One of the best ways to profit from penny stocks is to find a catalyst that can send a stock soaring. And yesterday's trade deal between the United States and China is exactly what we're talking about.
The United States and China signed a phase one trade deal yesterday, setting a positive course for both nations in 2020. While they're still far from a full agreement, a little good news can go a long way for both economies.
In fact, our top penny stock to watch right now is tied to the success of China's economy. And it's poised for 222% growth in the coming months.
The Dow is up more than 150 points today as news from the U.S.-China deal unravels. That's a good day, but it's only a 0.5% jump from yesterday's 29,030 close.
Penny stocks, however, can make huge market-beating gains on a little bit of good news. For example, last October, we saw BioNano Genomics Inc. (NASDAQ: BNGO) soar 107.33% after the company announced its genome-mapping technology had been adopted by the University of Iowa.
See, BioNano doubled its share price by adding a single client. And today's best penny stock pick is waiting in the wings for the entire Chinese retail sector to fly.
We found it using our Money Morning Stock VQScore™ system. Our penny stock scored a perfect 4.9. And here's what that means.
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After our proprietary algorithm scanned the financials underlying thousands of stocks, it decided that this penny stock was one of the most likely to break out.
A VQScore anywhere above a 4 would be in the "Buy Zone," but this stock's ready to more than triple in price.
Here's the big reason why...
Why This Is the Penny Stock to Watch
China's annual GDP growth struggled from 2018 to 2019 amid tariff battles with the United States, and now it hovers at a feared low of 6%. China's retail sales also took a dip at the end of last year.
But analysts are expecting a turnaround. And the phase one deal signed yesterday is just the beginning.
There's also a catalyst for long-term sustainable growth coming from China.
The phase one agreement lowers U.S. tariffs on $120 billion of Chinese goods by half - 15% to 7.5%. And China has agreed to buy $200 billion of U.S. goods in return.
But as much as warming U.S.-China relations can boost the economies, there's an even more important, constant factor driving the success of our top penny stock: the Chinese population.
Based on United Nations projections, China is home to more than 1.4 billion citizens. That's nearly 20% of the world's population.
But within that 1.4 billion is also the biggest consumer class in the world.
And this stock taps right into it, just as the trade war nears its end...
The Penny Stock Driven by China's Middle Class
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China's middle class is over 400 million strong. That's more than the population of the entire United States, which is around 325 million.
And the stock benefitting the most from China's middle class this year will be Qudian Inc. (NYSE: QD).
Qudian is a consumer credit services provider in China. And Chinese consumers are soaring in number.
China's consumer base is expected to grow from 400 million to 600 million - 50% growth - in just three years. And that's expected to fuel the $6 trillion Chinse retail industry. China's retail has grown about 400% in the last 10 years already.
That's because China has an exceptionally confident consumer class. At the end of 2018, even as Chinese retail growth was dwindling, consumer confidence was going up.
According to McKinsey & Co., China's consumers are willing to pay more for items "with a strong value proposition." This is also reflected in China's 2018 online consumption on "Singles Day" - $58 billion. That was more than Cyber Monday and Black Friday sales combined.
So there's good reason to believe in China's consumer credit market. That's why analysts give Qudian a $11.75 growth target over the next 12 months - or a more than a 222% leap from today's price of $3.64.
Progress in trade talks between the United States and China will only accelerate this growth. That and a perfect 4.9 VQScore make this penny stock a winner for 2020.
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