There is no question that the pandemic has brought a significant increase in day traders. And for many of these traders, penny stocks are a convenient investment of choice.
There’s no “right” definition for what constitutes a penny stock. Some investors will say the stock must be trading below $1. Others may put the threshold at $5; some may go as high as $10. The general point is that penny stocks are inexpensive to buy.
But along with that low price comes a significant risk. After all, many penny stocks are trading at a low price for a reason. And one reason could be that the company is under significant financial duress.
However, if an investor is willing to accept that risk and do a little research, investing in penny stocks can be an intriguing numbers game. After all, with so many to choose from, a handful will undoubtedly turn out to be winners. And when you factor in that many of today’s retail investors aren’t buy-and-hold investors, there’s even more incentive to take a risk on a few penny stocks.
And as the calendar turns to September, it’s a good time to take a look at six penny stocks that look like good buys.
- Romeo Power (NYSE:RMO)
- Meta Materials (NASDAQ:MMAT)
- Biolase (NASDAQ:BIOL)
- MannKind Corporation (NASDAQ:MNKD)
- DatChat Inc. (NASDAQ:DATS)
- Inuvo (NYSEAMERICAN:INUV)
Penny Stocks: Romeo Power (RMO)
Romeo Power is a good example of the volatility that can be found in the price of penny stocks. One month ago, RMO stock closed at $7.05. But in that span, the stock fell to a closing low of $4.20. And as of this writing, the stock is trading at $5.02.
As for the company itself, Romeo Power is engaged in manufacturing of lithium-ion batteries for Class 1 to Class 8 commercial trucks. The company’s innovative design features “up to 30%” greater energy density than current lithium-ion batteries. For fleet operators, this means batteries would hold a charge longer and need to be recharged less frequently.
Another benefit, according to the company, is that the battery will hold optimal temperature even in the parts of the country that are subject to extreme heat or cold.
There is a lot of competition in this space, including from companies such as Hyliion (NYSE:HYLN) which are offering Class 8 trucks with their own innovative solutions. However, with solid-state batteries likely still a few years away, Romeo Power may have an opportunity to wedge itself into the conversation.
Of the five analysts that have rated RMO stock, the consensus price target is $8.14 which would be a gain of over 60% from current levels.
Meta Materials (MMAT)
Many of the penny stocks on this list have been caught up in the meme stock movement at one time or another this year. And MMAT stock is no exception. At the end of June, the stock closed at $7.49 — a level investors had not seen for seven years. And with the price back down to $5.20 as of this writing, it’s fair to say that many traders took their profits and went looking for another target.
Meta Materials manufactures and develops “functional materials” and is known for being on the cutting edge of technological breakthroughs in this area. Essentially the company is looking to develop intellectual property that it can sell to the right partners.
The company recently formed a scientific advisory board which is likely to allow the company to develop stronger, more diverse products.
This is far from a sure thing. But for investors looking for a penny stock that could have some growth for the remainder of 2021, I’d encourage you to keep Meta Materials on your watch list. If it breaks past a point of resistance, there could be some short-term upside.
Penny Stocks: Biolase (BIOL)
One way to evaluate the value of a penny stock investment is to look at its potential market. And that’s why Biolase is a penny stock that merits consideration.
The company produces medical devices for the dental industry. This was a sector that was devastated during the pandemic as many dentist’s offices closed for obvious reasons.
But with the economy restarting, even with concern over the Delta variant, Biolase looks like a strong reopening stock. Investors seem to agree. After being part of the meme stock movement in January and February, BIOL stock has charged ahead more than 30% in the past month.
Biolase holds over 270 patents with 40 other technologies patent-pending as of this writing. And the company has sold its products in 80 countries. Analyst sentiment looks positive, with an average price target of $2.25. One reason for that may have been the company’s appointment of three new board members who have significant experience in the dental industry.
MannKind Corp (MNKD)
You’ll find a lot of biopharmaceutical companies like MannKind among lists of penny stocks. One reason for this is that these companies frequently are in the “pre-revenue” stage (i.e. they don’t have a product that’s in market yet).
That’s not the case for MannKind, which has managed to get a product approved and is in use. The main product — Afrezza — is a prescription glucose management product that is inhaled as a powder. The therapeutic is approved for adult use. MannKind is also peripherally involved in developing a Covid-19 therapeutic, which may explain some of its volatility. However, because it has Afrezza, investors don’t have to rely on that product panning out.
That being said, MNKD stock has closed over $6 a share this year and it’s traded under $5.
The consensus opinion among six analysts gives the stock a 25% upside from its current level.
Penny Stocks: DatChat Inc. (DATS)
If you’re a risk-tolerant investor, it can be exciting to get in on the ground floor of a newly public company. And that’s your opportunity with DatChat. The company just began publicly trading shares on Aug. 13, 2021.
And you can say it’s been a success. DATS stock has nearly doubled in the two weeks that it has been trading. It’s already well over $7, straining all but the most lenient of penny stock definitions.
Of course, it could also crash. That’s the risk with penny stocks. But let’s keep our eyes on the bullish side of this stock. DatChat is a technology company that creates communication software for, among other things, mobile messaging applications. The company’s signature product, DatChat Messenger emphasizes privacy and protection. Plus, the company is developing a blockchain-based communications platform which is adding to the buzz around the company.
The combination of a tech startup and the blockchain will likely make DATS stock irresistible to day traders. And that means it may be a short squeeze candidate eventually. However, it’s definitely a stock that should be on your watch list.
The last of the penny stocks to consider is a true penny stock. That is, INUV stock is trading for less than $1 per share as of this writing. Inuvo provides targeted media and display advertising solutions for eCommerce companies. That puts the company firmly in the vanguard of the explosive growth in e-commerce in the last year.
At one point this year, INUV stock was trading for over $2. But it’s now hovering around 72 cents a share. That’s still about a 60% gain for investors who bought shares at the beginning of the year. However, it also illustrates the risk and the reward that can come with investing in penny stocks.
The company is not yet profitable. However, it beat analysts’ expectations for revenue. In its most recent quarter, revenue came in 66% higher on a year-over-year basis.
And the company offered guidance that suggests double-digit revenue gains are likely to continue. And as they do, Inuvo expects that it will begin to post positive EBITDA.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.