Despite some warning signs that the market may be stretched, most traders don't seem to care. In a way, they have justification for their bullishness. Thanks to the power of coordinated trading on social media and the easy access to equities that mobile trading apps like Robinhood provide, it's never been easier to speculate on penny stocks.
Over the course of generations, penny stocks have always attracted speculators for their low price and high profitability potential. That's due in part to the law of small numbers. It's much easier to generate a 100% return on an equity unit priced at $1 than it is to generate that same percentage performance on a $99 unit, even though we're talking about the same nominal difference.
But penny stocks have always relied on mass interest to pop. Here, Robinhood and the power of the internet have teamed up to forge a new paradigm in speculative trading. Theoretically, if enough people keep pumping a particular stock, it could keep moving higher despite crumbling on an initial pump and dump.
However, we should also recognize that there's a serious downside to this tactic. At the end of the day, whether particular penny stocks perform one pump or multiple, they usually tend to fall flat permanently or for a very long time. When that last pop is – and at what price it peaks – is anyone's guess. Therefore, this sector is extremely risky.
Plus, this market segment doesn't necessarily respond to fundamentals. That's a good thing if major indices tumble and these speculative names don't. But because of the lack of predictability, penny stocks are more casinos than proper investments.
If you're okay with that, you may want to consider these risky ideas:
One final note to keep the lawyers happy. These penny stocks are wildly treacherous and you should not rely on any information – whether coming from me or from the companies in question – to guide you. Frankly, you should not buy these stocks unless you are mentally prepared to lose everything you put into them.
Penny Stocks for Robinhood Traders: Evolving Systems (EVOL)
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As a communications services provider (CSP), Evolving Systems already had a relevant business prior to the pandemic. With connectivity technologies driving commerce directly to where people are rather than where they must go, CSPs naturally make marketing initiatives more efficient while increasing revenue. But with the new normal, EVOL stock has taken on new relevance.
Due to the initial government mandates of lockdowns and non-essential business restrictions, consumers had no choice but to limit their activities. That forced many brick-and-mortar institutions to rethink their business model, organically improving the investment profile of EVOL stock. Although Covid-19 cases are declining, significant fears about mingling with the public remain.
Until we can really get back to normal, I believe contactless platforms will retain much of their utility. Given that Evolving Systems helps their clients bring the point of sale closer to the customer, this is one of the more credible penny stocks to buy.
NexTech AR Solutions (NEXCF)
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While NexTech AR Solutions doesn't quite get the chatter that many other Robinhood-fueled penny stocks receive, it's nonetheless one of the more compelling trades available. Indeed, you might consider it good news for NEXCF stock to be under the radar. That allows you to buy more shares in anticipation of a potential big wave of bullishness.
Listen, no one can guarantee that such a wave will materialize. But what makes NEXCF stock so alluring is that it's one of the few pure plays on the augmented reality (AR) space. One of the main reasons why NexTech should be on your radar of penny stocks is that its AR platform allows consumers to easily visualize how an appliance or piece of furniture will look in their home or how a pair of sunglasses will fit on their face.
With AR, the canvas is the real world, and the digitalized 3D imagery juxtaposed on the canvas is dimensionally accurate.
Zosano Pharma (ZSAN)
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According to the Migraine Research Foundation, migraines are the third-most prevalent illness in the world. Also, nearly a quarter of households include someone suffering from migraines. On a social cost scale, migraines represent the sixth-most disabling illness globally, with 90% of sufferers unable to perform their duties when having an attack.
Bluntly speaking, it's a serious problem and one that needs to be addressed. That's where Zosano Pharma comes into the picture, presenting a possible solution to this terrible illness. Utilizing a proprietary intracutaneous microneedle-array drug-delivery system, Zosano hopes that its novel formulation of zolmitriptan will provide therapies for migraines and cluster headaches. Because of its fundamental relevance, ZSAN stock has been a hot performer this year, up 126.8% since the beginning of January.
Of course, with pharmaceutical penny stocks, it's really anyone's guess where this ultimately ends up. But because of its social media chatter, we could see a significant boost in ZSAN stock. If you're a speculator, it's one to keep on your radar.
Rockwell Medical (RMTI)
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Another one of the penny stocks gathering momentum thanks to the power of social media is Rockwell Medical. Specializing in iron deficiency anemia, this is a condition with an expansive patient base. Iron deficiency anemia affects about "20% of women, 50% of pregnant women, and 3% of men." Typically, the solution to these cases is to eat more foods high in iron.
But other cases are not so simple. For instance, end-stage renal disease patients suffer from iron deficiency anemia due to insufficient production of red blood cells. Also, frequent dialysis treatments can result in blood loss, exacerbating the anemia. Thus, RMTI stock makes a strong fundamental case for itself through its underlying Triferic iron infusion therapy.
Like any pharmaceutical penny stocks you find, you'll want to be ultra-careful. Yes, RMTI stock has significant upside potential. But the low-capitalization pharma space is littered with more failures than successes. If you're going to place a bet, do so carefully and soberly.
Allied Esports Entertainment (AESE)
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I'm convinced that at least 90% of the older demographic must view esports as some kind of sick joke. This is basically "Revenge of the Nerds" becoming an everyday reality. I mean, who would have thought that when home console video games first launched that goofing around could lead to a multimillion-dollar empire?
But that's exactly what esports is. In 2019, total esports viewership was 454 million. By 2023, experts believe that it will reach 646 million. Last year, the global esports market was valued around $950 million. Therefore, with current trends, it's only a matter of time before the sector is bringing in billions. And that puts AESE stock in prime position.
Specializing in integrated arenas and mobile esports trucks, Allied Esports' core business took a hit due to the pandemic. However, with anticipation toward a return to normal, AESE stock could become one of the hottest penny stocks available.
Still, it's worth reminding ourselves that we don't know how this crisis will pan out. But if you believe in the long-term narrative of video games, AESE is a name to watch closely.
iMD Companies (ICBU)
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Easily one of the top stories recently is cryptocurrency exchange Coinbase registering 114.9 million shares for a public listing. Further, Bloomberg pegs the valuation of the company near $100 billion. Of course, you must also factor in the extreme bullishness – some might call it a bubble – toward cryptocurrencies. Just the anticipation alone of Coinbase including a particular token on its exchange can send its value to the moon.
With so much hype, it's not surprising that iMD Companies, billed as a holding company for cryptocurrency and blockchain-related acquisitions, has garnered intense speculator interest. ICBU stock is basically an ICBM, rocketing toward the stratosphere. For traders, the question now is whether shares will keep moving higher or come crashing back down to earth, leaving a nasty crater in their portfolios.
In my view, iMD represents a double whammy of risks commonly associated with penny stocks. First, you just don't know when other investors will tire of bidding up ICBU stock. Second, the cryptocurrency market itself is frenetic, shifting rapidly between bullish and bearish outlooks.
If you want to throw some risk money here, you might do well. But don't get too caught up in this craziness.
Premier Products Group (PMPG)
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Specializing in technology company acquisitions, Premier Products Group has arguably garnered the most interest recently for its development of smart city infrastructure. Specifically, the company manufactures SmartRoad pavement markers, which provide navigational data to automobiles. Initially, this tech has substantial safety implications. In addition, it can facilitate smoother logistics, a valuable feature for when society returns to normal.
Both anecdotally and through live traffic data, we can see that major metropolitan areas across the U.S. are steadily moving back toward normal levels. Obviously, this bodes well for PMPG stock. Moreover, the SmartRoad innovation can help foster the development of fully autonomous vehicles, which is a major talking point in the tech industry today.
Still, I've got to remind everyone that PMPG stock carries significant risk. This really is a trade that could go anywhere, so only put in money that you're comfortable losing.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That's because these "penny stocks" are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com's writers disclose this fact and warn readers of the risks.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
