7 Penny Stocks to Sell Before Year End

Penny Stocks - 7 Penny Stocks to Sell Before Year End

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2021 was a great year to invest in penny stocks. Thanks to the many waves of speculative frenzy that swept the market, scores of low-priced stocks saw tremendous run-ups in price. But just a little over a month before 2021 comes to a close, it may be time to pack it in.

In fact, you may have wanted to start packing it a few months ago. While major indices like the S&P 500 have stayed strong, the same cannot be said about penny stocks. What do I mean? Run a screener on Finviz for stocks trading for under $5 per share (i.e., penny stock levels), and you’ll see what I mean.

Out of around 746 U.S.-based stocks trading on major exchanges for less than $5 per share, only 18 are trading within 10% of their respective 52-week highs, and most of them are either exchange traded funds (ETFs) or closed-end funds. Although many remain up sharply from their respective 52-week lows, when it comes to recent performance, 426 of them are trading within 10% of their respective 50 days lows.

If they are floundering now while markets remain steady, you can imagine what may happen if predictions calling for stocks to correct play out. In a downturn, these types of speculative names could see even greater losses than those of stocks overall.

Ahead of what may be even greater declines for penny stocks, if you own any of these seven popular plays, you may want to cash out before we close the books on 2021:

  • Camber Energy (NYSEAMERICAN:CEI)
  • Clover Health (NASDAQ:CLOV)
  • Express (NYSE:EXPR)
  • Meta Materials (NASDAQ:MMAT)
  • Phunware (NASDAQ:PHUN)
  • Progenity (NASDAQ:PROG)
  • Lordstown Motors (NASDAQ:RIDE)

Penny Stocks to Sell: Camber Energy (CEI)

For a brief time in late September/early October, Camber Energy was one of the most talked-about meme stocks out there. Its high short interest and exposure to the clean energy trend sent this small oil & gas exploration company “to the moon.”

That all came into question when a vocal short-seller (Kerrisdale Capital) released its 25-page “short report” on CEI stock. Picking the company apart, Kerrisdale’s report called into question many things about the company. The quality of its assets, for one. Also, the potential of its clean energy technology. The report also pointed out the company’s history of shareholder dilution.

After this report dropped, it didn’t take long for this short-squeeze play to drop as well. Shares had a bit of a “dead cat bounce” immediately after. Since then, however, it’s floundered. Opening at $1.36 per share today, it’s down 72% from its 52-week high.

If it’s down so much, why sell? Even while down by high double-digits, it’s still up more than four-fold from its 52-week low. Barring any sort of game-changing news with its clean energy ventures, I would count on it continuing to tumble. As the meme crowd looks elsewhere, and investors again value the company on its fundamentals, another big drop may be in store.

Clover Health (CLOV)

a photo of a stethoscope laying atop medical papers

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At $5.46 per share today, admittedly CLOV stock isn’t a penny stock just yet. But a trip down into penny stock territory may be approaching, assuming the key issue that’s dampened the stock’s appeal continues. This company uses its digital platform to market Medicare Advantage plans and has had little trouble growing its sales.

For instance, as seen in its most recent quarterly results, total revenue soared 153% year-over-year. Profitability has been an issue, though. Paying out more in claims than it takes in as premiums, it has a Medical Care Ratio (MCR) of over 100%. Clover’s position is that this is temporary due to an increase in plan usage this year compared to last as a result of the end of the Covid-19 lockdowns.

However, as you can see from Clover’s continued slide in price since the summer, investors are not convinced. Add in the fact the company has had to sell new shares to bolster its balance sheet, it has a lot to prove before it’s in the good graces of Main Street and Wall Street investors once again.

Given the wild moves it made as a short-squeeze play back in June, some may still be holding it in the hopes this excitement comes back for a second round. But between its short interest being much lower than it once was and Reddit’s r/WallStreetBets community turning their attention elsewhere, don’t hold your breath. While not yet a penny stock, sell it ASAP before it becomes one.

Penny Stocks to Sell: Express (EXPR)

the storefront of an Express store in a mall

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Up 389% year-to-date, EXPR stock has held onto a large amount of its meme stock gains from earlier this year. If you were lucky or shrewd enough to lock down a position at such bargain basement prices, now is the time the cash in your chips.

Why? Don’t let its strong stock price performance fool you. Investors have priced in a turnaround expected to happen next fiscal year (ending Jan 2023). But all bets are off as to whether said turnaround will actually arrive. Although it’s making smart moves like growing its e-commerce business, inflationary and supply chain headwinds could continue to affect its results into 2022.

If that happens, and the company’s quarterly numbers fall short of expectations, an additional sell-off for Express stock could occur. This would be especially true if, due to continued losses, the company is forced to conduct another dilutive secondary offering. That might be like the one it conducted last summer, news of which caused an immediate 20% drop for shares.

Already pricing its post-Covid-19 recovery as if it’s a near certainty, there’s little reason to “let it ride” with EXPR stock, much less make an initial purchase of it. That’s not to say you should forget about it completely. If it plunges once more, a favorable entry point for bottom-feeders could open up. For now, though, sell it if you own it. Avoid it if you don’t own it yet.

Meta Materials (MMAT)

MMAT stock: An array of glowing lights.

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MMAT stock is no longer much of a short squeeze play. It’s also not getting much of a boost anymore from the fact it has the term “meta” in its corporate name. Still, many are bullish on MMAT stock because of the potential that it can turn its metamaterials (materials with electromagnetic properties) into highly successful products.

Those products include Glucowise, a non-invasive glucose monitoring device, as well as Nanoweb, a transparent conductive film with many use cases. Believing these products (in particular Glucowise) have billion dollar potential, the market has gone ahead and priced Meta Materials in a way that gives the company a nearly $1.1 billion market capitalization.

The problem is that it’s a long ways away from being a billion dollar business. Generating just $2.15 million in sales over the past twelve months, and heavy losses, in no way does its stock price (opening at $3.94 per share on Nov. 29) reflect its current fundamentals. Yet while fundamentals have taken a back seat to “hope and hype” in 2021, that won’t be the case in 2022.

In fact, it’s debatable whether it’s still the case now. Like other chancy penny stocks, MMAT stock has been trending lower. As this could accelerate in the months ahead, as factors like squeeze potential fall by the wayside, sell it and move on.

Penny Stocks to Sell: Phunware (PHUN)

Hands holding smartphone at night with car lights and street in background

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At first, you may assume the incredible run-up Phunware experienced in October was the result of its high exposure to cryptocurrencies. Besides operating its own crypto, PhunCoin (CCC:PHCN-USD), this company also holds around $31.8 million worth of Bitcoin (CCC:BTC-USD).

But that’s not why traders spiked PHUN stock from $1 to as much as $24.04 per share between Oct. 20 and Oct. 22. Instead, chalk that up to the frenzy that came about due to the Digital World Acquisition (NASDAQ:DWAC) and Trump Media & Technology Group merger news.

On the heels of that announcement, DWAC stock wasn’t the only stock to skyrocket in price. So too, did shares in other small publicly-traded companies, with some sort of connection to former President Donald Trump. For Phunware, this connection had to do with his 2020 re-election campaign. Because its main operating business (which provides mobile app solutions) was a campaign vendor, speculators jumped to conclusions, and rumors spread that Phunware would have some future involvement with TMTG and its planned Truth Social social media platform.

So far though, these rumors have not been confirmed. While it’s down 86%, this is another penny stock where I wouldn’t bank on a rebound. With no Trump connection and its valuation far above its underlying value (even with the Bitcoin portfolio), expect a steady trip back toward the $1 per share mark.

Progenity (PROG)

a gold and clear pill capsule contains a representation of a DNA molecule

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Many penny stocks have come and gone as short squeeze plays. But PROG stock is one of the few cases where the squeeze is seemingly still on. For the past few months, shares in the biotech company have become a battleground between Reddit traders, and Wall Street’s so-called “smart money” short-sellers.

As a Seeking Alpha commentator explained in October, Progenity announced plans earlier this year to divest its prenatal testing business and become a pure clinical-stage biotech company. Investors were not so keen on the idea, and the stock began to dip. Exacerbated by the short side piling in, the stock fell more than 80% in less than two months.

But starting in September, Reddit traders set their sights on it. Since then, even with its recent pullback, at less $4 per share today, it’s up over four-fold from its 52-week low. If you jumped on the bandwagon, and rode the Reddit set’s coattails to fast gains, what should you do now? Take the money and run.

It may be satisfying to beat the short side at its own game. But at some point, the bottom will fall out of it. As my InvestorPlace colleague Dana Blankenhorn wrote Nov. 16, PROG stock will fall once the squeezers take their profits. You may have followed them into this trade. But it’s best to take the lead, and make your exit now.

Penny Stocks to Sell: Lordstown Motors (RIDE)

A magnifying glass zooms in on the website for Lordstown Motors (RIDE).

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When it comes to EV stocks, you can say it’s shaping up to be as story of haves and have-nots. What do I mean? Top EV plays, like Lucid Group (NASDAQ:LCID), Rivian (NASDAQ:RIVN), and Tesla (NASDAQ:TSLA) are in the “haves” category. They have performed very well lately. Thanks to both company-specific developments, plus overall renewed enthusiasm for vehicle electrification plays.

Lordstown, however, finds itself in the “have nots” column. In contrast to Lucid, which has made its first deliveries, and Tesla, which continues to break sales records, this Ohio-based early stage maker of electric trucks hasn’t hit such milestones. Not slated to start production of its Endurance truck until late next year, it’s going to be a while before it starts generating revenue.

At the same time, it’s burning through cash. Running on empty, it’s selling its main factory to Foxconn in order to shore up its finances. Undercapitalized, and so far failing to deliver on its promises, RIDE stock has been a dud. Trading for over $30 per share back in February, it finds itself  today in penny stock territory. As of Nov. 29, it’s trading for around $4.86 per share.

Although heavily shorted (15.3% of float), don’t count on a squeeze saving the day here. The “smart money” in this situation appears to be right on the money betting against the floundering EV maker.

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, Thomas Niel held a long position in Bitcoin. He 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.

Thomas Niel, a contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.

Article printed from InvestorPlace Media, https://investorplace.com/2021/11/7-penny-stocks-to-sell-before-year-end/.

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