As everyone knows, penny stocks almost always suffer from a lack of liquidity. Even when a slight sell-off ensues, stock prices can plunge dramatically. Eventually, those stocks go on a downward spiral and investors could lose big. However, some of those stocks eventually make a comeback following recovery. So, it’s important for investors to keep an eye on the market in order to cash in on such an opportunity, quickly.
Investors often miss out on the chance of making money with penny stocks which are recovering. It’s the old mentality: when a stock goes up, people want to buy at the top and risk losing money. Rarely do new traders look at bottomed out penny stocks because “they’ve dropped so far.” Needless to say, it’s not a bad idea to keep an eye on companies that have seen dramatic sell-offs.
[Read More] Top 3 Penny Stocks To Watch On Friday
The first true signs of recovery could signal the next uptrend. But don’t get excited too early. Keep in mind your fundamentals and trading strategy. With this in mind, here is a look at two penny stocks which are now recovering from historic lows.
Penny Stock #1: GameStop (GME)
The stock of video game retailer GameStop Corp. (GME Stock Report) had been hammered for much of 2019. Back in January, the penny stock was trading at $16 but over the course of the years, has collapsed to $4. Additionally, the stock dropped to new 52-week lows of $3.15 That’s an 80% loss in value. However, things may now be getting interesting for the company.
On Wednesday, the company announced that it was going to cut costs significantly by laying off 14% of its employees from its headquarters. Cutting a workforce is never a good thing for human sentiment but shoring up costs can show favor to the bottom line.
The bigger boost came about a day later when, in an interview with Barron’s, Michael Burry of ‘The Big Short’ fame revealed that he holds 3 million GameStop shares and made a bullish case. He stated that 90% of the company’s stores are cash flow positive and that is one of the biggest positives. The stock has enjoyed a big move since then and has gained as much as 35% this week since those 52 week lows on the 15th.
Penny Stock #2 CV Sciences (CVSI)
The other penny stock to watch is cannabis company CV Sciences Inc (CVSI Stock Report). The pot stock has managed to sign a major deal. CV Sciences focuses on hemp-based CBD products and is a market leader in the space through its well-known brand PlusCBD Oil. In a new development, the company entered into an agreement with The Vitamin Shoppe Inc (VSI Stock Report).
According to the terms of the agreement, the PlusCBD Oil brand is going to get a special channel in The Vitamin Shoppe. It goes without saying that it could help CV Sciences further expand the scope of its number one product. After the news broke, the stock started to rise and gained as much as 5%.
