Should You Buy These Cheap Penny Stocks?
The definition of the term “penny stocks” refers to stocks trading for less than $5. This is according to the Securities & Exchange Commission itself. While some traders make their own definition up, the broad spectrum of “penny stocks” as a whole includes much more than the stocks under $1.
Aside from how you or the SEC defines these, traders remain focused on finding ways to make money with them. But why would anyone choose to buy stocks at such low prices? They’re volatile, high-risk, and many of the underlying companies are just getting started. Honestly, these are all reasons why people choose to buy penny stocks in the first place.
Higher volatility (though higher risk) presents much more potential for bigger gains. Furthermore, since many of these companies are “early stage” or “emerging growth,” there are circumstances that offer investors to find diamonds in the rough. Does this mean all penny stocks could be the next Amazon or Pfizer?
No, and many go on to become the exact opposite. However, due to these low-priced stocks’ speculative nature, there are ways to make money quickly, even if there isn’t a major headline. However, before you dive right in, make sure you actually know how to day trade. It will build the basis for everything else, including swing trading and even scalping.
Should You Buy All Penny Stocks That Have Momentum?
If you’ve already got the basics of day trading down, it’s time to put together your watch list. Look for different market trends to spot opportunities. It may come in the form of industry trends or even overall market trends. You can also check out companies with news to see if headlines are acting as a catalyst.
Once you’ve got your list of top penny stocks put together, it’s time to take it to the charts and look for entry targets. One thing to remember is that even if a stock looks good on paper, there may not be a trade in front of you. In light of this, here are 4 that are trading under $3 right now. But will they be the best penny stocks to buy?
Penny Stocks to Buy [or avoid]
- Guardion Health Sciences Inc. (NASDAQ: GHSI)
- AIM ImmunoTech Inc. (NYSE: AIM)
- Outlook Therapeutics Inc. (NASDAQ: OTLK)
- T2 Biosystems Inc. (NASDAQ: TTOO)
Guardion Health Sciences Inc.
GHSI is a penny stock that we’ve been talking about for a few months now. While it is considered a biotech penny stock, it is quite different from most biotechnology companies. Guardion Health provides medical foods and devices. Now, you might be wondering what exactly medical food is and how large the market for it is as well. Medical food is a segment that GHSI works in, where it produces vision-specific supplements to support and protect optical nerves. These foods can be used in the treatment of glaucoma and other ocular diseases.
Additionally, Guardion Health produces medical devices that are also specific to the ocular industry. This includes its CSV-1000 vision device, which is used for contrast sensitivity and earl treatment diabetic retinopathy. Guardion also produces the CSV-2000 as well as the MapcatSF devices, which measure macular pigment density. This may seem like scientific jargon, but these devices are used in the treatment and diagnosis of eye disease.
During the last week of January, a few exciting updates were announced regarding Guardion Health. For one, Guardion’s Malaysian product distributor, Ho Wah Genting Berhard or HWGB, stated that Guardion’s Astramern Astra H treatment received product registration approval from the Malaysian National Pharmaceutical Regulatory Agency. This approval will be valid for five years and will allow the drug to be prescribed and commercialized throughout the country. Also, NASDAQ stated that it granted Guardion Health an extension to March 15th, to regain compliance with the $1 minimum bid price rule.
AIM ImmunoTech Inc.
When it comes to AIM ImmunoTech, we’re all too familiar with the volatility of this penny stock. The last year has seen AIM shares skyrocket, plummet, then repeat the process. The last few weeks, however, have been a bit tamer in the aspect of heightened volatility. One of the biggest points of focus in the stock market is on AIM’s Covid-19 treatment. The last time we discussed the company was right before the end of 2020. The company’s post-COVID-19 “Long Hauler” portion of the active AMP-511 Expanded Access Program protocol received approval from the Institutional Review Board for public notification of potential patient enrollment.
Fast-forward a few weeks and now we see several key milestones that may be in focus in February. The first Long Hauler patient was dosed with AIM’s Ampligen treatment. Further to this, AIM also announced entry into a sponsorship agreement with the Centre for Human Drug Research for its proposed AMP-COV-100 study. This will monitor the safety of Ampligen as an intranasal therapy. Late last month, the company said it’s working to finalize study protocol and will “announce new information as it becomes available.”
Now just a few weeks later, we see AIM shares starting to move again. Whether or not that has anything to do with these previous milestones is to be seen. However, analysts have been bullish on the company. For instance, the last rating from TD Securities shows the firm has a Buy on the stock along with a $5 price target.
Outlook Therapeutics Inc.
Another one of the biotech stocks we’ve been watching closely is Outlook Therapeutics. The company was on our list of new penny stocks to watch for February earlier this week. The initial spark came after the company announced closing a $35 million financing round. GMS Ventures and Investments, an affiliate of Outlook Therapeutics’ largest stockholder and its strategic partner, purchased directly or through an affiliate $8.36 million of the shares of common stock offered in the offering.
In a press release on Thursday, Outlook confirmed that its recent funding rounds had brought sufficient capital to support current pipeline development initiatives. Specifically, Outlook is looking to use funds for its expected filing of the Biologics License Application (BLA) for ONS-5010 for wet age-related macular degeneration. This is planned for the end of this year. Outlooks said this financing also provides it with “optionality” as it evaluates the best commercialization path for ONS-5010.
“Extensive market research indicates that ONS-5010, if approved, will be a significant therapy in the retinal anti-VEGF market, currently estimated to be in excess of $13 billion worldwide.”Outlook Therapeutics Inc., Feb. 4, 2021
If you wondering what analysts think, Oppenheimer’s last rating showed an Outperform for the stock. The firm also gave a price target of $8, roughly 370% higher than the current levels.
T2 Biosystems Inc.
Shares of T2 Biosystems have also been in rally mode for several weeks now. Since mid-December, the penny stock has rallied from around $1 to highs this year of $2.92. One of the bigger catalysts recently has come in T2’s latest preliminary quarterly and annual results for 2020. A few things of note include the adoption of the company’s portfolio. It saw an increase in the adoption of its T2Dx instruments during the second half of the year. This is the company’s diagnostic system capable of running tests directly from whole blood.
If you remember, last year, companies like T2 were in the spotlight after whole blood was thought to have been an option for combating Covid-19. Fast-forward to the present, and the company is developing the TSARS-CoV-2 Panel, a molecular test for COVID. At the end of 2020, the company received Emergency Use Authorization or EUA for the panel. It can provide results within two hours and is done via a nasal swab.
With cases still a factor, related companies have become a core focus of some traders. However, you may also want to note that TTOO has been downgraded by a few analysts recently. Both Alliance Global and SVB Leerink lowered their price targets on the stock. While SVB maintained its Outperform rating, Alliance lowered its Buy to Neutral last month.