Are penny stocks worth it? You’ll get different responses to this question depending on who you ask. However, the vast majority of traders that continue to try their hand at making money with these cheap stocks will say that they are worth it. All it takes is a single piece of news or a social media-fueled frenzy to spark massive moves in even the most beaten-down penny stocks.
No two stocks under $5 reflect this, like GameStop (NYSE: GME) and AMC Entertainment (NYSE: AMC). The explosive rallies that these two meme stocks went on were legendary. GME stock exploded from under $5 to reaching highs of $483. AMC stock rallied from lows of $1.91 to highs of over $72 and helped solidify why penny stocks are worth the risk. This isn’t the norm, however. In many cases, the losses can be crushing, with prices dropping 50% or more within a single day.
Finding Good Penny Stocks To Buy
Since all penny stocks don’t respond like AMC and GME, a trading strategy is essential. As we’ve seen in 2022, “stonks” don’t always go up, and volatility can quickly determine the duration of a breakout (or breakdown). Today we look at some of the best-performing names in the stock market this quarter.
These penny stocks have rallied upward of 930% in less than a month. The exciting part is that they were also discussed on PennyStocks.com as momentum was first building! Our readers could see, first-hand, the catalysts at play and identify the unusual trading activity in the stock market. We offer a free newsletter sent daily if you want updates on companies like these. Click to subscribe.
- Revlon Inc. (NYSE: REV)
- RedBox Entertainment (NASDAQ: RDBX)
- AeroClean Technologies (NASDAQ: AERC)
Penny Stocks To Buy?
1. Revlon Inc. (NYSE: REV)
If you’ve been trading penny stocks in June, Revlon (NYSE:REV) is probably one of the penny stocks on your watch list. Yes, this is the same Revlon you see in make-up advertisements, and it has been at the center of attention for the last week. Shares hit fresh lows after reports of Chapter 11 bankruptcy began working their way through the news cycle.
What sent shares lower seems to have also helped aid in the massive rebound REV stock has seen in June. Like AMC and GME, retail traders rallied behind the beleaguered name. In addition to a massive sell-off, a significant short position was betting against it. As of this article, Fintel.IO data still shows a REV stock short float percentage of over 30%.
Fast-forward to this week, and buying continues fueling gains. The penny stock reached highs of over $9.30 during Wednesday’s first 30 minutes of trading. Meanwhile, rumors have surfaced that Revlon could become an acquisition target of India’s Reliance Industries. This mix of speculation and market dynamics has created the perfect storm for the ensuing breakout.
How Much $1,000 Invested In REV Stock Is Worth
In this article, we focus on a hypothetical $1,000, and by no means is this a suggestion to buy, sell, or hold any of the stocks mentioned. However, the question was asked, “Are penny stocks worth it?” and we wanted to see how “worth it” some of the top penny stocks of Q2 were.
In this case, REV stock exploded from an opening price of $1.85 on June 14th to highs of $9.40 (so far) on June 22nd. That’s a 408% run, which means our hypothetical $1,000 would be more than $4,000 in about one week of trading in Q2. Are penny stocks worth it?
2. RedBox Entertainment (NASDAQ: RDBX)
Another one of the popular brands you’re probably familiar with, RedBox (NASDAQ:RDBX), is, in fact, a penny stock. What you see outside places like Walgreens and grocery stores to rent DVDs is just one aspect of the company’s business model. We discussed the company first on April 20th as RedBox saw some unusual trading volume and one of the few green sessions throughout April. Ultimately, retail traders would focus on similar trends with RDBX stock as they have with REV: heavy short interest & news-based speculation.
Traders reacted bullishly to the leadership shakeup, and an acquisition bid from Chicken Soup For The Soul Entertainment (NASDAQ: CSSE) would light the fuse. RDBX stock rallied to highs of $18.20 so far this quarter. Something that brought a bit of caution to the market recently was news that the company entered into a warrant exercise agreement for the exercise of 1 million warrants. This was seen as a potentially dilutive event, and the market reacted with RDBX stock sliding.
Heading into the end of the month, the former penny stock remains trading at higher levels. What’s more, Fintel.IO data shows that the RDBX stock short float percentage is still significantly higher at 103%.
How Much $1,000 Invested In RDBX Stock Is Worth
Looking at the hypothetical $1,000 over the last few months, RDBX stock rallied from $2.02 on April 20th to highs o f$18.20 on June 13th. That 800% move means $1,000 is roughly worth $8,000 at those June highs. Are penny stocks worth it?
3. AeroClean Technologies (NASDAQ: AERC)
Everything from monkeypox to coronavirus has added uncertainty to the markets. In AeroClean’s (NASDAQ:AERC) case, its air purification technology has been a core focus for traders. In particular, it received FDA Clearance for its Pūrgo™ device earlier in June. The patented device effectively eliminated 99.99% of airborne microorganisms such as bacteria, viruses (like COVID), and fungi.
AERC stock wasn’t a “short squeeze stock” based on high short interest. But its float was of particular importance for some traders. That’s because it sits below 15 million. In cases where the public float of a penny stock is low, any level of above-average trading activity can trigger a volatile and speedy move. This is what AERC stock saw earlier in June as shares exploded to highs of $23.70. It’s also worth noting that low float stocks can crash just as quickly in the event of higher selling and lower buying activity.
How Much $1,000 Invested In AERC Stock Is Worth
Going back to our hypothetical $1,000, AERC stock has moved from a $2.28 opening price on June 1st to highs of $23.70 on June 15th. That means in roughly two weeks, the former penny stock jumped 939%. That also means the $1,000 on June 1 was worth nearly $9,400 at those June 15th highs.
Are Penny Stocks Worth It?
The moves these penny stocks have made this quarter are not typical, nor should such breakouts be expected. Stocks, in general, carry risk, so doing your research and having a trading game plan are essential. Having said that, if you’re asking the question, “Are penny stocks worth it,” these are just a few examples of how big of a breakout cheap stocks might see.