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7 F-Rated Penny Stocks Not Worth the Gamble

  • Babylon Holdings (BBLN) —  a U.K.-based tele-healthcare company that is making inroads into a new wave in mobility-based healthcare but may be a better idea than investment now.
  • Hippo Holdings (HIPO) — focused on the next-gen home insurance but the this isn’t exactly the market where people are interested “new” insurance ideas.
  • Qurate Retail (QRTEA) — a spinoff of a spinoff of Liberty Media (LSXMB) isn’t holding the kind of assets that look like much will propel them to new heights.
  • Inovio Pharmaceuticals (INO) — caught fire during the pandemic for its vaccine work but has failed to keep its name in the headlines since.
  • Orchid Island Capital (ORC) — has been flying high as real estate boomed but now that the market has changed dramatically, so will the company’s fortunes.
  • REE Automotive (REE) — has an interesting business — it builds modular platforms for a variety of EVs. But this market is thick with competition.
  • ContextLogic (WISH) — is best known as Wish.com an app-based site that links buyers and sellers, but many of those sellers aren’t delivering what they’re pitching.

Stack of coins bar chart and red graph trending downwards with white wall background on wooden table copy space. Economy recession crisis, inflation, stagflation, business and financial loss concept., penny stocks, sell

When everything is on sale, it’s tough to figure out what’s a bargain. And that’s where penny stocks get so much attention in markets like this.

Investors figure, if you’re not sure where anything is going — like content king Netflix (NASDAQ:NFLX) getting a 36% haircut in two days — you  might as well take a flier or five on small stocks with low prices, right?

Not really.

We’re in a stock pickers’ market right now. Sectors are being sold off by institutional investors as the domestic and global economies try to gain their footings. Remember the stock market is forward looking. It’s trying to guess where we’ll all be in the next 6 – 12 months.

As you can tell by the daily gyrations, nobody is willing to bet where that is yet. Once we have that direction, good penny stocks may be a great opportunity. But that’s not now.

I’m not saying these seven penny stocks are doomed, but since we have no idea where the bottom is yet, this isn’t the time risk it on these little stocks.

BBLN Babylon Holdings $1.75
HIPO Hippo Holdings $1.79
QRTEA Qurate Retail $4.31
INO Inovio Pharmaceuticals $2.95
ORC Orchid Island Capital $2.93
REE REE Automotive $2.12
WISH ContextLogic $1.80

Babylon Holdings (BBLN)

a doctor looks at a tablet
Source: Shutterstock

Before the pandemic hit it’s ironic that healthcare was a huge issue in the U.S. and many companies were looking to use the technologies that are changing retail and financial services in the healthcare sector.

But now that we’re out of the pandemic’s tsunami waves, it seems healthcare is on the back burner. That’s not good for Babylon Holdings (NYSE:BBLN) stock.

This company was really getting some momentum with its AI-driven, mobility-based healthcare solutions. But it still needs to garner more healthcare credentials than tech cred. It’s young, expanding, and losing money left and right.

BBLN stock has lost 37% year-to-date and those kinds of losses stretch back to its 12-month performance as well. The company and the stock need some good news, soon.

This stock has an “F” rating in my Portfolio Grader.

Hippo Holdings (HIPO)

Hand holding smartphone for select insurance technology (Insurtech). Insurance concept.
Source: ae ssp / Shutterstock.com

We’re finally living in the middle of all the “future of tech” predictions that were made when the dotcom bubble was inflating. Some things panned out, some haven’t. Some have shown up out of the blue.

Hippo Holdings (NYSE:HIPO) is a little bit of all three. It’s part of what’s now called the “insurtech” movement. Its insurance that takes into account the ability to customize insurance around new assets – smart homes, durable goods, electronics, etc – that traditional coverage doesn’t.

Some would argue it’s a differentiation with a difference. Again, it’s a tech solution that is searching for a problem that isn’t that prevalent. Most people insure their goods based on price, not a cool app. I mean, it’s insurance.

HIPO has a $1 billion market capitalization, lost 34% YTD and 84% in the past 12 months. Insure against loss here by not buying the stock.

This stock has an “F” rating in my Portfolio Grader.

Qurate Retail (QRTEA)

A magnifying glass zooms in on the Qurate Retail, Inc. (QRTEA) logo. QRTEA is a penny stock
Source: Pavel Kapysh / Shutterstock.com

Do you have a junk drawer in your house? You know, where you put various odds and ends that you don’t want to throw away but may never use? A “just in case I need it” space?

That’s kind of what Qurate Retail (NASDAQ:QRTEA) has become over the years. Liberty Media is John Malone’s media conglomerate and QRTEA has been through a couple iterations in the past and each time its real estate gets smaller. Imagine if the junk drawer started as half a room full of stuff.

QRTEA has been around for more than three decades, yet has a $1.7 billion market cap. That’s not a sign the parent company is expecting much growth, this one is neglected penny stock, even by its parent. QRTEA stock is languishing now; it’s down 45% year to date (66% in the past 12 months) and still has 7% short interest betting against it.

This stock has an “F” rating in my Portfolio Grader.

Inovio Pharmaceuticals (INO)

Inovio (INO) logo next to pills and face masks
Source: Ascannio / Shutterstock.com

Ah, what a ride it has been for this clinical biotech stock. Inovio Pharmaceuticals (NASDAQ:INO) had been slogging it out with relatively little fanfare for years. It has developed a DNA-based vaccine protocol that has proven effective in treating the human papilloma virus as well as a broad-based influenza vaccine.

INO also has contracts with the Department of Defense (DOD) for vaccines against certain bioweaponized viruses. So, it took off during the pandemic. The trouble is, it doesn’t use a typical syringe to apply its vaccines. It uses a unique drug delivery device, the current model is the Cellectra 2000. It uses an electrical charge to deliver the drug to cells just under the dermal layer.

It’s pretty cool, Star Trek tech, but that means docs and others need to be trained and also exposes them to new technologies that may open them to new legal exposure. During the pandemic that was a small issue. And the military doesn’t worry about this kind of thing. But those aren’t growth markets right now.

INO stock has since cratered back into the upper 2s, down 42% year to date and 68% in the past 12 months. Basically it’s back to pre-pandemic levels.

This stock has an “F” rating in my Portfolio Grader.

Orchid Island Capital (ORC)

Real estate investment trust REIT on an office desk.
Source: Vitalii Vodolazskyi / Shutterstock

When housing is booming, companies like Orchid Island Capital (NYSE:ORC) do well. ORC is organized as a real estate investment trust (REIT), yet it doesn’t own property, it owns and trades mortgages. More accurately, it packages residential mortgage backed securities.

Basically, that means the company strips out mortgages by interest, years, and capital and repackages them to sell in the secondary market. It makes money off the new packages and trades them long and short as well. The Federal Reserve has been a big buyer of these and doubled down when the pandemic hit. But now the Fed is cashing out and there’s less money looking to enter the real estate market.

These types of REITs offer stupendous dividends in the good times. ORC’s dividend is now around 18%. Unfortunately, the stock has lost 34% year to date, and 44% in the past 12 months. And it still has more than 8% short interest betting against it.

This stock has an “F” rating in my Portfolio Grader.

REE Automotive (REE)

An image of an EV charging with a cityscape, solar panels and wind turbines in the background
Source: petovarga/Shutterstock

This Israel-based company manufactures platforms for electric vehicles (EVs), whether they’re cars, delivery vans, busses or trucks. It’s a cool idea, to be sure. Instead of a company needing to build an entire vehicle it can outsource its EV platform to REE Automotive (NYSE:REE) and then drop the body on their chassis.

The trouble is, most of the EV makers that are up and running now don’t need to outsource. And up and coming EV makers are in a tough spot fighting for visibility in this crowded market. That means REE is stuck on the back of this growth curve. And while its tech is worthy, the growth prospects aren’t great right now.

Plus, the supply chain issues make it difficult for moving product from point A to point B. REE may well survive, but it won’t thrive in the next year or so, unless someone buys it.

REE stock has lost 65% year to date, 80% in the past 12 months. Its market cap is now down to $675 million, a true penny stock.

This stock has an “F” rating in my Portfolio Grader.

ContextLogic (WISH)

Wish, a ContextLogic company a worldwide online shopping app. WISH is a penny stock
Source: sdx15 / Shutterstock.com

ContextLogic (NASDAQ:WISH) had quite a run up to the pandemic. In 2017, it was the most downloaded e-commerce app in the U.S. By 2018, it was the most downloaded e-commerce app in the world. In 2019, it was the third largest e-commerce marketplace in the U.S. by revenue.

How does a company with so much promise end up among the penny stocks? And with a market cap slightly above $1 billion, and nearly 10% short interest still betting against it just three years later?

It seems the merchants weren’t all they reported to be. Google pulled WISH from France after numerous complaints of counterfeit and sub-standard merchandise. The app has more than 1 million merchants, but many are from China and other parts of Asia selling knock-offs and counterfeits. That’s not good for long-term business because it also keeps good merchants away too.

WISH stock has lost 42% year to date and 86% in the past 12 months. WISH had the tech down, it just could figure out the retail side.

This stock has an “F” rating in my Portfolio Grader.

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, Louis Navellier has no positions in the stocks in this article. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.

The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

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