Penny stocks, typically traded at prices under $5, can be an enticing investment option for those seeking substantial upside potential. The allure of discovering a hidden gem, a low-priced stock that could evolve into the next Fortune 500 company, is undeniably exciting.
By analyzing stocks that meet specific criteria, such as an Altimeter overall grade of A or B, an Altimeter risk level of A or B, a market capitalization of at least $250 million, and a consensus “buy” recommendation from analysts, investors can identify potentially promising penny stocks.
Despite the inherent risks, there are some hidden gems among the thousands of subpar penny stocks. These are companies that possess strong earning potential, favorable valuations, and bullish ratings from Wall Street analysts.
Best Penny Stocks In 2023:
| Stock | Current Price | P/E Ratio | Market Cap (B) | 52 weeks High | 52 weeks Low |
| Canaan (CAN) | $2.91 | NA | 5.48 | $3.16 | $2.89 |
| VAALCO Energy (EGY) | $4.21 | 7.5 | 4.50 | $5.87 | $3.51 |
| Ardelyx (ARDX) | $4.04 | NA | 8.66 | $4.22 | $3.84 |
| Savara (SVRA) | $3.53 | NA | 4.77 | $3.83 | $1.08 |
| Angi (ANGI) | $3.89 | NA | 1.97 | $6.31 | $1.81 |
Canaan (CAN) – A technology company with a market capitalization of $548 million and a year-to-date performance of 52%. Canaan (CAN) is a Chinese company that manufactures ASIC chips for cryptocurrency mining. The company’s share price has been on a downward trend in recent months, due to a number of factors, including the decline in the price of Bitcoin and Ethereum, as well as the increasing competition from other chip manufacturers.
VAALCO Energy (EGY) – An energy company with a market capitalization of $450 million and a year-to-date performance of 5%. VAALCO Energy is an energy company engaged in the exploration, development, and production of oil and natural gas. The company’s primary focus is on properties in Africa, particularly in West Africa, where it has significant oil reserves.
Ardelyx (ARDX) – A healthcare company with a market capitalization of $866 million and a year-to-date performance of 43%. Ardelyx is a biopharmaceutical company focused on the discovery, development, and commercialization of innovative medicines to treat gastrointestinal and metabolic disorders. The company’s primary goal is to address unmet medical needs and improve the lives of patients suffering from various gastrointestinal conditions.
Savara (SVRA) – Another healthcare company with a market capitalization of $477 million and an impressive year-to-date performance of 121%. Savara Inc. is a biopharmaceutical company focused on developing and commercializing novel therapies for the treatment of rare respiratory diseases. The company’s mission is to improve the lives of patients suffering from serious and life-threatening respiratory conditions through innovative drug development.
Angi (ANGI) – A communication services company with a market capitalization of $197 billion and a year-to-date performance of 56%. Angi Inc. is an online marketplace and platform that connects homeowners with service professionals for various home improvement and repair services. The company operates under several brand names, including Angie’s List and HomeAdvisor. ANGI aims to simplify the process of finding and hiring reliable and qualified service providers for homeowners.
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Methodology For Identifying Best Penny Stocks
The methodology used to identify the best penny stocks involves rigorous criteria to ensure a higher probability of potential success while managing the inherent risks associated with these stocks. Here are the key factors considered in the selection process:
1. Altimeter Overall Grade (A or B): The Altimeter overall grade evaluates multiple aspects, including profitability, earning stability, valuation, and earning expectations. Stocks with an A or B grade are ranked in the top quarter among nearly 5,000 stocks in Altimeter’s stock database. These top-ranking grades indicate that the companies have strong valuations and the potential to improve returns. By focusing on stocks with favorable overall grades, the methodology aims to identify companies with promising financial performance and positive growth prospects.
Example: If a company has an Altimeter overall grade of A, it suggests that the company is highly profitable, financially stable, undervalued, and has optimistic earning expectations. Such high rankings indicate the company’s favorable position in comparison to its peers and highlight the potential for attractive returns.
2. Altimeter Risk Level (A or B): Penny stocks are inherently risky due to their speculative nature, but not all penny stocks carry the same level of risk. The Altimeter risk grade considers factors such as a company’s credit rating, management sentiment, and a fundamental forensic assessment of its financial health. By screening for stocks with an A or B risk level, the methodology aims to reduce the chances of significant downside and identify penny stocks with relatively lower financial risk.
Example: If a company receives an Altimeter risk level of B, it suggests that the company’s credit rating is solid, management sentiment is positive, and the company’s overall financial health is relatively stable. Such a rating indicates that the company is better positioned to weather potential challenges compared to penny stocks with higher risk grades.
3. Market Capitalization of at least $250 Million: The market capitalization of a company reflects its total value in the stock market and is calculated by multiplying its share price by the number of outstanding shares. By focusing on penny stocks with market caps of at least $250 million, the methodology excludes microcap or nanocap stocks, which tend to be highly volatile and risky. Stocks with market caps above $250 million are more likely to have analyst coverage, media attention, and sufficient trading liquidity, providing investors with more information and opportunities to buy or sell shares.
Example: If a company has a market capitalization of $300 million, it signifies that the company’s outstanding shares are valued at $300 million based on the current market price. This size of the market cap implies a certain level of stability and interest from the investment community.
4. Consensus Analyst Recommendation of “Buy” or Better: Analyst ratings can offer insights into a stock’s potential performance. A strong consensus of “buy” ratings suggests that Wall Street analysts expect the stock to outperform the overall market. At least one “buy” rating by a Wall Street analyst signifies confidence from a professional stock picker, indicating positive sentiment towards the company’s prospects.
Example: If a stock receives a consensus analyst recommendation of “buy,” it implies that the majority of analysts covering the stock have recommended investors to buy the stock due to their positive outlook on the company’s future growth and performance.
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Why other stocks didn’t make the cut?
Other stocks were excluded from consideration for inclusion in the list of best penny stocks for several reasons:
- Market Capitalization: Companies with market caps of less than $250 million were not considered because they are classified as microcap or nanocap stocks. These stocks are often highly volatile and risky, with lower trading liquidity. The higher market capitalization requirement helps reduce the potential risks associated with investing in very small companies that may lack analyst coverage and public information.
- Stock Price Exceeding $5: Stocks trading above $5 were also excluded from the list. While the traditional definition of penny stocks includes stocks trading below $5, there is still a risk associated with stocks trading at relatively higher prices within the penny stock range. Stocks above $5 may have been excluded due to their risk profile or because the methodology focused on identifying lower-priced stocks with significant potential upside.
It’s important to emphasize that stock price should not be the sole determining factor for investors. Instead, they should consider various aspects of a company’s financial health, business fundamentals, growth prospects, and valuation metrics. As mentioned by Daniel Milan, founder and managing partner at Cornerstone Financial Services, investors should focus on the underlying value and potential of the business rather than solely being influenced by the stock’s share price.
How To Buy Best Penny Stocks?
To buy best penny stocks, follow these steps:
- Choose a Reputable Broker: Look for an online brokerage platform that allows trading of penny stocks on major exchanges. Ensure the broker is reputable, well-regulated, and offers reasonable fees and commissions. Some brokers may limit or restrict over-the-counter (OTC) stock trading or charge high fees, so it’s essential to find one that suits your needs.
- Diversify Your Portfolio: Instead of putting all your money into a single penny stock, consider diversifying your investments across multiple stocks. This approach spreads risk and reduces the impact of any individual stock’s poor performance on your overall portfolio.
- Research Trading Volume and Liquidity: Before buying a penny stock, research its trading volume and liquidity. Higher trading volume ensures that there are enough buyers and sellers in the market, making it easier to enter or exit positions without significant price fluctuations.
- Thoroughly Research the Company: Conduct thorough research on the company behind the penny stock. Analyze its financials, business model, industry trends, competitive advantages, and growth prospects. Make informed decisions based on comprehensive information.
- Risk Management: Penny stocks are highly speculative and carry substantial risk. It’s crucial to assess your risk tolerance and never invest more money in penny stocks than you are willing to lose in a worst-case scenario. Be prepared for potential losses and avoid overextending your investment.
- Place Your Order: Once you’ve chosen the penny stock you want to buy, log in to your brokerage account and place the order. You can choose between a market order (buy at the current market price) or a limit order (buy at a specific price or better). Be aware of any associated fees and commissions.
- Monitor Your Investments: After buying penny stocks, regularly monitor your investments. Keep track of company developments, market trends, and any changes that may impact your investment decisions. Stay informed to make well-timed adjustments if needed.
- Exit Strategy: Have a clear exit strategy in place. Decide on your profit targets or stop-loss levels to protect your gains or limit potential losses. Stick to your strategy and avoid making impulsive decisions based on short-term market fluctuations.
In summary, buying best penny stocks requires careful research, risk management, and prudent decision-making. Choose a reliable broker, diversify your portfolio, and be mindful of trading volume and liquidity. Always conduct thorough research on the companies you are considering and invest with a clear understanding of the risks involved.
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Risks to Consider When Investing in Best Penny Stocks
- Possibility of Total Loss: The U.S. Securities and Exchange Commission (SEC) explicitly warns investors that penny stocks carry a high risk of losing their entire investment. Due to the speculative nature of these stocks, their prices can be extremely volatile, and investors may face substantial losses.
- Low Liquidity and Market Manipulation: Best Penny stocks often have low trading volumes and limited liquidity, which can lead to wide bid-ask spreads and difficulties in executing trades at favorable prices. Moreover, the illiquidity makes these stocks susceptible to market manipulation by dishonest actors, who can artificially inflate or deflate stock prices for their benefit.
- Limited Regulatory Oversight: Compared to stocks listed on major exchanges, best penny stocks may receive less regulatory scrutiny. This lack of oversight creates opportunities for con artists to carry out penny stock scams, fraudulent schemes, and pump-and-dump activities, where false information is disseminated to inflate stock prices before the scammers sell their positions, leaving unsuspecting investors with losses.
- Lack of Information Transparency: Many penny stock companies may not provide comprehensive financial information or disclosures to the public. As a result, investors may face challenges in obtaining accurate and up-to-date information about the company’s financial health, business operations, and future prospects. This lack of transparency makes it difficult for investors to make informed decisions.
- Underperforming Companies: Best Penny stocks often trade at low share prices for a reason. Many of these companies have struggled to meet expectations or have faced operational challenges, leading to their depressed stock prices. While some may recover and experience significant growth, others may continue to underperform, leading to potential losses for investors.
Conclusion
In conclusion, investing in best penny stocks is not for the faint of heart, as it involves significant financial risk. However, for speculators with high risk tolerances, there is a potential for tremendous long-term returns, particularly from top-performing penny stocks. It is crucial to acknowledge the inherent risks associated with these investments and to approach them with caution.
One way to manage risk when investing in best penny stocks is to diversify the investment portfolio. Instead of putting all funds into a single penny stock, spreading investments across multiple stocks can help reduce the impact of any individual stock’s poor performance on the overall portfolio.
Identifying high-quality best penny stocks among the vast array of low-quality options in the market can be challenging. It requires thorough research, analysis, and an understanding of the company’s financial health, business fundamentals, and growth potential.
FAQs For Best Penny Stocks
Can I make a profit with penny stocks?
Yes, it is possible to make significant profits with penny stocks. Traders who can accurately time their entry and exit points, capitalizing on the extreme volatility and short-term price swings in penny stocks, can achieve substantial gains. However, this requires a high level of skill and experience, even for professional traders. Investing in penny stocks is inherently risky, and while there is potential for profit, there is also the possibility of significant losses.
How do I find the best penny stocks?
Finding the best penny stocks involves conducting thorough research and analysis. Look for penny stocks with strong underlying business fundamentals, attractive valuations, and long-term growth potential. Consider factors such as the company’s financial health, growth prospects, competitive advantages, and industry trends. Additionally, pay attention to stocks traded on major exchanges rather than those traded via over-the-counter transactions or on the electronic OTC Bulletin Board system, as the former typically undergo more regulatory scrutiny and may be of higher quality.
What are the penny stock apps?
The best penny stocks apps are those that are free, user-friendly, and offer essential features such as streaming data and real-time alerts. These apps should also provide fast trade execution at favorable prices. Some popular penny stock trading apps include Charles Schwab (SCHW) and TD Ameritrade, known for their low fees and real-time alerts.
What is the best brokerage for penny stocks?
Not all brokerages offer best penny stocks trades, so it’s essential to choose a brokerage that specializes in this type of trading. Look for brokerages that have full access to OTC (Over-the-Counter) or OTCBB (Over-the-Counter Bulletin Board) traded stocks, as these are common platforms for penny stocks. Some brokerages may charge higher fees for penny stock trading, so compare the costs and features before selecting one. Examples of brokerages that offer penny stock trading and access to thousands of OTC and OTCBB penny stocks include Fidelity, E-Trade, and Interactive Brokers.
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Note – Advice for Investors:
“The comments, opinions, and analyses expressed above are for informational purposes only. Please read our disclaimer for more information.”
“As of the date of the article published/written, the author does not own any of the stocks mentioned above.” It’s important for investors to conduct thorough research, stay informed about market developments, and maintain a disciplined approach to managing their investments.
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