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Penny stocks have gotten a lot of attention from the media this year.
We have seen Robinhood investors drive some ridiculous moves in low-priced stocks that ended badly when reality interceded…
Companies that have never come close to earning a profit saw their stocks soar when they announced that they lost less money this year than they did last year.
Just announcing that you weren't broke yet could attract fierce buying by the newbies.
The majority of stocks that fit the definition of penny stocks are garbage. The stock price is low for very good reasons. Any rally resulting from uninformed buying is going to crash back to earth quickly.
One of the best examples this year is Eastman Kodak Co. (NYSE: KODK). The stock went from being an irrelevant $2.10 bankrupt company on July 24, to as high as $60 per share just five days later on July 29.
This insanity was driven by speculative retail investors who probably didn't start buying until Kodak was $10 or more… and if they haven't exited the position yet, they're sitting on some pretty hefty losses now that KODK is only trading for about $8 per share.
All that being said, this does not mean we should quit looking for low-priced stocks with the characteristics that could lead to massive gains.
When these low-priced stocks begin to move and the big institutional money realizes these are real companies with growing profits and sound balance sheets, their buying pressure can drive the shares higher than you ever imagined…
No. 3: The Top Penny Stock to Buy Benefitting from COVID-19
TOMI Environmental Solutions Inc. (NASDAQ: TOMZ) is an example of a profitable company that is flying under the institutional radar screen.
TOMZ should see strong growth going forward as it's in the business of sterilizing and decontaminating indoor surfaces.
It also has a food safety division that helps protect the food supply and distribution networks from infection for pesticide-resistant bacteria.
TOMI Environmental's SteraMist products can be dispensed by handheld units or fixed units depending on the customer's needs. The units use a hydrogen peroxide mixture that quickly and effectively decontaminates surfaces.
The use of ionized hydrogen peroxide was initially developed under a U.S. Defense Advanced Research Projects Agency (DARPA) grant to explore combat chemical and biological attacks. It was so effective that it spread to commercial use to keep buildings safer from viruses like COVID-19.
TOMI Environmental has seen revenue increasing by more than 20% annually for the past five years. That pace is accelerating in 2020. In the most recent quarter, revenue was up more than 300% year over year.
The stock is currently trading for $4.35 per share. But if the explosive growth continues, it could easily be worth $15. That represents a 245% potential return for investors.
No. 2: The Top Penny Stock to Buy for Its Mutual Funds & ETFs
U.S. Global Investors Inc. (NASDAQ: GROW) started as an investment club in San Antonio, Texas, more than 50 years ago.
2020 is shaping up as one of the best years that U.S. Global has ever had. Inflows into its niche U.S. Global Jets ETF (NYSEARCA: JETS) from investors betting on an airline rebound have helped raise total assets under management to more than $2 billion.
The firms' U.S. Global GO GOLD and Precious Metal Miners ETF (NYSEARCA: GOAU) has also seen steady inflows this year.
U.S. Global Investors reported that third-quarter earnings were up 73% from the previous quarter and up more than 300% the same quarter from a year ago.
As the widespread distribution of a vaccine gets the economy growing again and airlines continue to recover in 2021, U.S. Global could see continued rapid inflows into its funds and ETFs that drive profits and the stock price a lot higher.
Currently trading for only $3.64, GROW is severely undervalued. Look for it to get up to $12 per share by the end of 2021 if capital inflows to its mutual funds and ETFs continue.