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All too often, people trading penny stocks make decisions based on one good story.
That can work in the short run. But betting on unfounded hopes and dreams is a recipe for disaster when investing. This is especially true with low-priced stocks.
The best penny stocks should benefit from the most powerful trends in the world today. Investors who want the massive potential gains from penny stock investing should focus on those with a real business producing real cash.
We have three penny stock companies doing just that today. And more than that, these companies are poised to capitalize on major long-term trends in the market.
In fact, one of these picks could get a 155% as people start to leave crowded areas amid COVID-19. We'll show you that one in a moment.
Here's our first penny stock today…
Penny Stock to Rise on Sports Betting
Entercom Communications Corp. (NYSE: ETM) is an excellent example of a company producing lots of cash every year that has the potential for huge gains.
It's one of the leading media companies in the United States. The company has 235 radio stations in the United States that reach over 170 million people every month.
Although the company felt the sting of the COVID-19-related economic slowdown, this business still generated more than $70 million in free cash flow in 2019.
The more important part of this company's future lies in the fact that Entercom is the largest owner and operator of sports radio stations in the United States. It owns 39 all-sports stations that reach more than 30 million sports fans every month.
WARNING: It's one of the most traded stocks on the market every day – make sure it's nowhere near your portfolio. WATCH NOW.
Forty-one professional sports teams and 50 top-tier college teams have an Entercom station as their flagship radio station. The lineup includes the New York Yankees and Boston Red Sox, Dallas Cowboys and Kansas City Chiefs, Golden State Warriors, and the Chicago Bulls.
Why is this so important?
Entercom has its eye on the emergence of sports betting. Sports betting is currently legal in 12 states, and over the next few years, we expect to see it legalized in most states.
In October, Entercom announced a six-year partnership with FanDuel, the leading online sports and entertainment company. It named FanDuel the official sportsbook partner of Entercom. It is one of the largest advertising commitments ever made within the radio industry.
In November, Entercom announced that it had bought sports data and iGaming affiliate platform QL Gaming Group for approximately $32 million. Entercom CEO David Field said that "As the sports betting marketplace continues to grow exponentially, the acquisition of QL Gaming Group is a perfect fit for our unrivaled sports audio platform."
Entercom is going all in on sports betting, and that could drive the stock price dramatically higher as more states legalize betting.
And still, this other $319 billion trend could produce even greater gains down the road…
Education Penny Stock Rolling in Cash
Houghton Mifflin Harcourt Co. (NASDAQ: HMHC) appears at first glance to be just a boring old publishing company that sells novels, textbooks, dictionaries, and reference books. It is an okay business, but books are so yesterday.
A deep dive shows that the company has pivoted to focusing on the fast-growing education technology industry.
We were going to get an e-learning market one way or another. The pandemic has accelerated that growth. We could see it nearly double to $319 billion by 2025, according to Research and Markets. And Houghton Mifflin is throwing its hat in the ring.
The company has hired investment bankers to explore the sale of its consumer publishing division. Houghton will use cash from the sale to pay down debt and help grow the education technology business.
The new focus on education technology is already paying off for Houghton Mifflin. In the most recent quarter, Education Software as a Service sales were up 147%. The number of users on its education platform rose by 54%.
These results are the reason Houghton generated $237 million in free cash in just three months.
Education technology is one of the fastest-growing industries in the world right now, and Houghton appears poised to soar as it focuses on this market. Its decades in the textbook business gives it an edge as it already has relationships with decision-makers in education systems all over the country.
There's significant upside as it dives deeper into education. But it's not even our best penny stock today.
Here's the 155% gainer…