Rather than catching penny stocks on a quick jump, you want to look for trends that could stick around for a while.
For instance, our best penny stock today is a company working on cloud computing and smart cities. Grand View Research expects the smart cities market to be worth $463.9 billion by 2027. That would be a 457% gain from $83.9 billion in 2019.
Before that, however, this stock could nearly double within the next 12 months.
When the lockdown began last year, thousands of people turned to online stock trading to pass the time. Low-cost and free trading apps like Robinhood were flooded with new account applications.
Chatrooms and social media groups devoted to finding the best penny stocks popped up all over the web. The volume of shares traded in stocks under $5 soared in 2020 and has continued in 2021.
We can take advantage of this trend to make huge profits from all the buying pressure flooding into penny stocks. While many of the stocks in that frenzy are story stocks that soon collapse back to earth, we can focus on low-priced companies with real businesses that can stand the test of time.
These could be future rock stars, or merely fallen angel stocks that have fallen out of favor with Wall Street and are ready to rebound.
Some penny stocks are just waiting for the mainstream to catch on. Here they are...
Colony Capital Inc. (NYSE: CLNY) is an excellent example of the type of penny stock that represents an opportunity for massive profits. Colony Capital is a real estate investment trust (REIT) that had fallen on hard times. It owned a collection of real estate, including hotels, senior living facilities, industrial properties, and more traditional market sectors.
Colony engaged in a three-way merger with two other REITs run by NorthStar, and it did not work as they had hoped. The resulting mess pushed shares of Colony Capital much lower.
The COVID-19 hit, real estate imploded, and shares of Colony Capital fell even lower.
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In the midst of all this, Colony was undergoing a transformation. It has been selling its legacy assets and redeploying the cash into digital real estate like data centers and cell towers worldwide. The company intends to own the infrastructure that makes smart homes and smart cities possible.
In 2020, Colony sold $695 million off legacy real estate assets and bought digital real estate properties.
The hospitality portfolio is under contract for $2.8 billion in a deal that should close in the first quarter of this year.
Digital real estate will get a massive boost from the Internet of Things, 5G, driverless cars, and just about every other hot technology trend we see globally.
As the owner of the backbone of the future, Colony Capital could see its stock soar in 2021.
This next penny stock pays a 10% dividend while you're waiting for the upside...
New York Mortgage Trust Inc. (NASDAQ: NYMT) got hit hard by the pandemic. Shares of the mortgage REIT got crushed in March and have only partially recovered. The REIT has turned out to be an unfortunate name as New York real estate raises the unpleasant notion of people fleeing large cities from the pandemic.
New York Mortgage Trust is located in New York, but it owns mortgages from all over the United States. Much of its lending activity, particularly in multifamily real estate, has been in the south and southeastern United States that are seeing an inflow of fleeing New Yorkers.
Believe it or not, this is actually a pretty good time to be in the mortgage business. New York Mortgage Trust is holding a lot of cash right now and is finding opportunities to get money to work on favorable terms.
At the end of the third quarter, the trust had more than $600 million of cash on hand to take advantage of market disruptions that created opportunities to invest at bargain prices. It also has $574 million of undrawn available loan financing, giving it more than $1.1 billion in total buying power.
Shares of New York Mortgage Trust are selling for less than the value of the cash and loans it has in the portfolio right now. As the price gets closer to $5, we could see institutional buying push the stock even higher.
While we wait for the stock to go up, we will enjoy a more than 10% dividend yield.
Now, here's the moment you have been waiting for. This next penny stock could pop 80% or more in a year.
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Synchronoss Technologies Inc. (NASDAQ: SNCR) is a technology company that offers a white-label solution for cloud computing services and messaging, as well as smart cities and smart buildings.
Its customer base is telecom companies. Currently, it is doing business with AT&T Inc. (NYSE: T), Verizon Communications Inc. (NYSE: VZ), and T-Mobile US Inc. (NASDAQ: TMUS) here in the United States, as well as large telecom companies all over the world.
The cloud market has the potential to be enormous over the next several years. It is expected to be a $15 billion to $25 billion business by 2025.
Synchronoss has focused its messaging business on RCS (rich communication services), which is the successor to SMS. That change has helped it grow its messaging business by 71% over the last two years.
The rollout of 5G should help increase demand for both cloud and messaging services.
The stock is off Wall Street's radar screen right now, but this could become a leading growth stock in 2021.
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