Penny stocks can be some of the most rewarding asset classes in the stock market today. Where else can you spend a few hundred dollars and have the potential to see returns of 100% or more within a short period? Sure, you could trade options, but you’re dealing with things like time decay and implied volatility. Penny stocks, however, don’t involve either. One of the most exciting niches that have come to light among retail trading circles is short squeeze stocks.
GameStop (NYSE: GME) and other so-called meme stocks brought this dynamic to the market during the early days of the pandemic. Now, traders are on the hunt for similar opportunities. The first step in finding names to add to your list of penny stocks is identifying higher levels of short interest. Today’s article looks at a handful of names that have amassed higher levels of short interest over the last month. Due to their nature of higher volatility, will they become the best penny stocks to buy this month, or should you avoid them entirely?
Penny Stocks To Buy [or avoid]
| SelectQuote Inc. (NYSE: SLQT) |
| OppFi Inc. (NYSE: OPFI) |
| Nine Energy Services (NYSE: NINE) |
Finding The Best Penny Stocks To Buy
To find the best penny stocks to buy, your first step is determining what “best” means for your strategy. Are the best stocks to buy the ones that move quickly in a single day? Does your definition of “best” relate to penny stocks that steadily climb in a matter of weeks? However you look at it, a plan is necessary to have even before you place a trade. Once you know what you’re looking for, you can take it a step further and start putting together your list of penny stocks. With this in mind, let’s look at a short list of short squeeze stocks to watch in May.
1. SelectQuote Inc. (NYSE: SLQT)
Shares of SelectQuote have popped in recent weeks. The insurance solutions provider has seen speculative, bullish momentum building up to its latest earnings release. On May 5th, the company reported a sales beat for the quarter reporting $275.1 million compared to Wall Street estimates of $259.11 million. Unlike other companies reporting earnings this quarter, SelectQuote also maintained its 2022 guidance. Revenue is expected in a range of $810 million to $850 million, with a net loss in a range of $255 million to $236 million.
Among its Senior, Life, and Auto businesses, Senior products produced the highest revenue for the quarter, coming in at $233.2 million. The company also highlighted that approved Medicare Advantage policies grew 48% year over year. CEO Tim Danker also discussed the growth and momentum in the company’s Population Health Business. “We are also thrilled with the continued momentum of the Population Health business, particularly our SelectRx pharmacy business, which ended April with over 23,000 members, a nearly 10-fold increase in less than a year.”
Is SelectQuote a short squeeze candidate? That’s something I’ll let you decide. With a 5.55% short float percentage on Fintel, SLQT stock is the lowest on the list based on short interest.
2. OppFi Inc. (NYSE: OPFI)
Fintech company, OppFi has also seen an uptick in bullish momentum this month. The latest move comes after the appointment of a new Chief Operating Officer and news that OppFi would report earnings.
May 5th marked the earnings release date, and so far, the market has taken it in stride. OppFi beat sales estimates for the quarter and posted an EPS of $0.01. It also affirmed its previously issued 2022 guidance. Todd Schwartz, Chief Executive Officer and Executive Chairman of OppFi, also explained, “While our first quarter profitability was muted as expected, due to elevated charge-off levels from loans originated late last year, our strong origination volume, improved credit performance, and enhanced operating efficiencies provide us with confidence for the remainder of the year. As a result, we re-affirm our previously issued full-year 2022 guidance.”
Right now, the current short float percentage on OPFI stock is 25.39%, according to Fintel data. Following the latest earnings results and upbeat market sentiment on tech stocks, it will be interesting to see how traders react this month.
3. Nine Energy Services (NYSE: NINE)
Nine Energy is no stranger to big moves in the market. When energy prices skyrocketed earlier this year, sympathy trading sparked a move in NINE stock to highs of $8.10. The oilfield services company recently reported its first-quarter results and beat earnings per share and sales estimates.
“Overall, market activity did improve during Q1, with the average frac crew count increasing between 6-8% versus Q4. We saw activity increase across the majority of our service lines, with double-digit price increases in both cementing and coiled tubing. Cementing performed extremely well this quarter with revenue increasing by approximately 31% quarter over quarter versus the average U.S. rig count, which increased by approximately 13%.”
Ann Fox, President and Chief Executive Officer
The Houston, Texas-based company has operating facilities in prominent claims, including the Permian, Eagle Ford, Bakken, and others. With another uptick in energy prices this week, NINE stock has come back into focus. What’s more, its short interest may have also garnered some attention. According to Fintel.IO, the short float percentage on NINE stock sits at around 17.31%.
Penny Stocks To Watch
With so much stock market volatility right now, it can be difficult to find the best penny stocks to buy. But with a little diligence and observation, finding names to add to your watch list helps drown out the noise. At the end of the day, the goal is simple: make money and repeat the process. Are any of these names on your list of penny stocks today?
