Penny stocks frequently stand out as a remarkable sector teeming with potential. With their generally low price points and volatility, these investment vehicles can present both incredible opportunities and significant risks. Are you interested?
What Are Penny Stocks?
So, what exactly are penny stocks? The U.S. Securities and Exchange Commission (SEC) defines a penny stock as any security issued by a small public company priced at less than $5 per share. Though the term “penny” suggests that these stocks trade for less than $1, which was historically the case, the current definition is broader.
Investing in penny stocks can be likened to prospecting for gold. It’s all about digging deep and unearthing those undervalued gems. However, remember that not all that glitters is gold. Due diligence and a deep understanding of the industry are the tools of an intelligent prospector.
To build a watch list of penny stocks, first, research is your best friend. Look for companies in industries you understand and are comfortable with. Visit financial news sites, market analysis platforms, and the companies’ websites to gather information. Read their financial reports, press releases, and recent news. Look for signs of growth, such as new product development, entering new markets, or recent strategic partnerships.
Keep an eye out for volume as well. Volume is the total number of shares traded in a day, and it’s crucial when dealing with penny stocks. Higher volume means more liquidity, which translates into the ability to buy or sell shares without significantly affecting the stock price. Low-volume stocks may be harder to sell at the price you want or even at all. With this as the understanding regarding penny stocks, today we look at a handful gaining momentum in the stock market. Are they the best penny stocks to buy, or should you avoid them entirely?
Penny Stocks To Watch
IronNet Inc. (IRNT)
Shares of cybersecurity penny stocks IronNet surged in the stock market today. While the price action has been relatively high, it has favored the bears for the most part. One of the reasons that shares of IRNT stock were originally on the watch list from May came as a 13G filing showed 3i, LP increased its stake in the company. The firm boosted its interest to 9.99%.
In addition, the company was also granted a US patent for “Detection of Abnormal Events (To Protect Powergrid Infrastructure From Cuber Attacks & Failure).” This also helped give a boost to sentiment in May. Now, IRNT stock is back on the radar.
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This time, it’s after an amended 13 filing said the JV affiliated with the company and an institutional investor delivered a proposal to IronNet’s board. What was proposed? Under the terms of the deal, the company would be taken private. In addition, there would be a capital infusion into IronNet simultaneously.
Hyzon Motors (HYZN)
Hyzon Motors is a supplier of zero-emission heavy-duty fuel cell electric vehicles. The company offers solutions in the transportation sector. Shares of HYZN stock slowly climbed back since reaching fresh 52-week lows last month. The drop came as Hyzon transitioned some of its leadership team, including its CEO and certain Board members.
This month HYZN stock caught a more substantial surge of bullish sentiment thanks to a recent deal with Performance Food Group (NYSE: PFGC). The two agreed to five fuel-cell electric vehicles.
Commenting on the milestone, Hyzon’s chief executive officer Parker Meeks said, “This agreement for up to 50 hydrogen-powered trucks demonstrates how Hyzon intends to build customer familiarity with a new technology as the hydrogen infrastructure accelerates.”
HYZN has also been put on the list of short-interest stocks to watch. Where does the penny stock’s short float percentage sit? According to TD Ameritrade, the penny stock’s short float is roughly 24.3%.
Clearmind Medicine Inc. (CMND)
Shares of Clearmind Medicine saw some of their highest trading volumes of the quarter on Friday. The biotech company focuses on psychedelic-derived therapy development. Last month, in an exclusive, Clearmind told Benzinga that it received an ethics committee approval for its Phase 1/2 trial to assess its CMND-100 for treating alcohol use disorder.
“Ethics Committee approval of the study marks a key step forward in beginning the first-in-human clinical trial of CMND-100,” stated the company’s CEO Dr. Adi Zuloff-Shani. “With CMND-100, we aim to revolutionize AUD treatment and improve patients’ compliance to therapy compared to other marketed pharmacotherapies.”
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If you’ve followed the story this year, you’ll remember that Clearmind engaged a contract research organization to support a first-in-human trial of CMND-100. The company also filed a provisional patent application with the US Patent and Trademark Office as a part of its collaboration with SciSparc. The application seeks protection for the company’s combination of MEAI and SciSparc’s palmitoylethanolamide for treating depression.
This month, the duo announced plans to conduct a study evaluating a combination treatment for obesity and metabolic syndrome.
“We are excited to further investigate the effect of the combination of MEAI and PEA for treating obesity and metabolic syndrome. Previous pre-clinical studies performed with our proprietary MEAI showed a very positive effect in treating obesity. In this study, we want to further investigate the synergistic effect between our MEAI and SciSparc’s PEA,” said Clearmind’s Chief Executive Officer, Dr. Adi Zuloff-Shani.
How To Trade Penny Stocks
Let’s move on to the trading aspect. While the fundamentals of buying and selling penny stocks are similar to regular stocks, the volatility and unpredictability of penny stocks necessitate a different approach. Always remember while the promise of high returns can be alluring, the risk associated with penny stocks is equally high.
Here are some essential tips for trading penny stocks:
- Diversify your portfolio: It’s a golden rule in investing—don’t put all your eggs in one basket. This holds especially true for penny stocks. Diversify your holdings to reduce risk.
- Use limit orders: This order type allows you to specify the maximum price you’re willing to pay when buying, or the minimum price you’re willing to accept when selling. This helps protect you from the rapid price swings common with penny stocks.
- Avoid falling for the hype: Penny stocks are often the targets of pump-and-dump schemes, where unscrupulous individuals artificially inflate the stock price before selling off their shares, causing the price to crash. Be skeptical of any stock that’s suddenly the talk of the town without a solid reason.
- Set a stop-loss order: This order type automatically triggers a sale once the stock reaches a specified price. It can help limit your losses in case the stock price plummets.
- Invest only what you can afford to lose: With their high-risk nature, penny stocks should only be a small part of a well-diversified portfolio.
Remember, the world of penny stocks is not for the faint-hearted. It requires dedication, thorough research, and a solid understanding of the market. There’s a reason why penny stocks have earned their place in the investment world. When handled correctly, they can provide an opportunity for substantial growth. However, the key to success lies in equipping yourself with the right knowledge and strategies.
List Of Penny Stocks
- IronNet Inc. (NYSE: IRNT)
- Hyzon Motors Inc. (NASDAQ: HYZN)
- Clearmind Medicine Inc. (NASDAQ: CMND)
