Penny stocks are considered potentially risky. But they also present the opportunity for big gains.
What are penny stocks, and how do investors choose those that are profitable? And how do investors decide on the best penny stocks to watch and the most profitable penny stocks to buy now?
Penny stocks are shares of stock that trade for under $5. With shares under $5, penny stocks typically have a higher level of volatility, but they also have a higher potential for reward.
Historically, penny stocks traded for less than $1 per share. The Securities and Exchange Commission (SEC) modified the definition to include all shares selling below $5.
While penny stocks sell for under $5, you still might have to put more than $5 in your account if you’re just getting started, as brokers often have different account minimums. It’s worth investigating broker fees and avoiding offshore brokers altogether if you’re just getting started investing.
Penny stocks carry higher risk than regular stocks. These stocks are great trading vehicles, but are not generally considered long-term investments. (Of course, there are always exceptions.)
While some penny stocks trade on the large exchanges such as the NASDAQ or NYSE, most do not. Some penny stocks trade OTC (over the counter). OTC are how stocks trade when they aren’t listed on a major exchange like NASDAQ or NYSE. This is typically where smaller companies trade when they can’t meet listing requirements of a bigger exchange, like having a certain number of publicly traded shares and a certain minimum price per share.
The cons of trading stocks OTC is that they tend to have low volume, so you might not be able to get the sale price you want when you go to sell – or worse, not be able to sell at all.
Something else to watch out for is when stocks are known as “Pink Sheet listings.” These are stocks that have the least regulatory oversight and liquidity. They are not required to file financial information with the SEC, so investors don’t always know exactly what they’re buying. This can make these companies less reliable as investments than those that have traded for years on a regulated exchange.
Because penny stocks tend to be volatile, and because the companies that list penny stocks frequently do not file with the SEC, investor research and due diligence is important. It’s also typically recommended to focus on penny stocks that are listed on a major exchange.
Research will help you choose which penny stocks to watch as potential “buys” to help investors meet their profit goals. When looking at penny stocks, there are several pieces of valuable information that can help.
Investors should first be familiar with the market sector that a penny stock is in as well as the industry of the company.
Investors should examine press releases and a company’s announcements. These documents can provide information about new contracts, positive earnings, or, in the case of biotech, news of test results, and can forecast potential gains. This can help investors spot companies that are just formed or might be heading for bankruptcy.
Another way to research penny stocks is to look for big percent gainers. Penny stocks that are on the move are penny stocks to watch. And a long-term chart with the historical information of a penny stock’s performance can tell you if a stock has been climbing steadily higher or been extremely volatile.
Stock liquidity is also important. Because penny stocks are usually associated with small companies and infrequent trading, they may have a lack of ready buyers in the marketplace. A lack of ready buyers means that selling stock can be difficult, and lowers the liquidity of the shares. Investors should look at a penny stock’s volume to make sure there’s enough daily activity should they want to sell their shares. They should also make sure that the price of the shares accurately reflects the market. A high price with not much volume is a warning sign.
Different industries thrive under different economic conditions. When deciding which penny stock to buy, an investor might consider if the current economic environment benefits the company’s industry.
For example, penny stocks to buy now are in industries like e-learning, food delivery, tech and biotech because of the global pandemic. Tech companies are creating innovative solutions to current problems, such as how to enable employees to work more effectively from home, and these companies may be developing the next solution for remote collaboration.
Follow Money Morning for continued info on how to successfully trade penny stocks, understand the process, and get lists of penny stocks like these to buy now.
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.
Money is pouring in to the psychedelic medicine space right now because the potential benefits are enormous.
Tens of millions of dollars have been spent researching new, life-changing cures.
And the mainstream media is completely ignoring it.
That just means investors who get in on the ground floor now could stand to make a fortune by investing in the best psychedelic penny stocks - before most of Wall Street catches on.
Oregon, Colorado, Washington, D.C., and Canada decriminalized psychedelics and allow them to be used in medical research.
We're now getting to see how micro-doses (taking very low amounts of psychedelic drugs) with medical professional oversight can be used to treat all sorts of mental health disorders and other diseases.
You have the chance to invest in companies at the forefront of this movement right now...
Here's my best psychedelic penny stock to buy now with massive return potential.
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.
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2020 was a lot of things.
It was the year of the pandemic.
It bought us one of the more hotly contested elections in some time.
And it was the year of a massive stock market crash, with the major indexes dropping by 35% or more.
But 2020 was also the year of the quickest market recovery in history - with prices rushing back to new all-time highs in a matter of months.
2020 was a fantastic year to invest and trade in low priced penny stocks.
New traders flocked to the market during the early stages of the lockdown.
And many of them have stayed even after the world began to reopen.
Intelligent speculation in penny stocks has made a lot of money for a lot of people in the past year.
With the vaccine finally arriving, we could see a full reopening of the economy that drives the markets higher.
This would create even more massive opportunities for low priced stock investors.
Here are the three best penny stocks to buy with 300% upside...
Institutions are a driving force in big stock moves.
They have trillions of dollars under management, and when they pile in or out of stock, they will move prices.
That's happening right now with our best stocks under $10.
In fact, institutional buying could send our best stock today soaring 124%.
2020 gave birth to a huge wave of new traders.
And their buying could provide the backdrop for a continued rally in penny stocks going into the new year.
2020 has been a great year to trade penny stock breakouts.
And with my help, 2021 is going to be even more prosperous for you because I'm going to show you exactly what to look for.
Buying penny stocks that are moving higher and nearing their 52-week highs has worked much better and has been particularly profitable in 2020.
The break above the 52-week high often attracts breakout traders that use the new high list to pick stocks.
Their buying can help push the stock above the $5 mark, allowing more institutions to get involved in the stock.
This type of trading is not for everyone.
It is very volatile at times.
You will have some good months, and you will have some bad months.
But if you can live with volatility and swings in your account balances, you can make a lot of money with penny stock new high breakouts.
Because we want new high list traders to help lift our stock higher, we want to buy when the stock is moving up and nearing the 52-week highs to get in ahead of the new high list buyers.
Today’s best pest penny stock to buy is getting hedge fund interest.
This could send its price rocketing as high as 158% in a matter of weeks.
Most institutions have specific guidelines that do not allow them to invest in stocks that trade for less than $5 a share.
However, hedge funds and other traders that are not managing huge pension or endowment funds do not have these restrictions and can jump into low-priced stocks they find attractive.
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There are several different ways to evaluate penny stocks using fundamental and technical analysis... One that has worked very well in 2020 is buying low prices stocks when they move to a new 52-week high.
There are hundreds of thousands of traders tracking the new high list looking to jump into a breakout momentum stock just before it makes a big move.
We can improve our odds of success even further by watching for large volume increases and identifying the catalyst for the breakout.
We all love a low-priced stock.
Wall Street telling us we shouldn't is a lot like our parents telling us candy was bad for us.
Sorry Mom, but we just came across one of the best stocks under $5 right now.
And it has the potential to pop 300% in a short time.
Sure, a move from $50 to $100 and $5 to $10 is the same percentage rate of return.
But it takes a lot less cash to create the buying pressure needed to move the $5 stock than it does to move the needle for the $50 stock.
Penny stocks have gotten a lot of attention from the media this year.
We have seen Robinhood investors drive some ridiculous moves in low price stocks that ended badly when reality interceded... 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 $60.00 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...
More good news on the vaccine front is continuing to power big rallies in the stock market this week.
While a lot of the money is flowing towards the big-name stocks and index funds, there are even more exciting opportunities in penny stocks right now.
You see, the best penny stocks aren't the speculative stuff you find on the pink sheets.
These are stocks in real businesses making real money with real upside potential.
They just happen to be trading in the price range of a penny stock, under $5 a share.
Even better, because of their low share price, the vaccine rally could send some of the top penny stocks soaring higher.
The Dow Jones finished April with its strongest month since 1987 as investors poured capital into beaten-down stocks.
At Money Morning, one thing we've been focusing on is penny stocks - shares that you can buy for under $5.00 that are poised to breakout in the coming month.
Just two weeks ago, we outlined three penny stocks that have outperformed the market.
On April 19, we laid out three different penny stocks for April.
Since those recommendations, we've seen solid gains.
We're tapping into several penny stocks that are poised to breakout this month.
Here are the three best penny stocks to buy in May 2020...
Markets have absorbed the news that U.S. states have extended their social distancing policies and shutdown of nonessential businesses.
Unemployment could sour to levels not seen since the Great Depression.
And Second Quarter GDP may plunge by as much as 40%, according to analysts at JPMorgan Chase.
Some investors may be nervous about buying and holding stocks right now - particularly expensive ones trading at $100, $500, or even $2,000 or more.
That's why penny stocks are so popular, especially now.
Because they trade under $5 per share, we can tap into inexpensive stocks that have high profit potential due to coronavirus and ride them out until the breakout ends.
Today, we're looking at three of the top penny stocks to buy in April...
The markets are experiencing wild swings every day.
While a 20% jump in markets this week technically ended the shortest bear market ever, don't think for a second that we're passed the worst of this crisis.
We will see significant volatility in the coming weeks as concerns about credit hammer the banking sector and investors fret about the nuclear bomb that is about to hit second-quarter GDP.
With that in mind, there are still a number of stocks out there that are very intriguing as "Buy and Hold" candidates.
Penny stocks - which typically trade for $7 per share or lower - offer high-upside opportunities given the current conditions in the market.
