Discover the top 5 penny stocks you may purchase now for profit. Get started with sensible investing now! 📈
What Is a Penny Stock?
Penny stocks, priced at less than $5 per share, have a lot of risk but can promise big profits. These equities are linked to little, frequently volatile businesses that do not have a strong track record or trustworthy financials. While some investors have made significant returns, others have lost much money. When considering penny stocks as part of their investment strategy, investors should do their homework, comprehend the dangers, and proceed carefully.
Penny stocks are shares of micro- and small-cap firms that can yield higher-than-average returns for investors. However, they also come with a significant risk. Their low liquidity makes it more difficult to exit a position when necessary, increasing price volatility. Furthermore, market participants can manipulate penny stocks, emphasizing the significance of comprehensive research and due diligence for potential investors.
Top 5 Penny Stocks List
Let’s explore the best penny stocks to buy now.
VAALCO Energy (EGY)
Independent oil and gas exploration and production firm VAALCO Energy in Texas focuses on holdings in Western Canada and West and North Africa.
The tight global energy markets were further unsettled by Russia’s invasion of Ukraine in 2022. The energy sector has seen unprecedented profits due to constraints in the world’s energy supply and inflation in commodity prices.
Despite decreased commodity prices, VAALCO claimed a 20% year-over-year rise in output in August of 2023.
Additionally, EGY has a current yield of about 5.46%. Since penny companies rarely pay dividends, VAALCO’s management is anticipating strong growth in 2024 based on the company’s decision to increase dividends.
Desktop Metal (DM)
The shares of Desktop Metal (NYSE: DM), a 3D printing company, fell below $1 per share, approaching penny stock territory. The company faced severe difficulties due to rising financing rates. The price had peaked at $30 in 2021. But Desktop Metal emerged from the crisis stronger than ever, setting itself up for a possible comeback in the upcoming penny stock surge.
In contrast to the prior philosophy of prioritizing growth at any cost, especially while debt was cheap, executives, board members, and shareholders of companies such as Desktop Metal learned important lessons after the period of near-zero interest rates (ZIRP). Penny stocks that adjusted to the shifting economic environment came out stronger monetarily, more capable of navigating unforeseen challenges in the future, and more prepared to profit when the stars align in their favour.
In its fourth-quarter report, Desktop Metal showed a significant improvement in its financial position, reducing its net loss by more than half to $323.4 million at the end of 2023 from $740.3 million at the end of 2022.
The business also greatly expanded its cash reserves and cut its burn rate by 25%. Desktop Metal’s forecast of breaking even EBITDA in the second half of 2024 is even more encouraging. With these encouraging trends, investors can still get involved before Desktop Metal makes a profit.
SoundHound – Nvidia Buys Stake in AI Voice Recognition Player
At just over $1 billion in valuation, SoundHound AI offers investors an excellent opportunity to get their foot in the door in the artificial intelligence (AI) space. Prominent for its artificial intelligence voice recognition technology, SoundHound AI allows machines to efficiently understand human speech.
The company made headlines when it got funding from the top chipmaker, Nvidia, which caused its stock price to soar by an astounding 67%. More enthusiasm in the market was stoked by Nvidia’s acquisition of more than 1.7 million SoundHound AI shares, valued at about $6.8 million.
In addition to voice recognition, SoundHound AI is working on conversational intelligence products. These developments enable smooth user-machine interaction, opening up applications such as car dashboard assistants and restaurant order-takers.
The stock has had significant volatility since its 2022 initial public offering (IPO), but it is currently trading at a significant 60% discount to its IPO price.
The growing interest in AI technology is fueling sales growth even if SoundHound AI hasn’t turned a profit yet. According to management, sales for 2023 are expected to climb significantly, with estimates ranging from $43 million to $50 million, or a nearly 50% increase.
SoundHound AI is still a fascinating penny stock in the ever-changing field of artificial intelligence thanks to its creative AI solutions and bright future.
Tilray Brands (TLRY)
Tilray Brands (NASDAQ: TLRY) is a remarkable penny stock due to its early edge in the upcoming bull run. It is expected to be sparked by Germany’s movements toward legalizing cannabis and indicate new worldwide market potential for cannabis stocks. Despite the stock’s post-IPO top at an exaggerated $150, Tilray saw a noteworthy 26% jump within days, providing some hope to investors suffering since the stock’s decline to a peak near $30 per share in February 2021.
Prospects for cannabis companies look even more bright, given the industry-specific outlook. Despite the uncertainty around full legalization, there are continuous efforts to reschedule cannabis in the United States from Schedule I to Schedule III, which may indicate a more accommodating federal position.
Positive changes at the federal level regarding cannabis could lead to large increases in marijuana stocks nationwide. Tilray has a tremendous asset in its 5% share of the US craft beer industry, which puts it in a unique position to weather such uncertainty.
This combination helps Tilray maintain its financial stability as it waits for legalization in the US and increases earnings in legally managed markets with tight profit margins. Additionally, Tilray’s acquisition of Anheuser-Busch’s craft beer sector gives it access to priceless marketing, distribution, and compliance knowledge, differentiating it from rivals and putting it in a good position for potential legal challenges.
iRobot (IRBT)
iRobot (NASDAQ: IRBT) is a fascinating possibility with substantial upside potential, even though its per-share pricing may not meet the classic definition of a penny stock. This is because of its smaller market capitalization of 9 million compared to firms like Desktop Metal and Tilray. With the potential to take advantage of favorable market conditions and generate unstoppable momentum for its robotics stock, iRobot emerges as the year’s biggest comeback story.
Despite the recent drop in sales of robotic vacuums, investors and potential acquirers are still drawn to iRobot’s cutting-edge technology, even if the focus of Amazon’s (NASDAQ: AMZN) proposed acquisition of the business was its intellectual property and patent portfolio.
The robots market is booming, and as the trend gains traction, institutional and individual investors will take a serious look at iRobot, one of the few well-known brands.
Because it doesn’t rely solely on M&A opportunities, iRobot remains resilient. The business is streamlining its operations despite revenue downturns, adhering to the “survive or die” mindset typical of small-cap stocks. It has recently seen a 26% increase in earnings per share.
Moreover, iRobot’s stock offers a distinct value offering in addition to its growth potential, trading at just 0.37x sales.
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Are penny stocks a good investment?
Penny stocks are only occasionally considered reliable long-term investments. Even if there might occasionally be undiscovered treasures among them, most stocks that trade for less than $5, especially those under $1, are cheap for good reasons. Additionally, many penny stocks have high volatility and poor trading liquidity, which can cause investors to lose a lot of money quickly.
Instead of seeing penny stocks as long-term investments, successful traders frequently see them as short- or medium-term opportunities, focusing on timing entry and exit points to profit from market swings.
An in-depth analysis of over 10,000 over-the-counter (OTC) securities, mostly penny stocks, showed an average yearly return of -27%, highlighting the risks of investing in this asset class.
How to buy penny stocks?
To purchase penny stocks, begin by locating an internet broker who allows the trading of penny stocks listed on significant exchanges. Be aware that some brokers can limit or charge exorbitant fees for trading stocks over the counter.
Rather than putting all your money into one penny stock, consider spreading your investments over a few stocks after choosing a broker with fair commissions. One bad investment decision might reduce the chance of suffering substantial losses with a diverse portfolio.
You must thoroughly research penny stocks before investing in them, regardless of their trading volume and liquidity. Ensure sufficient trading volume and liquidity so you can promptly exit your position when needed.
You must also pay attention to the cautions issued by the Securities and Exchange Commission (SEC) and avoid investing more money in penny stocks than you can lose in the worst-case scenario. You might have superior options if you are thorough and cautious when investing in penny stocks.
Conclusion
Investing in penny stocks carries a substantial risk of losing money, so it is not advised for shy investors. On the other hand, penny companies that do very well might yield huge long-term rewards for investors with a strong risk tolerance. By diversifying their assets, penny stock investors can reduce their overall risk instead of choosing one penny stock and making a sizable investment.
Among the thousands of low-quality penny stocks accessible, it could be difficult to identify a few high-quality stocks. Nonetheless, penny stock investing can also be a financially and emotionally rewarding experience for those who are successful with it.