A penny stock is a cheap stock, generally one that sells for less than five dollars and does not trade on a huge exchange.
Companies that are just starting out or are struggling often to issue penny stocks. These trade on “pink sheets” rather than on a major stock exchange. The market for penny stocks is also called an “over-the-counter” (OTC) market because it doesn’t come with the same level of oversight that you get on a major market.
Penny stocks don’t have to register with the SEC or meet SEC requirements. As a result, the penny stock world is sometimes called the “Wild West” of investing. Penny stocks could come from worthless companies, or from shell companies that don’t exist at all. You’ll be hard pressed to get the fundamentals on the companies that issue penny stocks. That makes it hard to do your due diligence as an investor. It also increases the risk that comes with buying penny stock.
Now, there’s nothing really bad about a penny stock. Some legitimate companies with real growth potential offer them.
Penny stocks to buy
1. General Cannabis Corp
CANN is a well-known company, which provide services of all levels in the cannabis industry. The range is quite imposing including cash and securities management, real estate, marketing and finance, consulting and advisory services. The market cap has reached significant $143 million with shares outstanding over 35M. The one-year performance rate is incredible 101.5%. That is my fav stock and leader in swing trades.
2. Immunovaccine Inc
A very interesting stock that deserves closer attention. To be honest it is a completely new joiner on my 2018 list but I am keeping my eye on it to catch its ascent. Immunovacine Inc was founded in Canada and is a clinical-stage pharmaceutical company. The business covers development of products based on unique platform with embedded vaccine improvement, which focuses on T cells to activate therapies for cancer. The company has announced its DepoVax platform, which serves as a controller for antigens and adjuvant flowing into the immune system.
3. Nemaura Medical Inc
Founded in 2009 the Company has yet made a revolution in treatments for diabetes symposium. In February 2017 at the Paris medical conference Nemaura announced its very new sugarBEAT™ device that caused a mighty furore. SugarBEAT™ is a wireless and, what is important, non-invasive skin patch designed for those with Type I and Type II diabetes, which can be deployed for pre-diabetic purposes, too. NEMAURA is a holding company that possesses specialty medical facilities to develop and test such kind of devices to help cure various forms of diabetes.
Pros & Cons of Penny stocks
Get Rich Quick
Penny stocks’ major attraction is the potential to get rich quick. Penny stocks are issued to raise equity capital for small companies just entering their respective industries, companies emerging from bankruptcy or growing companies that are still flying below the investment analysts’ radar screens. Most penny-stock companies are small fry with big dreams, living in the backwaters of the investment world. But if they are discovered by the investing mainstream, the stock price could explode upward in a matter of weeks or even days.
Penny stock shares are cheap, so an investor can buy a large holding for very little money. For instance if a company’s stock trades at 50 cents a share, an investor can buy 1,000 shares for just $500. If the price climbs to $2 a share, the investor reaps a $1,500 profit on his 1,000 shares. If the stock collapsed and became worthless, the investor would be out only $500.
Very Big Risk
Penny stocks are a perfect example of the old saying that great reward always entails great risk. Penny stocks are extremely risky speculative investments, and most investors who buy penny stocks make little or no profit. You are investing in small businesses that might not become profitable for years to come or that might never get things right and go bankrupt. Because these stocks aren’t tracked by the mainstream analysts and investment banks, it can be difficult to get company information needed for assessing a stock’s potential. Companies with assets under $10 million and fewer than 500 shareholders aren’t required to file financial statements with federal securities regulators.
Penny stocks are traded in small lots among a handful of investors, which can exaggerate price swings. These stocks can shoot up in price very quickly but also drop in price just as fast. Penny stocks are not for the buy-and-hold investor or anyone with a low risk tolerance. Investors need to keep close tabs on their stocks and sell when they show a fat profit. Holding onto a penny stock too long can turn a tidy profit into a dismal loss. But the thin market for penny stocks may make it hard to find a buyer when you want to sell.
Penny Stock Frauds
Penny stocks are prime targets for fraudulent price manipulation and sham promotions because they are thinly traded, minimally regulated and unfamiliar to most investors. For example, the perpetrators of a scam may trade the stock back and forth among themselves to pump up the price, then dump the shares on other unsuspecting investors to garner a dishonest profit. Fraudulent stock promoters typically claim their company is onto some sort of “sure thing” that will generate big rewards with negligible risk.
Types of Penny stocks to buy
Tier 1 Penny Stocks: These are the penny stocks that we focus. They are listed on a major exchange like the NYSE or NASDAQ and are usually priced below $5.00 per share but can be a little higher priced than that. Tier 1 penny stocks are still speculative but less open to manipulation because they are required by the exchanges to provide financial information and are held to a higher standard than OTC penny stocks.
Tier 2 Penny Stocks: Traditional penny stocks, in my opinion, are stocks priced between 1 cent and 99 cents. They aren’t below 1 cent (if you didn’t already know, stocks can trade at fractions of a penny). It’s not uncommon to see a stock priced between 1 cent and 99 cents that is still listed on the NYSE or NASDAQ.
These companies will typically get a letter (which is made public), that they need to meet the listing requirements to have their stock above $1.00 within a certain amount of time. If they do it, the stock remains listed, if they can’t it will be de-listed and move to the OTC market exchange.
However, it’s very important to note that stocks that trade above $1.00 will never have a spread less than 1 penny. That means the stock will trade 1.01 x 1.02, or 1.05 by 1.06, but never 1.015 x 1.017. When a stock trades BELOW $1.00, the stocks will trade down to fractions of a penny.
Tier 3 Penny Stocks: Sub-Penny Stocks are stocks that are below 1 penny per share. So that starts at .0099. These will not be NYSE or NASDAQ stocks, so for that reason I wouldn’t trade them. These aren’t particularly noteworthy beyond the fact that the companies aren’t strong enough to even have their stock priced at 1 penny per share.
Tier 4 Penny Stocks: Trip Zero Stocks (Priced .0001 – .0009) Trip Zero Stocks are priced with 3 zeros. These are stocks priced between .0001 and .0009 per share.
As you can imagine these stocks after often used as vehicles for manipulation. Each increment the stock moves up is a 100% move versus the entry price of .0001.
Many of the “hot penny stock” alerts are on sub penny stocks or trip zero stocks and primarily benefit the people who first bought the stock.
Penny stock info from; WarriorTrading.com