Before we get into a discussion about penny stocks to buy, let’s get this out of the way: Don’t buy penny stocks.
Most penny stocks — equities that go for less than a buck a share — trade on the over-the-counter market, where listing requirements and regulatory oversight is much more lax. Sure, most OTC stocks are on the up and up, but this is also the market where scammers go to run their pump and dump schemes.
In spite of this, penny stocks remain popular with a subset of investors because of their tremendous potential upside. Traders like the dramatic price swings, and investors like that it’s a lot easier for a stock to go from 50 cents to $5 than it is to go from $50 to $500.
We bring this up only because the crushing stock market slump is turning lots of major-market listed names into penny stocks. According to Finviz, there are currently 44 stocks on the New York Stock Exchange and 198 on Nasdaq that are trading below a dollar a share.
Yes, some could get delisted for not adhering to listing requirements. But there are also some stocks that could possibly, just maybe, have some serious upside.
If I haven’t communicated it to you clearly enough, penny stocks are dangerous. We’re talking Hail Mary throws, speculative plays — don’t go nuts. You must be prepared to lose your principal.
With those caveats, here are five penny stocks to buy if you’re willing to stomach the risk: