Are penny stocks worth it? That’s something we hear a lot, especially from new traders. In particular, the question, what’s the opportunity when it comes to investing in penny stocks? Considering the relatively higher risks involved, investing typically comes second to trading. First, investing in penny stocks is much riskier than investing in companies like Apple (NASDAQ: AAPL) or Amazon (NASDAQ: AMZN). However, some may say nobody is safe considering the implosion of Netflix stock this year.
The NFLX stock chart is more akin to a fly-by-night penny stock than an example of a true “FANG” name. Despite this outlier, the fact remains that penny stocks carry higher levels of risk and thus require much more attention to detail than other asset classes. Today we look at some of the more active stocks under $5 that haven’t experienced such rampant volatility as companies like Clarus Therapeutics (NASDAQ: CRXT) or CEL-SCI Corp. (NYSE: CVM).
Penny Stocks To Watch
- Gran Tierra Energy Inc. (NYSE: GTE)
- Ring Energy (NYSE: REI)
- Hour Loop Inc. (NASDAQ: HOUR)
Should You Invest In Penny Stocks?
This begs the question: should you invest in penny stocks? The answer is something that only you can arrive at. But, no matter your outlook on cheap stocks, having a proven strategy in place is always the most important. Trends are consistent until they aren’t, and stocks can always go lower. Let’s look at a few penny stocks with more consistent trends this year to see what’s gone on and what could be on the radar heading into the rest of the year.
1. Gran Tierra Energy Inc. (NYSE: GTE)
Energy stocks have been the talk of the stock market in 2022. Not only was this the case before, but after the Russia-Ukraine conflict heated up, energy prices went into overdrive. New sanctions on one of the world’s largest energy producers hit everything from transportation to manufacturing. Gran Tierra Energy has become a clear winner so far.
Since the beginning of the year, GTE stock has climbed from below $0.80 to as high as $2.02. Current trading levels have the penny stock sitting above $1.80 during the second half of April. Despite not experiencing the massive 1-day spikes like others, the year-to-date move is still hovering around 125%.
What’s more, analysts are also bullish on GTE stock. RBC lifted its C$1.65 target to C$1.75 in February. It also maintains a Sector Perform Speculative Risk rating. Analysts at Canaccord Genuity also initiated coverage on Gran Tierra. Analyst Roman Rossi gave a Buy rating and a price target of C$2.70.
The company forecasts 2022 Brent prices at $95/bbl. Based on this, it also expects to hit $220-$240 million in capital and maintain a 2022 cash flow of $410-$430 million.
2. Ring Energy (NYSE: REI)
Like Gran Tierra, Ring Energy has been on fire this year. On January 3rd, REI stock traded around $2.25 and, as of this week, has reached new 52-week highs of over $4.30. That puts the year-to-date move at approximately 91% (so far). Unlike Gran Tierra, however, Ring stock is much more volatile and has experienced its share of big pops and drops along the way.
Ring is also coming off of strong earnings for 2021. The company’s significant Q4 sales volumes 11% to more than 9,000 barrels of oil equivalent per day compared to the third quarter. Net income for the fourth quarter was also robust, up 70% compared to Q3, at$24.1 million. Ring management reaffirmed its goal of remaining cash flow positive on an annual basis.
“The combination of increased production, improved commodity prices, and our continued focus on driving cost efficiencies drove more than a 20% increase in adjusted EBITDA during the quarter and approximately $83 million for the full year 2021. The fourth quarter marks the ninth consecutive quarter of generating free cash flow. We also saw our year-end reserves increase by 2%, more than offsetting our 2021 production.”
Paul D. McKinney, Chairman of the Board and Chief Executive Officer
With expected strength in energy for 2022, REI stock has been one to watch.
3. Hour Loop Inc. (NASDAQ: HOUR)
Online retail remains strong even after the pandemic. Ecommerce stocks continue gaining attention as consumers have been steadfast in shopping from home instead of going to malls. Hour Loop engages in eCommerce in the US retail market, operating as a third-party seller on outlets like Amazon and Walmart websites. The company manages more than 100,000 SKUs in various product categories.
One of the competitive angles Hour Loop has looked to leverage is its software solution for assisting in identifying product gaps. This has ensured that products remain in stock throughout the year. Looking ahead, the company has focused on expansion. Earlier this year, Hour Loop opened new offices in Taiwan.
Something that has brought some uncertainty to Hour Loop is the recent resignation of its CFO last month. CEO Sam Lai will serve in the interim while the board’s search for a new CFO begins. Hour Loop posted its latest round of earnings at the start of April, showing strong revenue growth compared to 2020. The company hit $62.79 million compared to $38.65 million. Meanwhile, net income came in at $4.78 million for 2021, roughly 25% higher than the $3.82 million in 2020.
Final Thoughts On Penny Stocks
While many of the names on this list of penny stocks have seen consistent moves higher this year, that isn’t a reason to throw caution to the wind. Having a strategy in place, no matter how strong a trend it will be prudent in all cases. So, whether you’re investing in penny stocks, trading them, or simply putting together a watch list, your strategy can help dictate the action plan to make money in the stock market today and for years to come.
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