Are Cheap Penny Stocks Really Worth The Risk?
Penny stocks are well-known for their high risk and high reward potential. In the stock market today there are hundreds of companies that fall under this definition of stocks under $5 but it also begs the question: is the risk worth it? In many cases, companies trade at these lower levels for a reason. It usually doesn’t involve them being “the next Apple” in the near term. However, that isn’t to say these smaller companies can’t grow into market leaders down the road.
Needless to say, for a majority of traders right now, the future potential of companies has taken a backseat to the current potential of their share prices. What sparks momentum in these cheap stocks? It can be a mix of different things. Technical catalysts, fundamental catalysts, or a blend of both can play a part.
It’s also not a bad idea to take a look at different sectors and trends in the market. Is the biotech sector hot? Are energy stocks losing their charge? Have investors become captivated by cryptocurrency mining companies because Bitcoin prices are rising? These are also things that can act as underlying catalysts for broader moves in related companies.
Today, we’re going to take a look at some of the cheapest stocks in the market. These are ones that even a 5 or ten-cent move can equate to a percentage change of 40% or more. Keep in mind, though that this change can happen in either direction. So if you’re looking for cheap penny stocks to buy, make sure to weigh your risk and reward with a clear strategy in mind even before taking a full position.
Robinhood Penny Stocks To Buy For Under $1
The interesting thing about penny stocks on Robinhood is that they’re limited to NASDAQ & NYSE-listed companies. So you really don’t see stocks under $1 on the platform due to the requirements of these exchanges. There’s a requirement that companies maintain a minimum bid price of $1. If they trade below that threshold for too long, there’s a risk that the companies will be delisted from these exchanges. However, that doesn’t mean there aren’t a few still left to watch:
- Matinas Biopharma Holdings (NYSE:MTNB)
- Cyren Ltd. (NASDAQ:CYRN)
- Gran Tierra Energy (NYSE:GTE)
- Reeds Inc. (NASDAQ:REED)
1. Matinas Biopharma Holdings (NYSE:MTNB)
Shares of Matinas Biopharma are high-priced right now. That is if you’re looking for penny stocks under $1. MTNB kicked off the week trading just under $0.90 but momentum has quickly picked up in the market already. That’s due, in part to the company’s latest headline.
Matinas announced positive data in its ongoing EnACT trial of MAT2203. This is the company’s drug candidate being developed for treating cryptococcal meningitis. The trial is also being sponsored by the National Institute of Allergy and Infectious Diseases. According to Matinas, data demonstrated safety and efficacy demonstrating how the platform can lead to meaningful clinical impact on a disease like this. CEO Jerome D. Jabbour also explained that he believes “these data are supportive of the enormous potential for our LNC platform delivery technology and a key for potential partners and collaborators who are currently evaluating MAT2203 and broader applications of the LNC platform to antivirals, vaccines, and nucleic acid polymers, such as mRNA.”
With this news has come a surge of trading momentum. It has also brought plenty of attention from retail traders at the start of the week.
2. Cyren Ltd. (NASDAQ:CYRN)
One of the companies we discussed over the weekend was Cyren. The company recently announced that its partner, Improving, would collectively boost efforts to address the “new normal” in cyber security threats. Improving’s IT services combined with Cyren’s anti-phishing solution aim to help businesses build upon already existing cloud framework.
Thanks to a spike in cybersecurity threats, related companies like Cyren are gaining exposure. The fact is that more workers are now in remote settings. Obviously, cyber security has become a core focus in the “new normal” corporate environment. A study from HP also pointed out the situation that IT teams face when trying to improve cybersecurity for the world’s remote workforce. The study found that IT workers feel that there is no choice but to compromise cybersecurity to appease workers complaining about slower business processes. In essence, these cybersecurity methods are believed to “get in the way” of deadlines and time-sensitive projects. The reports showed that more than 75% of IT teams said cybersecurity took a “backseat to business continuity during the pandemic,” and 91% reported feeling pressured into compromising security for business practices.
With a bump in market awareness and a search for more cybersecurity stocks to watch, CYRN has become a popular topic of discussion among retail traders.
3. Gran Tierra Energy (NYSE:GTE)
Energy penny stocks are heating up this month. Thanks to continued discussions on infrastructure deals and the global reopening, oil, gas, renewables, and more are part of the daily discussion. Gran Tierra falls into the mix of oil and gas stocks to watch. It manages exploration and production in Columbia and Ecuador.
As far as growth is concerned, Gran Tierra has managed to sustain its expansion goals. Second-quarter figures show the company was able to achieve total production of more than 23,000 barrels of oil per day, which was up 14% from its prior year’s second quarter. The company also reaffirmed full-year production guidance of between 27,500 and 28,500 BOPD with an EBITDA target of $265-$285 million.
On the company’s Q2 conference call, CEO Gary Guidry explained that there is exciting exploration planned with a goal of getting to 40,000+ BOPD. Specifically, Guidry explained that “next year as you can see from our financial outlook, it’s a totally different world than it was a year ago, with quite a bit of our debt paid off, free cash flow at current prices – at stripped prices. We will be directing some of that to our exploration portfolio, and it’s quite exciting. We’re ready to go. But there are things that we’re doing this year to get ready for next year.”
With reaffirmed guidance and a brighter outlook heading into the next year, GTE stock has found its way onto watchlists of retail traders during the second half of the year.
4. Reeds Inc. (NASDAQ:REED)
Shares of REED stock have been under pressure for months on end. However, the latest surge in trading action has some rethinking this beaten-down name. If you’re unfamiliar with the company, you’ve probably seen its products in your local grocery store. The company owns a portfolio of natural beverages including Reed’s, Flying Cauldron, and Virgil’s brands. Right now the company’s products are sold in more than 40,000 stores nationwide with sales growth acting as a tailwind into the second half of the year.
Last quarter, the company saw a jump in net sales as well as core brand gross sales. The company also reaffirmed its 2021 guidance. “Demand remained strong across our portfolio during the second quarter reflecting positive underlying consumer trends related to our new products and broader availability. Growth remains exceptional in our Reed’s Real Ginger Ale, both full-sugar, and zero sugar varieties, and we continued to see solid gains in Reed’s Extra and Zero Extra cans,” said Norman E. Snyder, Chief Executive Officer of Reed’s, Inc.
Something else that has helped boost sentiment in the market is insider activity in the penny stock. Toward the end of August, company director, John Bellow picked up 135,000 shares of REED stock at an average price of $0.72. This added to his already large stake in the company. With this latest purchase, Bello’s stake via John and Nancy Bello Revocable Trust was brought to over 3.6 million shares.
Penny Stocks To Buy Or Avoid?
If you’re looking for cheap stocks to buy, keep in mind that just because penny stocks might be lower in price, they may not be “cheap” so to speak. It’s important to weigh all factors before deciding to hit the buy button. Risk and reward are two big things to take into account especially when it comes to stocks under $1.