Are there good penny stocks to invest in? They're cheap, they're volatile, and they're moneymakers. With a small amount of capital and the right strategy, you stand to make major bank.
A simple investment of $3,000 in a .$20 stock could yield a $12,000 return if the stock went to $1.00. That is, of course, if you pick the right penny stocks. In an attempt to help you pick theses winners, here are a few characteristics of good penny stocks to invest in.
Are There Good Penny Stocks to Invest In?
- Are there good penny stocks to invest in? That is the question. Penny's are so popular because of their price. They're cheap and volatile. Which is both good and bad. There are good penny stocks to invest in but more often than not, there are bad ones. It's all about learning the difference.
If you want to learn the difference between good and bad penny stocks to invest in, make sure to take our penny stock trading strategies course.
1. An Unfortunate yet All Too Common Scenario
For whatever reason, perhaps a hot tip from a friend, you rush in to buy 1,000 shares of stock ABC at $3.00 a share. Unfortunately, the stock tanks to $.50.
Considering the fact that you had no idea what you were doing and didn't have a stop loss in place -as you should, you just lost $2500.
With your tail between your legs, you admit to your friend what happened. I can almost anticipate the barrage of questions that followed, "Did you check the float?
No. Did you check the volume? No. Did you check the relative volume? No. Was there a catalyst? No." For what it's worth, you were gambling.
With your pride wounded and head held low, you swear off penny stocks and trading altogether. But it doesn't have to be this way if you follow a few simple rules for good penny stocks to invest in.
Make sure to check out our live trading room if you want to talk about penny stocks and which one are the best to invest in.
2. Is a Penny Stock Worth Pennies?
Despite the misleading name, not all penny stocks are worth pennies. In fact, any stock traded for less than five dollars are considered penny stocks.
Make sure to check our our penny stocks list that we update each night. These have stocks that range from below a dollar up to the $5 and can be good penny stocks to invest in.
Remember to do your due diligence. Don't buy a stock just because it's on a watch list.
3. Well Known Companies That Were Once Penny Stocks
At certain times, a few well-known companies, including Monster Beverage Company ($MNST), traded as a penny stock.
Monster Beverage Company ($MNST) was surprising to me, but it did in fact trade for less than $1 per share in 1995. Monster is not a corporation that comes to mind when most people think about penny stocks.
Unbelievably shares of Monster Beverage now trade around $60, and the company has achieved a market cap of $32.55 billion.
While hindsight is always 20/20, Monster Beverage Company turned out to be one of the good penny stocks to invest in.
Check out our trading alerts with support and resistance levels to look at when potentially trading penny stocks.
What Are the Best Penny Stocks to Buy in 2020?
- Do you know what the best penny stocks to buy in 2020 are? (in no particular order)
- $HENC - Outperformed the S&P 500 by 211.7% in the past year. HENC has outperformed its sector by 238.0% in the past year. The Energy sector has underperformed the market by -26.3% in the past year.
- $OESX has outperformed the S&P 500 by 186.5% in the past year. OESX has outperformed its sector by 205.9% in the past year. The Industrials sector has underperformed the market by -19.4% in the past year. Orion Energy Systems Inc is a developer, manufacturer, and seller of lighting and energy management systems.
- $ELA is in the business of buying and selling jewelry, diamonds, fine watches, bullion, coins, and precious metals. Its brands include Dallas gold and silver exchange and Charleston gold and diamond exchange. The company primarily serves individual consumers, dealers, and institutions throughout the United States. The business operations of the group are organized around two primary types of customers, retail customers, and wholesale customers. ELA has outperformed the S&P 500 by 739.8% in the past year. ELA has outperformed its sector by 742.5% in the past year. The Consumer Cyclical sector has underperformed the market by -2.7% in the past year.
- $FSM has performed nearly in line with the S&P 500 over the past year. FSM has outperformed its sector by 12.6% in the past year. The Basic Materials sector has underperformed the market by -10.8% in the past year.
- $GLGI has outperformed the S&P 500 by 27.8% in the past year. GLGI has outperformed its sector by 38.6% in the past year. The Basic Materials sector has underperformed the market by -10.8% in the past year.
- $UMC shows up on Stock Rover as a long term growth stock. It has outperformed the S&P 500 by 20.6% in the past year. UMC has outperformed its sector by 2.7% in the past year. The Technology sector has outperformed the market by 17.9% in the past year
- $CAOVF is a Chinese real estate company. It has performed nearly in line with the S&P 500 over the past year. CAOVF has outperformed its sector by 11.3% in the past year.
The Real Estate sector has underperformed the market by -13.1% in the past year. It currently pays an .11 cent dividend as of May 2020.
*All reports are from Stock Rover - and are not a recommendation to buy or sell. Please do your own research*
Characteristics of Good Penny Stocks to Invest in
- What are some good characteristics of good penny stocks to invest in?
- Low float
- High liquidity
- High volume
- A catalyst
1. Low Float
By definition, the float is the number of shares available to trade on the open market. And the lower, the better because these are the stocks that will move and move quickly because they're less liquid. Be warned though, the smaller the float, the more potential it has to do something nuts. Get more education on low float stocks.
As a rule of thumb, I suggest you firstly stick with a float over 300,000 to ensure the stock is liquid. Secondly, the float needs to be under 20 million. The reason is that stocks with floats over 20 million don't have the big daily price moves you need for stock trading.
2. High Liquidity
You need to trade liquid penny stocks. A liquid stock is one that is easy to sell. Even if a stock is at a rock bottom price and you think it's a steal of a deal, be careful.
You might not have any buyers for the penny stock you just bought. Anything under 50 cents a share, trading less than 100,000 shares a day is not liquid. It's not only illiquid, it's dangerous.
3. High Volume
Volume verifies trends and precedes price action.
Any price movement with high volume's seen as a stronger, more relevant move than a similar move with weak volume. By the same token, volume verifies trends and precedes price.
For example, a surge of volume is mandatory to confirm a breakout. To put it another way, if there's no volume, it is not a breakout. Most likely, it's just a false rally. Thus, if you're looking at a large price movement, look at the volume to see if it tells the same story. Read more on what does volume mean in stocks.
4. A Catalyst
The reality is, a penny stock trader capitalizes on swift moves in price. And nothing moves a price more swiftly than hot news or, some other fundamental catalyst just released.
5. Now Is Your Golden Opportunity
With COVID-19 sweeping away gains of stock markets across the globe, many are worried, as they should be.
But despite the grim state of affairs in the stock market, this is also a golden opportunity; the stock market is on sale! Prices are at an all-time low, and the sale won't be on for long.
Two Penny Stocks to Watch
- What two stocks to watch when looking for good penny stocks to invest in?
- $PTN - not doing so well from a technical stand point, but rated a strong buy by analysts. Palatin Technologies Inc is a part of the healthcare sector. The company is engaged in developing targeted, receptor-specific peptide therapeutics for the treatment of diseases with significant unmet medical need and commercial potential. Its programs are based on molecules that modulate the activity of the melanocortin and natriuretic peptide receptor systems. Its main product in clinical development is bremelanotide, which treats hypoactive sexual desire disorder, which is a type of female sexual dysfunction. PTN has underperformed the S&P 500 by -65.0% in the past year. PTN has underperformed its sector by -76.3% in the past year. The Healthcare sector has outperformed the market by 11.4% in the past year.
- $LCRX - This stock has been hammered in the last year. LXRX has underperformed the S&P 500 by -73.6% in the past year.
LXRX has underperformed its sector by -85.1% in the past year.
The Healthcare sector has outperformed the market by 11.5% in the past year. However, LCRX has seen some serious sales and price to earnings growth lately. LCRX is a biopharmaceutical company developing medicines that transform patients' lives. The company commercializes and develops drugs and drug candidates. Its drugs candidates include XERMELO (telotristat ethyl), an orally-delivered small molecule drug, in the United States for the treatment of carcinoid syndrome diarrhea in combination with somatostatin analog, or SSA, therapy in adults inadequately controlled by SSA therapy; Zynquista (sotagliflozin), an orally-delivered small molecule drug candidate, as a treatment for type 1 diabetes; sotagliflozin as a treatment for type 2 diabetes, heart failure and chronic kidney disease; and LX9211, an orally-delivered small molecule drug candidate, as a treatment for neuropathic pain. Check out the research report from Stock Rover below.
1. Millendo Therapeutics Inc. (MLND)
The weeks ahead looks promising for Millnedo. Although shares in the penny stock tumbled in April due to unsuccessful clinical trial results, they closed strong last week.
For those of you unfamiliar, the trial was for the drug Livoletide. Livoletide is being trialed as a cure for those living with Prader-Willi syndrome. Prader-Willi is an inherited disorder characterized by obesity and type 2 diabetes due to insatiable hunger.
Needless to say, after dropping to lows of $1.26, MLND stock has a long way to go. Considering the fact that MLND traded above $9 a share earlier in 2020, there's a lot of work to do.
However, hope remains high, and it's reflected in the action we've been seeing. On Friday alone, shares shot up to $2.13 with more than 6.4 million shares traded.
I'm always concerned about stocks that move without a catalyst and Millendo hasn't released any big updates to speak of. With that in mind, be cautious.
But there's no reason why you can't add it to your watch list. If it starts to gain momentum and triggers your entry criteria, I see no reason why you can't scalp it.
2. Fluidigm Corporation (FLDM)
Another late-breaking penny stock to watch from the week of May 27th was Fluidgim Corporation. After a quiet week and morning, shares exploded in the afternoon. When I say exploded, I mean exploded; the penny stock shot up from $2.15 to $4.39.
But the lingering question remains: Why did Fluidigm stock rally so strongly last week? To get a better understanding, it would help if you understood what the company does.
In a nutshell, Fluidigm focuses its efforts on diagnosing and testing solutions for cancer. By utilizing proprietary CyTOF® and microfluidics technologies, they have a multi-omic solution for testing and diagnostics.
In an attempt to adapt to current needs, Fluidigm began focusing its efforts on COVID-19 to research applications for SARS-CoV-2 virus detection.
Luckily for them, their efforts did not go unnoticed. Case in point: An article released on May 1st in the Guardian titled "US germ warfare research leads to new early Covid-19 test".
To this end, the FLDM stock soared. Like I mentioned above, this is the catalyst confirmation needed for me to enter into a penny stock.
My Parting Thoughts
What are good penny stocks to invest in? My first concern is that people are looking to get rich quick. If something sounds too good to be true, it probably is. The most important message we have is to do your own research. Find stocks with good fundamentals and a REASON TO BUY at that technical level.
I'm not here to tell you what penny stocks to trade; you need to learn how to interpret the technical indicators for yourself.
That said, if you're looking to learn how to do this, then you've come to the right community. We have free online trading courses designed to teach you day trading penny stocks the profitable way. Get started now with our free trial.
Good luck in your trading journey. I hope this helped, and enjoy your week!
This post is for informational purposes only, nothing on this website is a recommendation to buy or sell any stock or security. Please read our disclaimer.