (NASDAQ: MDRX) is positioned well as a technology alternative for clinics and hospitals.

Analysts expect profit growth of 15% in 2020. With shares trading for only 11 times current year estimated earnings, Allscripts is cheap. That won't be the case next year.

Analysts have a high price target of $15 for MDRX, which would be a gain of 40% from today's price.

Penny Stocks to Watch Now, No. 2: Changyou.com

The trade war with China made Chinese stocks nearly untouchable in 2019. I've predicted an end to the tensions by the summer of 2020, just in time for the election.

Trump will try to look like the hero. It's nearly guaranteed. Changyou.com Ltd. (NASDAQ: CYOU) is an electronic gaming stock, and the gaming industry is growing rapidly.

Shares of Changyou trade for a paltry valuation of five times current year estimated earnings. That number should be more like 20 times.

Earnings are expected to grow 16% in FY2019, which should fuel this stock into 2020.

Penny Stocks to Watch Now, No. 1: U.S. Steel

No stocks were punished more thanks to the trade war with China than steel stocks.

In February of 2018, when the trade war was beginning in earnest, U.S. Steel Corp. (NYSE: X) traded for more than $40 per share.

Today you can buy the stock for just over $10. When the trade war ends and the economy roars in 2020, shares of U.S. Steel will recover much of that lost value.

Steel remains an integral component to many consumer goods. Profitability and growing revenue will replace the negativity of collapse. This penny stock is a great contrarian play for 2020.

Analysts have a high price target of $21 for U.S. steel stock. That would be a gain of almost 100% from today's price.

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