Looking to invest in stocks but want to keep the cost low? Then take a look at these 7 penny stock picks that look to be the perfect little additions to add to your collection.
As the saying goes you get what you pay for this too can be said when looking to invest in stocks.
Penny stocks typically refer to stocks sitting on a share price of under $5 but just because the price looks and is affordable it doesn't necessarily mean that it's cheap if you dig further into a penny stocks financials.
But that being said there are plenty of penny stocks flying under the radar that have the potential to offer great growth prospects that are either at the start of their journey or have not yet been fully discovered by investors.
So let’s take a look at what is entailed in penny stocks, what key features to look out for when looking to choose the best penny stocks to invest in, taking a look at 7 of the best penny stocks sitting on the market today along with how to invest into these stocks.
- Overview: What Are Penny Stocks?
- Pros And Cons Of Investing In Penny Stocks
- Key Characteristics To Look Out For In Penny Stocks
- 7 Best Penny Stocks To Invest In
- The Bottom Line
- How To Invest In Penny Stocks And Trade Penny Stocks
- What Is The Right Time To Trade Penny Stocks?
Overview: What Are Penny Stocks?
In short penny stocks are small common shares of small companies that either trade on large public exchanges such as the New York Stock Exchange (NYSE), more notably these stocks trade over-the-counter (OTC) through the electronic OTC Bulletin Board (OTCBB) or these stocks can trade through private markets such as OTC Market Groups for a small cost of under $5.
If the term penny stocks is not familiar these stocks can be referred to by other names that include ‘OTC stocks’ and ‘unlisted stocks’.
Pink sheets are another point to mention when discussing penny stocks. Pink sheets are listings for stocks that trade on OTC exchanges that have not met the requirements to trade on public exchanges. Typically most pink sheets are small-company penny stocks under $5 that tend to trade infrequently due to the strong high-risk factors and low liquidity, making it a challenge for investors when seeking to buy and sell such shares.
Pros And Cons Of Investing In Penny Stocks
Historically penny stocks have been subject to wrongful doings for many years causing these stocks along with their high volatility to be overlooked by investors. Wrongful happenings such as scams and fraud factors along with lack of information and low liquidity are among the many reasons why these stocks are not some investors' go-to's.
The pump and dump scheme is one of the biggest fraud happenings that unfolds when connected to penny stocks. Pump and dumps is a scheme where investors who hold shares within a specific company intentionally look to broadcast and spread false or misleading information to shine the stock in an attractive light. This then leads individuals investing in the specific stock causing its share price to rise quickly and sharply in order for the holders to then “dump” or sell their shares at the inflated prices.
In today’s society, social media platforms are prime platforms for holders to share their misleading information when it comes to the pump and dump scheme, proving that it pays to conduct thorough research and use your due diligence before seeking to invest in penny stocks.
But on the flip side, investing in penny stocks can be extremely exciting and rewarding by showing strong price appreciation as these stocks are more affordable to invest in, have a wide range of options set in various industries and offer great growth prospects.
Another positive that can be taken from penny stocks is that profit can be made which is why when you hear the term high volatility it is not always associated with a negative image. For example, you could look to buy 100 shares at $2 and sell them at $4 proving that you have doubled your earnings. But naturally, this does work both ways meaning as quick as you can potentially double your earnings, the quicker you can also lose your earnings.
Although investing in penny stocks have their strong benefits it is recommended that due to the strong risk elements that these stocks possess investors do not make a collection solely centered around such stocks, and look only to add a small few to your portfolio due to the strong risk exposures.
Pros of investing in penny stocks:
- Can show great upside in share price appreciation, can take a small amount of money and turn it into much more.
- Great growth prospects.
- If you are looking to invest in penny stocks for the short-term penny stocks can see quick price movements within a matter of days.
- You can invest with a little amount as penny stocks are classified at a fee of $5 or under.
Cons of investing in penny stocks:
- Access to low-quality companies as some penny stocks are sitting in a negative financial position.
- Penny stocks are thinly traded meaning that these stocks may see a low trading volume compared to larger companies trading on public markets.
- High volatility on both ends of the scale meaning that when it swings in a stocks favour that’s perfect, but when it doesn’t it can be damaging for both the stock and investors.
- High risk to scams, fraud elements and pump and dumps.
Key Characteristics To Look Out For In Penny Stocks
As we have already established penny stocks are riskier investments as opposed to larger companies on the market but you can look to limit the risk factors when looking into these stocks by taking a closer look at these three characteristics within a penny stock:
Stick to public exchanges
By looking for penny stocks that trade on well-known exchanges such as the New York Stock Exchange (NYSE), Nasdaq, the London Stock Exchange and more these stocks have to meet minimum requirements or listing requirements (most commonly referred) set by Securities Exchange Commissions.
This includes meeting financial requirements and also being able to pay exchange listing fees to enter and make yearly listing payments. Due to the tighter restrictions, these stocks are less likely to be subject to scams and fraud happenings. Typically most penny stocks do trade on OTC markets via OTC Bulletin Board.
This way offers a diverse collection of penny stocks to investors yet are more prone to stronger risk elements that investors must sound out and be made aware of before investing in any penny stock.
Look at penny stocks with higher trading volumes
This factor is a key element to look at when looking into penny stocks because the main aim for any investor is to make money from your investments.
If you are an investor that is looking to take advantage of quick, sharp price movements in the form of Day Trading, then you do want to look at stocks that carry a high daily average volume in order to sell your shares at a potential higher price or to break even, rather than for nothing at all.
So a key point to keep in mind is that a high trading volume is a good characteristic to look for when looking into penny stocks, especially if you are looking to gain price appreciation within a shorter period.
Look into a company’s financials, including it’s earnings per share (EPS)
Just like all stocks on the market investors should look to evaluate a penny stocks financial position. Granted, this can be even more challenging when looking into penny stocks due to lack of public information proving that this is a clear sign that the stock in question is a riskier investment.
When looking into a stock's earnings per share (EPS) look to see if a company holds a high EPS as this will indicate value for investors and can also determine to see if a company is sitting in a profitable position.
The way in which you calculate a stock's EPS is by dividing a company’s profit divided by the amount of outstanding shares. To round it up the higher a company’s EPS typically the more profitable and valuable it is to an investor.
Read Also: 9 Small-Cap Stocks With Growth Potential
7 Best Penny Stocks To Invest In
Having looked at what penny stocks entail and the pros and cons of investing in such stocks, now it's time to take a look at 7 penny stocks under $1 that look to be the great additions to add to your portfolio in 2021.
- Supreme Cannabis Company Inc (SPRWF)
- Naked Brand Group Ltd (NKD)
- Sundial Growers Inc (SNDL)
- Zomedica Corp (ZOM)
- PolarityTE Inc ( PTE)
- Oragenics Inc (OGEN)
- RiceBran Technologies (RIBT)
1. Supreme Cannabis Company Inc (SPRWF)
The cannabis company Supreme Cannabis Company Inc (SPRWF) comes as the first best penny stock to consider adding to your collection.
One strong factor that this stock holds is its merger with Canopy Growth Corporation (CGC). This merger was announced by the company last month and will see SPRWF shareholders benefit from stronger market exposure and additional growth avenues such as Canopy’s CBD business, along with Supreme’s shareholders receiving 0.011 of Canopy common share and $0.001 in cash exchange for each Supreme Cannabis share.
It's worth noting that Canopy Growth was the largest cannabis company based on revenue in 2019 and still remains as one of the leading cannabis companies on the market in 2021.
Within Supreme stocks recent Q2 performance the company has continued to deliver strong revenue growth with positive adjusted EBITDA of $3.6 million, consolidated net revenue of $18.3 million a growth of 54% quarter-over-quarter and remains in a strong liquidity position with a cash balance of $41.9 million.
The cannabis stock has improved its balance sheet over the past quarter by raising an additional $21.5 million in net proceeds from equity and $4.2 million from the company’s at-the-market equity program in order to fund further growth prospects.
What is also included within these figures is the stocks recent merger with humble+fume, a leading distributing cannabis company that distributes cannabis products and accessories to leading dispensaries and shops.
The stock is up over 150% over the past 12 months with analysts giving an average 12-month price target of $0.38 per share for the stock with some bullish analysts forecasting the stock to reach CA $0.55 per share. Looking at the bigger image, analysts are looking for revenue to increase by 74% by the end of 2021.
This cannabis stock is looking to strengthen its position within this leading industry. As more U.S states give more green lights for legalized marijuana usage, the more the company looks set to further grow.
Supreme is set to release its Third Quarter results on May 13th.
Check Out: Best Marijuana Penny Stocks Right Now
2. Naked Brand Group Ltd (NKD)
Naked Brand Group (NKD) is a leading company that has a diverse collection of intimate, swimwear and apparel brands under its belt that includes 11 internationally recognised brands across the globe.
In recent days the company held an “extraordinary general meeting” on April 23rd where the company confirmed that it plans to undergo a reconstruction that will see the release of unprofitable bricks-and mortar operations and place its full concentration on the company’s e-commerce business, the stock recently raised capital in order to establish further growth within its this sector.
The stock is up over 160% over the year and has witnessed its shares surge following the meeting rising by almost 13% the morning of Friday 30th April.
This penny stock is one that has been around for some time but does not have much to show when it comes to its financials than it should, considering how long the company has been around for. Based on the stocks visible data from the end of 2020 the stock hit a yearly revenue of $82.5 million a YoY, gross profit took a decline to $33.99 million from $37.44 million in 2019 along with a negative EBITDA of $25.6 million based on visible data.
But with that being said the stock is on the way to making a comeback as announced with its strong focus on its e-commerce business which could take some time for the stock to start witnessing the positive impacts, nevertheless, it is making its start to try archiving positive results.
The stock's share price has been fluctuating in recent days where it sits today at $0.54 upon writing this report, up by 2.66% from its previous close and holds a 52 week range of $0.07 at its lowest at $3.40 at its highest.
Due to a lack of information, it is hard for analysts to determine forecast predictions for the stock.
This stock does come with high-risk factors that investors need to look into before investing in but it's certainly not a stock to right off just yet as its new e-commerce business plan might just be a slow start to a positive shift ahead.
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3. Sundial Growers Inc (SNDL)
Another cannabis stock to enter the list of 7 best penny stocks to buy in 2021 is that of Sundial Growers Inc (SNDL).
SNDL is looking to turn the tables into positive territory over the coming year and more to come, inputting almost $190 million CAD into its business venture with the investment management firm SAF Group to make investments in marijuana.
The stock is up just over 90% over the past 12 months yet is continuing its downward trend leading up to its expected results set to be released on 11th May 2021. The stock upon writing this report declined by 4.14% from its open at $0.77 to $0.73 where the stock is currently trading.
From the stocks previous report the company’s full-year gross revenue increased by 10% to $73.3 million and for the three months ended on December 31st the company witnessed an increase of 8% in revenue to $13.9 million over Q3. Branded net revenue also increased by 15% from the third quarter to quarter four totaling at $11.4 million.
Although these are positive stand outs for the cannabis stock the company did confirm negatives which included adjusted EBITDA loss of $5.6 million, equalling a full year 2020 adjusted EBITDA loss of $26.1 million, although better then a year prior at a loss of $30.1 million.
SNDL is sitting in a risky spot but is looking to try and turn it all around as the company have recently announced that they entered an agreement to acquire Inner Spirit Holdings (INSHF) to strengthen value for shareholders in providing further quality cannabis.
Given a style score by Zacks Investment Research of A for Momentum and C for Growth, makes this cannabis penny stock one to keep an eye on moving forward.
Sundial Growers is set to release its First Quarter 2021 results on May 11th 2021.
4. Zomedica Corp (ZOM)
Zomedica Corp (ZOM) is an animal health company built up of clinical veterinarians that focuses on both patients and practise health by delivering diagnostic products both effectively and financially.
The company’s Truforma platform is an in-clinic biosensor platform that enables veterinarians to make clinical decisions quicker and obtain faster results. The stock in a recent announcement has changed its business model from a distributor-based sales model to a direct-sales organisation due to truforma now having a market presence, set to make a stronger foundation over the long-term although may be a slow start to witness results.
Prior to this announcement the stock witnessed a good rise in cash and cash equivalents of approximately $62 million compared to $0.5 million a year prior. This cash will and should be able to sustain the company’s cash flow burn rate over a three-year outlook, leaving the company to be sitting in a relatively stable financial position over the coming years.
The company's overall performance witnessed a loss over 2020 by a total of approximately around $16.9 million or $0.05 per share, slightly improved from a loss of around $19.8 million or $0.19 per share in 2019.
The stock is currently trading around $0.80 upon writing this report, a decline of 5.28% from its open and currently holds a 52-week range of $0.06 at its lowest and $2.91 at its highest. The stock has been given an average price target of $1.20 showing an upside of above 40% from its current price.
As the stocks truforma is now available to consumers and as more reviews start to flood in, if the news stays in the positive this could be a great run ahead for the company that could earn its shareholders good value over the coming years.
5. PolarityTE Inc (PTE)
The biotechnology stock PolarityTE Inc (PTE) comes just above the $1 price tag and one that had to make the list as a penny stock to consider to add to your portfolio.
To start the stock is currently up just under 18% over the week and it looks as though it could continue.
As from the news on May 10th the company announced the preliminary topline data of a controlled trial evaluating the treatment of diabetic foot ulcers with SkinTE. The test rollout evidenced that 70% of patients who received SkinTE over a 12 week period witnessed wound closures.
The company is looking to file a new drug application with the FDA along with SkinTE looking to obtain a biologics license to be regulated as a biologic.
Due to this news the stock has risen by 23.27% from its pre-market price proving that PTE could be looking to improve in all areas moving forward, especially as the stock archived -$1.11 per share over the past year despite a good performance in 2020.
In the stocks Q4 and full-year results the company witnessed some impressive results off the back of a new strategic plan executed back in May 2020. Total revenues represented a 79% increase to $10.13 million YoY with SkinTE revenues reaching $3.73 million in 2020, a rise of 59% YoY, contract services increased by 94% to $6.40 million in 2020 and lastly, the company confirmed that operational cash burn decreased by 33% or $18.89 million YoY to $37.75 million.
The stock confirmed a net loss at the end of 2020 of $45.85 million compared to a net loss of $92.49 million a year prior.
In light of the stock's momentum PTE is due to release its First Quarter report on May 13th 2021 and investors will see if the stock has and can continue its strong momentum looking ahead as it gives all the clear signs that it can.
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6. Oragenics Inc (OGEN)
The American biopharmaceutical company Oragencis Inc (OGEN) focuses on the development of novel antibiotics and treatments against various infectious diseases and is now turning its concentration on developing and delivering its Terra CoV-2 product against the novel COVID-19 virus.
The stock announced in February that it had raised $21.9 million in capital in order to further progress with Phase 2 clinical trial of the stocks SARS CoV-2 vaccine, Terr CoV-2 to fight the Covid-19 infection. Additionally, the stock announced that it would be able to further develop its lantibiotics program.
Following this news of raised capital the stock took a slow downward turn as investors turned to selling off shares, with the stocks share price today sitting at $0.65 3.31% down from its pre-market open of $0.68.
In early March the stock announced its partnership with Biodextris Inc for the use of three of the company’s mucosal adjuvants BDX100, BDX300 and BDX301 to enhance immunogenicity within its COVID-19 vaccination.
The stock recently issued earnings data on May 2nd 2021 confirming an EPS of $0.05 for the quarter, missing estimates by $0.01, leading the stock to deliver $0.37 earnings per share over the full-year outlook.
Upon the stocks next quarter results which are estimated to be announced around May 21st, analysts are predicting an EPS estimate of $0.04 for the quarter and one Wall Street analyst giving the stock an average price target of $2.75 for the year, showing an upside of over 300% within its share price.
With the novel Coronavirus not going anywhere for the foreseeable future OGEN is looking to be a strong contender in preventing individuals from this deadly virus and other serious infections for many years to come.
7. RiceBran Technologies (RIBT)
The food company that is on a mission to deliver the best quality ingredients from customer foods to animal foods and more is RiceBran Technologies (RIBT).
The company launched its new strategic plan within Q4 that showed improved results and within the stocks Q1 2021 performance the company entered phase 2 showing more signs of financial improvement.
The stock managed to gain a 3% increase in revenue to $8.6 million and gross profit reached to the positive for the first time in over two years to $672,000, a change from a loss of $405,000 in the same period a year prior.
As we are mid way through 2021 the stock is looking to gain a positive adjusted EBITDA this year where the stock confirmed a change by 92% YoY to an adjusted EBITDA loss of $159,000.
With the strong consumer demand and the stocks accelerated growth plans this should easily be achieved in 2021 and if the stock manages to sustain, this company should see most financial areas in the positive in the coming years as the stock becomes profitable.
The stock currently trades at $0.91 and holds a 52-week range of between $0.37 at its lowest and $1.83 at its highest. The stock has a high trading volume with 603,589 shares traded over the last trading day making this stock a great penny stock when looking at both short and long term trading.
The Bottom Line
If you are looking to add value, looking for an exciting challenge along with adding diversity to your collection adding one or more of these penny stocks to your portfolio will prove to be great additions.
All of the above penny stocks look to offer great growth prospects as witnessed in their improving results so far in 2021. As these stocks look to add more value for their shareholders, now is a good time if you are considering investing in these stocks to enter and reap the benefits.
Although these stocks are exciting and rewarding they do come with strong risk factors including that they can be extremely volatile proving that you should not hold a collection of just penny stocks as this is exposing yourself to even greater risks.
Investing wisely is strongly recommended when looking to invest in any stocks but in particular do your due diligence when investing in penny stocks, be wise and protect your future.
How To Invest In Penny Stocks And Trade Penny Stocks
Now we are at the final stages. The most important step moving forward is looking into how to invest in penny stocks and trading penny stocks.
Investors can look to invest in penny stocks via an online digital platform, just like any ordinary stock. Additionally, penny stocks that are not on public markets can be traded the same way and can also be found on the OTC market website where investors have access to all penny stocks on OTC markets.
When you are ready to invest and have researched and hand picked your preferred brokerage, then all you need to do is set time aside to open an account which takes a matter of minutes, place money into your account and get ready to invest in penny stocks of your choice.
Upon placing your order you will have a choice to choose from market orders or limit orders, which your broker can choose from a few options for you when dealing with your order. This also includes that if the price is not marketable that you are aiming to achieve your broker can tailor the quote to reflect the new price for the share or chosen shares.
If you are in any doubt before placing your investment, carry out as much research as possible by looking and speaking to customer service or consulting an online platforms help service or educating material to get up to speed.
What Is The Right Time To Trade Penny Stocks?
Although there is no official right time to enter into any investment, the quicker you do invest the quicker you are going to witness results. Entering, exiting and timing the market are essential points upon investing that you should always carry with you through your trading journey, especially with penny stocks.
If you are a beginner to investing, sticking to the simple fundamental analysis of these stocks is strongly advised as getting too technical with technical analysis including reading charts will be heavy at the start and too much to take on board. You don’t want to over complicate things from the get go.
Making sure you're in a financial position to invest, picked your preferred trading style whether it be trying to take advantages of small price movements or looking to hold a penny stock for the long term outlook, and the last key point to mention is to make sure you do as much thorough research as possible throughout your trading journey as you look to re-invest for a brighter investing future ahead.