Are Cheap Stocks Worth The Risk?
In this article, I’ll go over a few things. First, what is a penny stock? Next, I’ll touch on some basic rules of thumb many traders use to consistently profit. Finally, we’ll look at a few “cheap” stocks that are trending right now. In the end, it will be up to you to decide if they’re really worth the risk or if they should be avoided entirely.
What Are Penny Stocks?
Penny stocks are shares of companies trading for less than $5 per share. This is according to the standard definition of penny stocks issued by the Securities & Exchange Commission.
How To Trade Penny Stocks
When it comes to day trading penny stocks, there are countless styles and strategies. Some will look for high volume stocks; others will seek out stocks with fundamental catalysts. Still, some traders look for penny stocks to buy in a specific industry. Regardless of your own style, there are a few things to consider before buying anything. First, is there enough volume in the stock you’re looking at?
If you normally trade with a $5,000 position and a stock has an average daily volume of $10,000, it’s probably not enough volume for you to even enter that trade. Not only will you account for the majority of the daily average, but when it comes time to sell, there may not be enough of a market to exit at optimal prices.
Next, you want to keep your risk in mind. Have a strategy in place that allows you to get out of losers quickly and stay in winners longer. Some use the tier trading method to do this. It involves entering in different “tiers” or chunks of your overall position. For instance, if you normally put $1,000 into a trade, instead of entering with your entire cash amount, you enter in portions; smaller early on to “test the waters,” then larger as the trade works itself out. If the trade doesn’t work out, you only take a loss on a smaller sum than on your entire cash amount.
Cheap Penny Stocks To Buy [or avoid]
This leads us to a list of penny stocks. Just because they’re inexpensive doesn’t necessarily mean they’re “cheap” and some valuations may be much higher, relatively speaking. At the end of the day, it’s up to you to decide if they’re the best “buys” or if they should be put on the back burner.
- Marin Software Inc. (NASDAQ: MRIN)
- Soligenix, Inc. (NASDAQ: SNGX)
- SINTX Technologies (NASDAQ: SINT)
- ThermoGenesis Holdings Inc. (NASDAQ: THMO)
- Nabriva Therapeutics (NASDAQ: NBRV)
Marin Software Inc.
You’ll come to find that many of these penny stocks have been on our previous lists numerous times. Since so many of these low-priced stocks have caught attention, it obviously makes sense. In Marin Software’s case, the last time we talked about the company, it had begun turning heads as a few tech stocks were climbing last week. One trend we have begun seeing is that reopening efforts have brought about renewed popularity in things like commerce. With that comes advertising.
For some context, Marin focuses on digital marketing software for performance-driven advertisers and agencies. Furthermore, when it comes to digital commerce, platforms like Amazon have vastly outperformed broader online retail. In fact, to this point, in the last quarterly update, CEO Chris Lien said, “the increase in online commerce that has been generally observed since the beginning of the Covid-19 pandemic combined with the upcoming Q4 retail season both highlight the importance of Amazon as part of a digital marketing strategy. Marin’s integration with Amazon Attribution unlocks what is currently a black box for many advertisers and helps them better understand the full value of their Google and Facebook investment.”
Shares of MRIN stock have steadily climbed in 2021 so far. However, the last week or so has been one of the most active.
Another one of the penny stocks under $5 trading higher this week is Soligenix. Shares have continued pushing toward new 2021 highs as volume levels remain well-above-average compared to the end of last year. Soligenix is still in recovery mode after dropping in December. The move came after the company reported that it missed its primary endpoint in its SGX942 oral mucositis late-stage study.
Regardless of that, Soligenix has pressed on to continue developing its current pipeline, which includes SGX301. This is a treatment for cutaneous T-cell lymphoma. The company secured a long-term supply and distribution agreement with Daavlin to manufacture a light device for use with SGX301. Upon approval of SGX301 by the FDA, the company said it would promote the treatment and the companion light device in addition to facilitating the purchase of the device from Daavlin.
As traders wait to see the outcome, speculation has continued spurring momentum for the stock. Last week, Soligenix shares jumped after it was granted an international patent titled “COMPOSITIONS AND METHODS OF MANUFACTURING TRIVALENT FILOVIRUS VACCINES.”
SINTX Technologies (SINT)
Shares of SINTX also have jumped this week. The company has been in the spotlight for quite some time, thanks to attention driven by virus news. SINTX has a silicon nitride ceramic and applies it in medical settings.
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Last year the company found that SINTX’s product was effective against COVID-19. Through bigger deals, it will be applying its SINTX AP2 silicon nitride powder into polymer materials. These products will things like personal device cases for cell phones and tablets, among other frequently touched accessories.
While no further news has come from the company since its Q3 earnings, we see that speculation has played its own role. As with many virus-related companies, more cases or more ways to prevent cases sparks intrigue. As you’ll notice, this seems to have been the case for most of 2021 so far.
Furthermore, institutional interest has also grown. Last week, Kershner Trading Americas, LLC reported a 5.4% stake in the company. With this as the case in light of recent momentum, will SINT be on your list of penny stocks to buy or avoid this month?
ThermoGenesis has also seen a nice uptick in momentum recently. More specifically, starting in January, shares began experiencing substantial trading volumes, and the company began releasing new information. In particular, ThermoGenesis kicked things off with a presentation at the H.C. Wainwright BIOCONNECT Conference. This was followed up with the launch of its GMP compliant automated cell washing and reformulation system this month.
This PXP™-LAVARE System has been a more significant point of interest recently. It allows for fast, automated washing and reformation of cell suspensions. It’s designed to be used with the company’s PXP™-1000 System. The 1000 system is a U.S. FDA-cleared 510(k) class II medical device used for downstream cGMP compliant clinical manufacturing of cell-based therapeutics. These are things like the increasingly popular CAR-T cells.
Aside from the attention on cancer stocks right now, the company has not released much to suggest the recent surge beyond what came out last week. Among analysts, H.C. Wainwright was the most recent to weigh in on the company in November. The firm has a Buy on the stock along with a price target of $8.50 right now.
Finally, Nabriva Therapeutics has continued along with its latest uptrend in the share price. The stock is now up more than 40% from its December 52-week lows. This week, the excitement seems to have focused on the issuance of a U.S. patent titled “Purification of pleuromutilin,” which seems to have acted as a catalyst so far.
Pleuromutilin is an ingredient in the company’s treatments. BC-7013, for instance, is a semi-synthetic compound derived from pleuromutilin. The company is developing it for the potential topical treatment of Gram-positive infections. This includes things like uncomplicated skin and skin structure infections. Phase 1 clinical trials for BC-7013 have been completed. Could this patent add to the company’s strength in its development of current pipeline treatments?