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January optimism tends to drive stocks a little higher every year. Investors call this the "January Effect." And it tends to impact penny stocks the most.
That's why we're sharing with you our best penny stocks to buy for 2020.
You see, due to their low share price, they can see huge percentage gains on only a little upward movement in the market. In fact, our top penny stock today offers 153% potential appreciation to investors.
We found this stock using our proprietary Money Morning Stock VQScore™ system. It scans the financials behind thousands of penny stocks to find the ones with the most breakout potential.
The VQScore does this by reading the earnings growth prospects of each company, then giving it a score of 0 to 4.9. The higher the score, the more likely it is to break out.
To arrive at the top penny stocks, we take our high-scoring stocks and select the ones trading under $5 – that's the definition of a "penny stock" provided by the U.S. Securities and Exchange Commission.
We have three of those stocks for you now, all with perfect scores of 4.9…
Best Penny Stocks to Buy for 2020, No. 3: CEMIG Inc.
CEMIG Inc. (NYSE: CIG) is headquartered in Belo Horizonte, Brazil. It's the capital of Minas Gerais, a Brazilian state.
CIG is one of the country's biggest power generators and distributors, with roughly 50 power plants both in Brazil and neighboring Chile. CIG is the fourth largest Brazilian electric company, and its output is equal to 12% of Brazil's total energy. It serves approximately 18 million customers in 774 municipalities.
All of that makes it ideally positioned to benefit from a tremendous energy consumption boom going on in Brazil.
In fact, a British Petroleum Inc. (NYSE: BP) report indicates that the average growth in Brazil's energy consumption is almost double that of other developed countries.
Brazil is the second biggest global user of biofuels, fuel made of organic waste materials.
This strong growth in energy consumption has supported robust profit growth for CEMIG over the past several years.
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In the past four years, its gross profits have soared 72%. That kind of growth will likely continue.
Wall Street analysts have seen the profit potential and have a target price of $4.20 on the stock – a more than 26% profit from today's $3.32 price.
That's not unheard of, but it's good profit. Our next penny stock, though, is close to gaining in the triple digits…
Best Penny Stocks to Buy for 2020, No. 2: Intrepid Potash Inc.
Denver-based Intrepid Potash Inc. (NYSE: IPI) manufactures fertilizer. It's the biggest potassium chloride producer in the United States.
Potassium chloride is the fertilizer most used by farmers in the U.S.
In the past four years, the use of potassium has climbed 15% across the country. The company's profits rose an astonishing 732% during the same time period.
The third quarter of 2019 saw its profits grow by $5.3 million over the same quarter last year. Revenue advanced $2.5 million quarter over quarter.
Profits have been spurred by reduced operation costs – which, in turn, are driven by solar evaporation ponds that are both cost-efficient and environmentally friendly.
Analysts forecast that the share price could climb to $5 from the current $2.55 level, which would be a 96% gain for investors.
But our top penny stock for 2020 is a 153% gainer…