One of the reasons why people have gravitated toward benchmark cryptocurrencies is that their supply tends to be deflationary. That is, despite ravenous demand for popular cryptos, their supply — controlled by a decentralized protocol called the blockchain — only increases incrementally. Thus, we have a classic situation of Economics 101: high demand, low supply, soaring prices. Can the same principle apply to low-float penny stocks?
In theory, the answer is yes but the actual answer is more nuanced and complex. First, the term low-float penny stocks refers to a speculative class of publicly traded securities that feature a limited number of shares available for retail investors to trade. Mainly, market participants consider an equity unit low float if most of the shares are held by insiders.
This dynamic somewhat accomplishes the deflationary effect of cryptos for low-float penny stocks. Furthermore, the term can also be applied to companies that, irrespective of the insider-versus-public-buyer equity ratio, choose not to exercise dilutive strategies. Think of a special purpose acquisition company (SPAC), which waters down the available equity for trading through the distribution of warrants and additional shares.
Now, think of the exact opposite — that’s low-float penny stocks in a nutshell.
However, does this necessarily mean that a lower supply of a particular equity leads to higher prices? That’s the tricky question that prospective investors of low-float penny stocks must ponder carefully. To be blunt, lower supplies generally equate to higher prices only if the underlying asset is in demand. Therefore, you don’t want to jump into risky ventures simply because of their low float. If it were that easy, everyone would do it.
Instead, you’ve got to look at limited availability in conjunction with other business and sentiment dynamics. Otherwise, you’re going to find your journey an unpleasant one. And even with the strongest due diligence, these ideas for low-float penny stocks are highly dangerous so approach with extreme care.
- HeartBeam (NASDAQ:BEAT)
- G Medical Innovations (NASDAQ:GMVD)
- Blackboxstocks (NASDAQ:BLBX)
- NeuroBo Pharmaceuticals (NASDAQ:NRBO)
- Bluejay Diagnostics (NASDAQ:BJDX)
- Bridgeline Digital (NASDAQ:BLIN)
- NXT-ID (NASDAQ:NXTD)
- China Liberal Education (NASDAQ:CLEU)
- Lucid Diagnostics (NASDAQ:LUCD)
- Data Storage Corp (NASDAQ:DTST)
Among the multiple risk factors for low-float penny stocks that catch newbies unaware is that this category also implies low trading volume. Low volume suggests that there might not be enough buyers and sellers of a particular equity unit, thus leading to high bid-ask spreads. Never buy low-float securities simply on that basis alone.
Low-Float Penny Stocks: HeartBeam (BEAT)
As I mentioned in a report for Benzinga, one of the reasons why heart-related conditions such as hypertension is so deadly is because it’s truly a silent killer. Without overt symptoms, people may continue their routines unaware of underlying dangers. That’s where HeartBeam, a medical technology firm enters the frame.
Thanks to its core heart attack detection system, patients can immediately determine whether they need to seek medical attention. Better yet, the HeartBeam device is personal, portable and intuitively manageable, thus staying with the patient at all times. As with any condition and especially acute ones, early detection can be a lifesaver.
Now, BEAT stock is incredibly risky. Over the trailing year heading into the first weekend of 2022, shares have plummeted almost 26%. At the same time, HeartBeam is among the fundamentally intriguing low-float penny stocks, with a float of 3.52 million shares against a shares outstanding figure of 7.81 million.
G Medical Innovations (GMVD)
While many social critics bemoan how portable smart devices have eroded our abilities to communicate meaningfully with each other, such products actually serve many utilitarian purposes. One of them is to provide easily accessible diagnostics, which is the core specialty undergirding G Medical Innovations.
Billed as a medical smartphone that measures your vital signs, through the G Medical cloud system called Prizma, you can monitor your health trends over time. Further, you can share this report with your doctor, facilitating greater insights and perhaps more impactful therapeutic regimens.
As is the case with most low-float penny stocks, GMVD stock is super risky. Over the trailing half-year period, shares have hemorrhaged 33%, which is simply astonishing. At the same time, over the trailing year, GMVD stock has soared.
In other words, this stock can move, benefitted at least partially by its relatively low float of 8.31 million shares against a shares outstanding metric of 13.46 million.
Low-Float Penny Stocks: Blackboxstocks (BLBX)
Pre-pandemic, many financial analysts bemoaned that millennials were not buying stocks in similar rates to prior generations, thus setting this demographic up for reduced wealth. Now, the situation has completely flipped on its head: millennials are buying equities like mad.
Some might even have suggested that young folks are overdoing it thanks to the extreme popularity of speculative fare like, yes — low-float penny stocks. As I said earlier, this is not a topic to be taken lightly because it’s so volatile.
Nevertheless, the cat’s out of the bag, which should be the marketing pitch for Blackboxstocks. Undergirding this relatively unknown company is a trading system that alerts users to potentially “explosive opportunities in the market in real time.”
BLBX stock tends to have a “peaky” nature which is commonplace among penny stocks, low float or otherwise. However, BLBX stock is not a heavily diluted security, featuring a float of 6.17 million against a shares outstanding of 12.93 million.
NeuroBo Pharmaceuticals (NRBO)
Although the coronavirus pandemic was an economically and societally destructive event, it was nevertheless a boon for biotechnology. Those who made a pivot to Covid-19 vaccines and treatments benefitted from the soaring global demand. Additionally, the information gleaned could also be beneficial for other core research and development projects.
Therefore, even as fears of the coronavirus steadily fade away, this circumstance may still be a positive for companies like NeuroBo Pharmaceuticals. Billed as a “clinical-stage biotechnology company focused on developing and commercializing multimodal disease-modifying therapies for viral, neuropathic and neurodegenerative diseases,” NeuroBo pivoted to Covid-19 therapeutics when the crisis was raging.
Now, it can take the lessons learned and apply it to its primary product line, which involve drugs for neuropathic pain and Alzheimer’s and dementia.
However, prospective buyers must note that NRBO stock is extremely speculative, even compared to other low-float penny stocks. Over the trailing year, shares have plummeted 78%, which is devastating. Still, its 10.71 million share float against 26.59 million shares outstanding may appeal to certain speculators.
Low-Float Penny Stocks: Bluejay Diagnostics (BJDX)
When it comes to addressing long-term chronic conditions, information is vital. That’s why Bluejay Diagnostics could appeal to speculators seeking the next big thing in biotech. Billed as a “near-patient biomarker detection platform,” Bluejay’s Symphony “aims to help improve healthcare outcomes by providing quantitative clinical chemistry results vital for triage and acute care.”
In short, the company improves the lives of patients through a “more cost efficient, rapid, near patient product for triage, diagnosis, and monitoring of disease progression.” Now, among the fundamental risks is that Symphony has not yet been cleared by the Food and Drug Administration, per Bluejay’s website. This, like many other bio and medical technology penny stocks, BJDX is aspirational.
Further, BJDX is extremely volatile. Over the trailing year, shares have lost over 50% of market value. At the same time, it features a low float of 9.55 million against a shares outstanding of 19.5 million. A little over 50% of available shares are held by insiders.
Bridgeline Digital (BLIN)
One of the problems I personally face when covering penny stocks is that I struggle with corporate buzzwords. For instance, Bridgeline Digital states on its website that its goal is “to create a hyper-optimized digital presence” for its customers to “facilitate acquisition, conversion and retention.”
The company then mentions that it “powers digital experiences for some of the world’s largest brands.” I prefer clear direct language but that’s just me. Apparently, throwing out buzzwords is in vogue and it also works. Bridgeline commands an enviable list of over 2,500 clients across more than 100 countries.
Further, these are serious enterprises, such as UPS (NYSE:UPS) and CVS Health (NYSE:CVS), which is impressive. Unfortunately, the not-so-impressive part is BLIN’s losses in the market. Over the trailing six months, shares have cratered 67%. Even in the trailing month, they’re down almost 20%.
To be fair, BLIN doesn’t command a low float relative to ownership ratios, as its 8.7 million float is nearly the same as its 10.2 million shares outstanding. However, powering digital experiences could be huge moving forward, making BLIN one of the intriguingly speculative penny stocks to consider.
Low-Float Penny Stocks: NXT-ID (NXTD)
While penny stocks have a reputation for only offering speculative, low-viability businesses, you’ll occasionally find incredibly relevant opportunities. Such is the case (in my opinion) with NXT-ID, which develops personal emergency response systems (PERS).
According to information from its website, “79% of elder adults over 55 expect to ‘age in place,” per a Gray New World Report on Aging. If that’s the case, PERS devices should be in huge demand, boding well for NXT-ID. Furthermore, the pace of baby boomers retiring has accelerated in the past year, according to a Pew Research Center report. That just means a larger addressable market for NXT-ID.
Still, like the other penny stocks I mentioned on this list, this is a high-risk, high-reward opportunity. Over the trailing year, NXTD shares have dropped a staggering 79%. However, on the positive front, there’s not that many of these shares around, with a 6.82 million float against an 8.9 million outstanding shares count.
China Liberal Education (CLEU)
If you tend to vote Republican, you may want to avert your eyes since China Liberal Education contains some of the most triggering words in our political discourse all rolled into one brand. In all seriousness, though, CLEU is probably not going to be for everyone given some of the rough feelings that our governmental administrations have toward each other.
Nevertheless, if you approach your investments without any emotions — which I understand is ironic when discussing penny stocks — you might see a speculative opportunity with China Liberal Education. As you may know, the U.S. and China is engaged in an educational technology (edtech) battle and Forbes points out that we’re falling behind.
I hate to be cynical but CLEU might be a trade involving betting on the winner, even if that goes against your patriotic feelings.
Adding to CLEU’s intrigue is its somewhat low float of 8.91 million shares against an outstanding count of 12.35 million. However, this equity unit is super risky, down 66% over the trailing year.
Low-Float Penny Stocks: Lucid Diagnostics (LUCD)
Before we get into Lucid Diagnostics, let’s discuss two clarifiers. First, this is Lucid Diagnostics so it’s not an electric vehicle manufacturer. I know, I know — but these types of mistakes actually happen. Second, with a share price of $4.52, I’m stretching the definition of what you might call penny stocks.
But I’ve got an article to finish so let’s let this one slide, shall we?
Lucid’s core product is EsoCheck, a “five minute office based procedure to sample cells from the esophagus.” Specifically, EsoCheck can “collect cells of a targeted region of the esophagus without the need for endoscopy. The sampled cells can then be subjected to any commercially available diagnostic test.”
Naturally, Lucid should be able to improve broader health outcomes since onerous testing procedures may prevent many folks from attaining potentially lifesaving information. However, LUCD follows other penny stocks in the volatility department, shedding almost 62% in the trailing year. Still, it’s also a low-float speculative opportunity, featuring a 7.2 million float against 36.8 million shares outstanding.
Data Storage Corp (DTST)
Thanks to the progression of the digitalization movement, Data Storage Corp’s IT solutions have always been relevant. Ranging from high-demand areas such as infrastructure as a service, hybrid cloud platforms, disaster recovery services, cyber security and software management, Data Storage has been at the forefront of the digital revolution.
With the advent of the Covid-19 pandemic along with the mass work-from-home experiment, the need for digital services intensified, boosting the fundamental profile of DTST. Unfortunately, the market hasn’t been consistently kind to Data Storage. Though shares have enjoyed sizable peaks — at one point in February 2021, DTST traded hands at over $30 a pop — in the trailing year, they’re down 40%.
Also, in the past six months, the name dropped nearly 63% in the market, which is rather typical for speculative penny stocks. Still, the business itself makes sense. In addition, it’s a low-float fare, with only 4.18 million shares available (against an outstanding count of 6.69 million).
On the date of publication, Josh Enomoto 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.
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.