What are Penny stocks?
A penny stock is a common share of a small public company that is traded at a low price. Penny stocks are usually classified as microcap stocks with a market capitalization of less than $250 million or $300 million.
Characteristics of a Penny Stock
A potential investor must be aware of the following characteristics that make them extremely risky investments:
- Low liquidity
Penny stocks are traded over the counter. As a result, they have low liquidity. Therefore, an investor may not always be able to sell the shares when he/she wants. Also, the low liquidity results in low trading volumes. Thus, even relatively small transactions can cause large swings in the price of the shares.
- Limited historical information
Penny stocks usually belong to new and young companies. And there isn’t enough information available about these companies. Therefore, companies generally lack a proven track record regarding operations, products, assets, or revenues. Investing in such companies is extremely risky.
- Lack of public information
Since these companies belong to the micro-cap segment, they are not required to file reports to regulatory authorities like the SEC. Also, these stocks are usually not covered by professional stock analysts. Therefore, potential investors might face difficulty finding enough information on these companies to make an informed investment decision.
- No minimum listing requirements
Since penny stocks are primarily traded over the counter, the companies that issue these stocks are not required to meet certain minimum requirements for the listing.
Why do Investors Choose to Invest in Penny Stocks?
Penny stocks can be a high-risk investment with some peculiarities, but still, investors choose these shares for trading. Mainly the reasons are:
- High Volatility
Due to the high volatility of penny stocks, it is possible to make a larger profit in a shorter period of time than with blue-chip stocks. Since penny stocks are very low in price, investors usually buy a huge number of shares and as a result, a small movement of $ 0.1 can be very profitable
- Find a hidden gem
Start-up companies when going public as penny stocks can also bring a huge profit to investors. There are many successful examples in history that have shown that startup company stock skyrockets during the initial days.
- Low Price
Investors who do not have large amounts of money but want to learn about investments can start by investing in penny stocks.
If the company behind the Penny Stock merges with a bigger company and thus becomes more profitable.
Pros and Cons of Penny Stocks
Here are the benefits of investing in Penny stocks:
- High-income potential
Penny stocks are issued by small and young companies. Most of the time the reason behind issuing these stocks is the need to earn equity capital for future development or companies that recover after a difficult financial situation or bankruptcy.
There is a good chance that these companies have the tendency to grow rapidly. Therefore, it is always best to analyze and estimate the possible potential of the company by analyzing the market, company, and situation in the world.
- Low price
The low price of penny stocks is one of the most attractive features. Investors with very low capital can also start investing via penny stocks.
However, these stocks are not free from disadvantages, which are:
- Lack of information
Penny stock companies are considered to be small and young, and thus, there might not be so much information available. That may lead to problems with the estimation of possible risks and losses when deciding whether to invest.
- Low standards
Since these companies are not required to provide all the information to regulatory authorities, the information they provide is usually of low standards which makes it difficult for investors to analyze the information
- Low Liquidity
Penny stocks are often linked with small businesses and are traded infrequently, resulting in a lack of liquidity and an absence of genuine and consistent buyers on the market.
Penny stocks are often the target of financial fraud and scams. Fraudsters establish companies, then issue large amounts of stocks at a low price and later announce bankruptcy or even flee with the money.
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Best Ways to Invest in Penny Stocks
Here’s how to position yourself for maximum gains and minimal losses while investing in Penny stocks
- Set a limit for your losses. Yes be prepared to lose but put a cap on your losses too beyond which you should not allow yourself to go. Set aside an amount and avoid putting the bulk of your savings into these unpredictable holdings.
- Use major exchanges to trade penny stocks – There are plenty of penny stocks that can be found on big exchanges like the NYSE or top NASDAQ stocks. By using the platform of major exchanges, the odds of unknowingly investing in a fraudulent company reduce. Also, the liquidity offered on these main exchanges is also much better than in the OTC market. And investors will be able to buy shares using a traditional brokerage instead of using OTC methods, which should make trading even easier.
- Do your research. While reliable information might be more difficult to find on many penny stocks, you can look to companies traded on major exchanges that have recently fallen below the $5 threshold. That is a good starting point for investment and research.
- Look out for fallen angels. By doing plenty of research and keeping a wary eye out for fraud, investors may be able to find “fallen angel” stocks that are in industries experiencing cyclical downturns. These could be otherwise solid companies that have stumbled on bad times.
- Carefully consider the fee. Due to the low prices of penny stocks, don’t pay more in fees than you could easily earn back from investing. Look for platforms that offer low fees for penny stock trading.
- Watch out for the letter Q. When a “Q” is added to the end of a stock ticker, it indicates that the company is in bankruptcy. Always steer clear of “Q” stocks.
Where to Buy Penny Stocks?
Penny stocks are mostly traded through the OTC Markets Group’s Pink Sheets. However, some of the low-priced penny stocks you can find on the stock trading platform Interactive Brokers (IBKR).
Top Best Penny Stocks in 2023
Here is a list of the top 10 penny stocks that can add value to your portfolio in 2023:
|Sr.||Company Name||Symbol||Market Cap||Price (As of 19th May 2023)|
|1||American Shared Hospital Services||AMS||$ 17.57 million||$ 2.8288|
|2||American Reprographics Company||ARC||$ 130.69 million||$ 2.96|
|3||Comstock Hlds Cos||CHCI||$ 41.44 million||$ 4.18|
|4||Vaalco Energy Inc||EGY||$ 415.88 million||$ 3.895|
|5||Pitney Bowes||PBI||$ 573.4 million||$ 3.265|
|6||The Container Store Group Inc||TCS||$ 114.67 million||$ 2.265|
|7||First Republic Bank||FRC||$ 653.6 million||$ 3.51|
|8||Oak Street Health||HE6.MU||€ 35.4|
|9||Saipem||SAPMY||$ 2.465 billion||$ 0.2850|
|10||Revvity Inc.||PKI||$ 14.456 billion||$ 116.3|
American Shared Hospital Services engages in leasing radiosurgery and radiation therapy equipment to healthcare providers. Its equipment includes Gamma Knife, PBRT, and IGRT. The Gamma Knife radiosurgery equipment is a non-invasive treatment for malignant and benign brain tumors, vascular malformations, and trigeminal neuralgia. The company was founded by Ernest A. Bates in 1977 and is headquartered in San Francisco, CA.
American Shared Hospital Services recently reported its three-month financials for the period ending 31st March 2023:
- Revenue was reported at $ 4,925,000 an increase of 1.6 % from the previous year’s same period
- Operating Income was reported at $ 98,000 as compared to operating income of $ 68,000 from the previous year’s same period
- Net Income was reported at $ 188,000, as compared to $ 26,000 from the previous year’s same period
- Earnings per share were reported at $ 0.03, as compared to $ 0.04 in the previous year’s same period
American Reprographics Company
ARC Document Solutions, Inc., a digital printing company, provides digital printing and document-related services in the United States. It provides managed print services, that places, manage, and optimize print and imaging equipment in customers’ offices, job sites, and other facilities; and cloud-based document management software and other digital hosting services. The company also provides professional services and software services to re-produce and distribute large-format and small-format documents, and specialized graphic color printing. In addition, it engages in the sale and supply of equipment; and provides ancillary services.
American Reprographics reported its three-month financials for the period ending 31st March 2023:
- Net Sales were reported at $ 68.9 million as compared to net sales of $ 69.5 million from the previous year’s same period
- Net Income was reported at $ 1.9 million, as compared to net income of $ 2 million from the previous year’s same period
- Earnings per share were reported at $ 0.04, as compared to $ 0.05 in the previous year’s same period
Comstock Hlds Cos
Comstock Holding Companies is a diversified real estate organization that has been investing in, developing, acquiring, owning, and operating virtually all types of residential, commercial, and mixed-use real estate since 1985. They have designed, developed, constructed, acquired, and managed several thousand residential units and millions of square feet of residential and mixed-use projects throughout the Washington, D.C. metropolitan market.
Comstock Holding Companies reported year-end results for the fiscal year 2022:
- Revenue was reported at $ 39.3 million an increase of 26 % from the previous year’s revenue of $ 31.1 million
- Operating Income was reported at $ 8 million as compared to operating income of $ 5.1 million from the previous year, an increase of 57 %
- Net Income was reported at $ 7.7 million, as compared to $ 16 million from the previous year, primarily due to $11.2 million non-cash tax benefit in 2021
- Earnings per share were reported at $ 1.02, as compared to $ 1.76 in the previous year’s same period
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Vaalco Energy Inc
VAALCO Energy Inc (VAALCO) is an upstream oil and gas company. It acquires, explores, develops, and produces crude oil and natural gas. The company owns working interests in the Etame Marin block in offshore Gabon, West Africa. The company’s producing fields in the Etame Marin block include Etame, Avouma/South Tchibala, Ebouri, Southeast Etame, and North Tchibala. The company delivers produced oil and associated natural gas from these fields through a riser system to allow for delivery, processing, storage and ultimately offloading of the oil from leased floating production storage and offloading (FPSO) vessel to the seabed on the block. The company also owns working interests in an undeveloped block offshore Equatorial Guinea, West Africa. VAALCO is headquartered in Houston, Texas, the US.
VAALCO Energy Inc. reported its three-month financials for the period ending 31st March 2023:
- Revenue was reported at $ 80.4 million as compared to operating income of $ 68.6 million from the previous year’s same period
- Operating Income was reported at $ 21.6 million as compared to operating income of $ 40.005 from the previous year’s same period
- Net Income was reported at $ 3.5 million, as compared to $ 12.16 from the previous year’s same period
- Earnings per share were reported at $ 0.03, as compared to $ 0.21 in the previous year’s same period
Pitney Bowes Inc (Pitney Bowes) is a provider of shipping and mailing services. The company offers cross-border solutions, domestic parcel services, digital delivery services, mail sortation services, fulfillment services, and pick, pack, and ship services. It also offers e-commerce and retail solutions, mailing equipment and software, mailing services, parcel locker, package tracking solutions, and mail accounting and expense management. The company’s financial services include a line of credit, prepaid deposit account, equipment financing, and working capital. The company markets its products and solutions through direct and inside sales force, direct mailings, global and regional partner channels, and digital channels. Pitney Bowes is headquartered in Stamford, Connecticut, the US.
Pitney Bowes Inc. reported its year-end financials for the fiscal year ending 31st Dec 2022:
- Revenue was reported at $ 3.5 billion as compared to revenue of $ 3.67 billion during the previous year
- Operating Income was reported at $ 39.8 million as compared to an operating loss of $ 1.35 million from the previous year
- Net Income was reported at $ 36.9 million, as compared to a net loss of $ 1.35 million in the previous year
- Earnings per share were reported at $ 0.21, as compared to a net loss per share of $ 0.01 in the previous year
The Container Store Group Inc
The Container Store Group Inc (The Container Store) is a specialty retailer of storage and organization products and solutions. The company offers advanced, multifunctional, and customized storage and organization products and solutions through retail stores and online. It retails a range of products including countertop organizers, shower and bathtub organizers, cosmetic and jewelry organizers, cabinet storage drawer organization, hampers, laundry bags and baskets, hanging storage bags, shoe racks, hangers, boxes and bins, wall and door rack solutions, shelving and drawer components and systems, sliding doors and accessories. The company’s operations are spread across Sweden, Norway, Finland, Denmark, Germany, and Poland. The Container Store headquarters is in Coppell, Texas, the US.
The Container Store Group Inc. reported its year-end financials for the fiscal year ending 31st March 2023:
- Revenue was reported at $ 1,047 million as compared to revenue of $ 1,094 billion during the previous year
- Operating loss was reported at $ 127.6 million as compared to operating income of $ 125.5 million from the previous year
- Net Loss was reported at $ 158.9 million, as compared to net profit of $ 81.7 million in the previous year
- Loss per share was reported at $ 3.21, as compared to net loss per share of $ 1.65 in the previous year
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First Republic Bank
First Republic Bank (FRB) was a regional commercial bank providing commercial banking, real estate lending, and wealth management solutions to individuals, corporate, and high-net-worth entities. Its portfolio of offerings comprised checking, money market, and savings accounts; certificate of deposits; individual retirement accounts; and debit cards. The bank provides lending solutions for home, commercial, personal needs, business, and education. FRB offers private wealth management services such as investment management, brokerage, and trust and custody services. The bank had an operational presence in California, Oregon, Massachusetts, Florida, Connecticut, New York, and Wyoming. FRB was headquartered in San Francisco, California, the US.
First Republic Bank reported its financial reports for the quarter end 31st March 2023:
- Total Interest income was reported at $ 1.897 million, as compared to Interest Income of $ 1,189 in the previous year’s same period
- Net Income was reported at $ 229 million, as compared to Net Income of $ 364 million in the previous year’s same period
- Earnings per share was reported at $ 1.24, as compared to earnings per share of $ 2.03 in the previous year’s same period
Oak Street Health
Oak Street Health, Inc, together with its subsidiaries, offers healthcare services to patients in the United States. The company operates primary care centers for Medicare beneficiaries. As of December 31, 2021, it operated 129 centers in 19 states, including Illinois, Michigan, Pennsylvania, Ohio, and Texas. The company was founded in 2012 and is headquartered in Chicago, Illinois.
Oak Street Health, Inc. reported its year-end financials for the fiscal year ending 31st December 2022:
- Revenue was reported at $ 2,160.9 million as compared to revenue of $ 1,432 million during the previous year
- Operating loss was reported at $ 466.2 million as compared to an operating loss of $ 414 million from the previous year
- Net Loss was reported at $ 509.2 million, as compared to net profit of $ 409.4 million in the previous year
- Loss per share was reported at $ 2.21, as compared to net loss per share of $ 1.84 in the previous year
Saipem SpA provides integrated basic and detailed onshore engineering, procurement, project management, and construction services mainly to the oil and gas, complex civil and marine infrastructure, and environmental market sectors. It operates through the following business segments:
- Offshore Engineering and Construction – The Offshore Engineering and Construction segment includes platforms, pipelines, subsea field developments, MMO or Maintenance, Modification, and Operations activities, and the execution of large-scale offshore projects.
- Onshore Engineering and Construction – The Onshore Engineering and Construction segment designs and constructs hydrocarbon production facilities, hydrocarbon treatment facilities, and large onshore treatment and transportation systems and facilities. The Onshore Drilling segment comprises a fleet of drilling rigs for wells in Italy and abroad.
- Offshore Drilling; and Onshore Drilling – The Offshore Drilling segment consists of a fleet of vessels for deep water, mid-water, high specifications jack-up, and standard jack-up operations.
The company was founded in 1957 and is headquartered in San Donato Milanese, Italy.
Saipem SpA reported its financial reports for the quarter end 31st March 2023:
- Total Revenue was reported at € 2.582 million, as compared to Revenue of € 1,842 in the previous year’s same period
- Operating Income was reported at € 91 million, as compared to operating income of € 2 million in the previous year’s same period
- Net Income was reported as breaking even for the current quarter, as compared to a Net Loss of € 98 million in the previous year’s same period
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Revvity provides health science solutions, technologies, expertise, and services that deliver complete workflows from discovery to development, and diagnosis to cure. Revvity is revolutionizing what’s possible in healthcare, with specialized focus areas in translational multi-omics technologies, biomarker identification, imaging, prediction, screening, detection and diagnosis, informatics, and more.
With more than $3 billion in revenue and over 11,000 employees, Revvity serves customers across pharmaceutical and biotech, diagnostic labs, academia, and governments. It is part of the S&P 500 index and has customers in more than 190 countries.
Revvity Inc. reported its financial reports for the quarter end 31st March 2023:
- Total Revenue was reported at $ 674.8 million, as compared to Revenue of $ 963 million in the previous year’s same period
- Operating Income was reported at $ 76.1 million, as compared to operating income of $ 261.9 million in the previous year’s same period
- Net Income was reported at $ 569.5 million, as compared to Net Income of $ 176.9 million in the previous year’s same period
Should I buy Penny Stocks for the Short-term or Long-term?
Penny stocks are a class of low-price, high-risk public companies. They tempt highly speculative traders with the illusion of easy exponential growth, offering the chance to double, triple, or quadruple their money. The decision to invest in penny stock depends on your investing plan and it solely depends on your personal goals and your research skills.
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