5 Of The Best Penny Stocks To Buy Now

These are definitely Penny stocks to watch in 2017

Approach Resources Inc (AREX)

Approach Resources Inc. is an independent oil and gas company headquartered in Fort Worth, Texas.

The oil and gas industry as a whole are seeing some good earnings and activity overall, Zacks.com just upped it to a buy due to its own strong financials.

Liquidmetal Technologies Inc (LQMT

“Liquidmetal Technologies is the leading developer of bulk alloys and composites that utilize the performance advantages offered by amorphous alloy technology”

LQMT has seen some upward movement recently and has had speculation of being used in future phone devices.

Aerotech Inc (ARTX)

“Arotech creates quality defense and security products for the military, law enforcement, and homeland security markets.”

Arotech has created quite a few hybrid power systems that utilize solar energy for the United States Military. Expect a big shift in renewables and biofuels for the military. The Navy is moving towards biofuels and you can bet that hybrid energy systems will be big moving forward.

MagneGas Corporation (MNGA)

MangeGas is a technology Company that counts among its inventions, a patented process that converts liquid waste into hydrogen-based fuels.

MNGA won the “Best Alternative Fuel Solutions Award” from The New Economy. Its Hydrogen based fuels are something huge for future markets.

Heat Biologics (HTBX)

With a very innovative approach to treating cancer HTBX is something you should definitely keep an eye on.

“Heat Biologics is a clinical-stage company focused on developing its proprietary “ImPACT” (Immune Pan-Antigen Cytotoxic Therapy) fully allogeneic “off-the-shelf” cell-based immunotherapy to treat patients with a wide array of cancers and infectious diseases.”

 

For some investors, finding “the next big thing” in the stock market is presents the ultimate rush. After all, the thought of discovering and investing in the next Wal-Mart, Apple, or another similar corporate behemoth and all the financial gain that it can bring is incredibly alluring. This is the main reason why penny stocks can be such an appealing option. But there is a little more to this investment strategy than just randomly picking a business that appears to be burgeoning and hoping for the best.

Penny Stocks Defined

Penny stocks are defined as being any stock under $5, as per the definition put forth by the Securities & Exchange Commission (SEC). With that being said, the dollar threshold can be fluid depending on the investor – some investors may even consider a stock trading above $1 to be beyond the penny stock realm. Others eschew price entirely, choosing to foist the term on any stock that’s trading on the over-the-counter bulletin board (OTCBB) or Pink sheets. The very terminology of a penny stock can also be up for debate; it can sometimes be referred to as a micro-cap stock, even though this latter term is technically defined by their market capitalization as opposed to their price.

Whatever the definition or parameters investors decide to give penny stocks, one thing’s for certain: Penny stocks present a much greater risk than regular, blue chip stocks. This may seem obvious on paper, but there is a little more complexity behind the risk.

The Components of Penny Stock Risk

There are four parts to a penny stock that makes their investment a riskier proposition than their blue-chip counterparts. First and foremost, there may not be a whole lot of company information available to the public. Unlike blue-chips, whose information is solid concrete, penny stock data can be shaky, if not flat-out inaccurate. The chief reason for this is because they aren’t required to file with the SEC, and are therefore not under the same regulatory or analytical rules as stocks found on the NYSE or the Nasdaq.

Penny stocks also aren’t obligated to fulfill any minimum standard requirements to stay on the exchange. These minimum standards will often act as a safety net for some investors; if they aren’t met, they’ll stay away. The removal of the minimum standards ups the mystery quotient behind the penny stock because there is no benchmark for an investor to use as a measuring tool.

A lack of liquidity is also a risk factor with penny stock. While they come with a cheap price tag, they may be tough to find a buyer if there isn’t a whole lot of associated liquidity, and this deficiency may require the owner of the stock to resort to selling the stock off at a lower price. A lack of liquidity may also lead some traders to manipulate stock prices by resorting to tactics like the “pump and dump” strategy, which involves buying more stock than anticipated then trying to build hype around it until investors finally find it attractive.

“Pump-and-dump” schemes involve the touting of a company’s stock (typically small, so-called “microcap” companies) through false and misleading statements to the marketplace.  – sec.gov

Finally, the history behind the penny stocks or micro-cap stocks is either virtually non-existent or pretty weak. In some cases, the stock won’t have the past to build a cohesive strategy, and if they do, it may be ugly. These factors may make it difficult to mine any positive potential out of the stock.

Penny Stocks and Unscrupulousness

As one may guess, the upside of potentially landing the big one and the downside of little to no regulation makes penny stocks a haven for shysters looking to prey off the naivety and greed of investors. Indeed, there are many scams built on penny stocks that those interested in jumping into the market at this level must be made aware.

The two biggest scams out are built on biased recommendations and offshore brokers. In the case of the former, certain micro-caps will work with various forms of media to puff up “recommendations” to buy the stock. Some of these may be easy to spot, such as spam emails. Others are much more subtle in their approach. Regardless, it’s imperative that penny stock investors do thorough investigations on any buy recommendation before pulling the trigger.

Offshore brokers may be a little more nefarious. Their method of operation usually involves companies selling stock to foreign investors for discounted prices, only to see the investors sell it back to the U.S. for a big profit. What makes this fraudulent scheme particularly nasty is that the proponents of the project will use high-pressure “boiler room” sales tactics to coerce investors to buy the stock. These tactics add a layer of slime to the proceedings, and some investors may feel this icky coating seeps onto the concept of trading penny stocks as a whole.

Weren’t the Big Boys Penny Stocks Once?

One of the big reasons why investors may find intrigue behind penny stocks stems from the notion that the Walmarts of the world were once penny stocks that exploded. However, this is a dangerous mindset to have. In reality, a lot of the blue-chips entered the market with a high market price that was several dollars above the penny stock threshold. This may not be readily evident in some cases because investors may wrongly misinterpret the company’s adjusted stock price as a price tag befitting of a penny stock

Another big reason is something that seems obvious but is often pushed by the wayside. Namely, investors can lose big on penny stocks. While it may not look like a huge deal if you’re snapping up, say, 1,000 stocks at 10 cents a stock, the impact can be surprisingly huge if that stock bottoms out to half of the entry price – particularly if this streak of bad luck perpetuates to other penny stocks.

So…Should Penny Stocks be Avoided?

Penny stocks aren’t necessarily a lost cause. Savvy investors could still spin them into profitable gains.

However, it does take a substantial amount of due diligence, research, and knowledge of how these stocks work in order to make them worth investing. Without these metrics in place, they could spell disaster quicker than you may think.

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