Alluring for their cheap price on paper, penny stocks invariably find their way into many, if not most, people’s portfolios. It’s one thing to buy one share of a technology blue chip. It’s quite another to get 6,000 or more shares in an up-and-coming firm that could potentially be the next big thing. The question is, will it ever get there?
While you can never say never, the most realistic answer is no. True, I cannot give you a specific failure rate of penny stocks, as they come in all shapes and sizes. Some start off being priced in the mud whereas others were formerly recognizable names that fell onto hard times.
However, TheBalance.com contributor Joshua Kennon has a much more declarative take, noting that investing in penny stocks is “almost always a bad idea.” Among the many dangers of this investment category Kennon cites is the bid-ask spread. Blue chips have strong liquidity and therefore feature narrower spreads.
On the other hand, penny stocks are very illiquid, as evidenced by their often wide spreads. Therefore, even if you buy shares at six cents and they move up by a factor of 10, you might not find a buyer. Even if you do, the wide spread may mean that your actual profit is much less than your paper profit.
To keep you away from the really speculative stuff, I’ve amassed a list of penny stocks with credible or interesting catalysts. But please be warned: even “credible” wagers in this arena are still very much speculative.
Before we dive in, most of these companies are not what you would call literal penny stocks. When you start getting into six-cent shares, the odds of total failure rise exponentially — and yes, I would know!
- VerifyMe (NASDAQ:VRME)
- RF Industries (NASDAQ:RFIL)
- Elys Game Technology (NASDAQ:ELYS)
- Savara (NASDAQ:SVRA)
- Patriot One Technologies (OTCMKTS:PTOTF)
- Geely Automobile (OTCMKTS:GELYF)
- BIGG Digital Assets (OTCMKTS:BBKCF)
Penny Stocks: VerifyMe (VRME)
Not all penny stocks are backroom operations with websites that look like they came straight out of 1994. Case in point is VerifyMe, a brand protection and consumer engagement firm. Through its verification products — tamper-resistant labels, QR codes, NFC chips and invisible inks and pigments — companies can help secure their products against counterfeiting.
At the point of sale, consumers can scan labels with their smartphones, which gives them the peace of mind that what they’re purchasing is the real McCoy. Further, this engagement allows product manufacturers to communicate vital information to their customers, promoting brand loyalty. As well, VerifyMe’s product labels can enhance the supply-chain experience, providing track-and-trace capabilities.
However, like all penny stocks, you should be prepared for volatility with VerifyMe. On a year-to-date basis, VRME stock is up over 25%. Yet compared to this year’s peak price, shares are down more than 33%.
Before you make your decision, you should note that counterfeiting is a $250-billion-a-year problem. Though nothing is going to take the risk factor away from penny stocks, VerifyMe is certainly one of the more credible.
RF Industries (RFIL)
On the surface, I must admit that RF Industries doesn’t sound very interesting. As a designer and manufacturer of interconnect products, its product portfolio includes “RF connectors, coaxial cables, data cables, wire harnesses, fiber optic cables, custom cabling, energy-efficient cooling systems and integrated small cell enclosures.”
But what does intrigue astute investors toward RFIL stock is the reopening of the economy. When the novel coronavirus first disrupted our nation, the ensuing lockdowns meant that RF Industries’ business suffered an imbalanced impact. Demand for wireless/wireline telecom and data communications industries increased due to work-from-home initiatives while sales from the transportation and distributed antenna systems (such as live concert venues) utterly collapsed.
Presumably, with the declining Covid-19 cases along with the expanding footprint of the vaccination rollout, society will gradually return to normal. To be fair, I have my doubts about this. But if you’re more optimistic than me and have the conviction to boot, RFIL stock might be worth a look for the rebound effect.
Elys Game Technology (ELYS)
If you’re going to bet on penny stocks, you might as well increase your odds of success by focusing on relevant growth markets. And one of the most exciting is online sports gambling. According to SportsProMedia.com, in 2018, any state in the U.S. that desired to legalize gambling could do so thanks to a landmark ruling. This led to an explosion of wagers:
“In October 2020, Americans legally bet an estimated US$3 billion on sports for the first time in a single month, according to the American Gaming Association. Sports betting revenue was up nationwide by 53.5 per cent year-over-year to US$237.5 million. In December alone, New Jersey set the national sports betting record for the fifth consecutive month, taking an eye-watering US$996.3 million in bets.”
Elys Game Technology fits neatly into this narrative, featuring a “fully integrated international betting technology company providing an innovative, world-class betting platform.” Shares spiked recently in February, though they have tapered off a bit.
To be sure, ELYS stock is risky. However, it’s also possible that it can ride the momentum that has carried up other gambling-related companies.
Ironically, one of the worst-hit sectors of this health crisis was the biotechnology and pharmaceutical industries. Unless a company decided to pivot to Covid-19 treatments or vaccines, they were often forced to wait out the storm. Many long-term medical patients experienced disruption as hospitals and care facilities scrambled to address the immediate threat of the pandemic.
But now that Covid-19 cases are declining, it may be time to consider biotech plays such as Savara. Specializing in rare respiratory diseases, Savara’s primary focus is IMPALA 2, which the company’s website describes as a “second Phase 3 clinical study of Molgradex for the treatment of autoimmune pulmonary alveolar proteinosis (aPAP).”
The appeal for SVRA is this. To treat aPAP in the conventional form requires “a whole lung lavage, a procedure in which one lung is cleansed with a salt solution while the other is pumped with pure oxygen.” That doesn’t sound fun.
With Savara’s Molgradex therapy, the drug targets the autoimmune dysfunction that prevents the lung from naturally cleaning itself. While there’s still much work to be done, SVRA stock could benefit from a game-changing innovation.
Patriot One Technologies (PTOTF)
What made 2020 such a terrible year wasn’t just the coronavirus. Of course, the pandemic is a memory that none of us will ever forget. But what happened next is, in some ways, just as tragic. Rather than working together as Americans to address a common scourge, deep resentments across political and social boundaries contributed to unprecedented incidents of social unrest.
I don’t need to go into all the gory details. However, I think it’s fair to say that public safety and security is a concern for many.
That’s where Patriot One Technologies comes in. A security solutions expert, Patriot One offers its PATSCAN multi-sensor covert threat detection platform, designed to detect and combat active weapons and explosive threats before they are deployed for nefarious reasons.
Given the recent series of mass shootings we’ve witnessed, it’s time for private and public institutions to get serious about preventative security. This could bode well for PTOTF stock. Though Patriot One puts the penny in penny stocks, the necessity for its services could win many investors over.
Geely Automobile (GELYF)
Honestly, I’m not sure how Geely Automobile does it. One of China’s biggest automakers, Geely features an array of cars that look alarmingly like leading European luxury brands. For instance, the Xing Yue looks like a Mercedes Benz GLC Coupe, at least from the side.
The Icon? I don’t know about you, but this just screams Range Rover through and through. But let’s give credit where it’s due. Stereotypically, Chinese counterfeit products are often associated with obviously fake apparel. With Geely, you’re dealing with a high-end (and apparently legal) counterfeit — or I should say, heavily influenced design.
Still, GELYF hasn’t graduated with other automotive penny stocks into the big leagues yet. Its product portfolio focuses on combustion engine cars — that is, until recently. As Car and Driver noted, Geely will launch its Zeekr electric vehicle (EV), a brand that’s designed to compete with the best in the EV space.
For GELYF stock, it may benefit from strong enthusiasm for EVs. On the other hand, the sector has been struggling recently, so you’ll want to tread these waters carefully.
BIGG Digital Assets (BBKCF)
You should know right off the bat that BIGG Digital Assets is a blockchain company. Therefore, it generates tremendous attention from the cryptocurrency crowd. That’s good when prices are soaring. But as I write these words, many crypto tokens are tumbling, which may not augur well for BBKCF stock.
In other words, please choose your entry point wisely. But if you have the stomach for extreme volatility, BIGG Digital is one of the more intriguing penny stocks available.
Through BIGG’s subsidiary, Blockchain Intelligence Group, the company provides various compliance and regulatory services associated with cryptocurrencies and their transactions. Of particular importance in my view is the law enforcement business. While virtual currencies have fostered a new way of thinking about peer-to-peer transactions, they’ve been a nightmare for law enforcement and intelligence agencies because many blockchain technologies feature hard-to-crack anonymous records.
Moving forward, cryptocurrencies will probably represent the universal choice of compensation for illicit activities. That’s why it’s vital for authorities to stay ahead of the game. Blockchain Intelligence Group does this with its suite of forensic tools.
To be completely transparent, this doesn’t take away from the riskiness associated with BBKCF stock. But it also has a chance to be an extremely pertinent investment in the years ahead.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.