Three Penny Stocks to Pick Up Now
Penny stocks produce a visceral reaction in most investors. Some love them. Others avoid them at all cost. But there’s no denying their upside potential.
Penny stocks – as their name implies – are cheap. This makes them a perfect starting point for new investors who can’t afford expensive blue chip stocks. The only problem is that they don’t come with the same level of safety as their more expensive counterparts. But with the added risk comes the possibility of greater reward.
Part of the risk comes from the fact that many penny stocks aren’t traded on major exchanges like the NYSE. Instead, they’re offered on over-the-counter (OTC) exchanges. However, because these are less regulated, it’s harder to qualify the financial health of a company.
For instance, penny stocks traded on OTC markets aren’t required to make accounting statements and credit reports public. This makes it very difficult for an investor to make an informed investment in an OTC penny stock. To complicate matters even further, companies can withdraw from OTC markets at any time… burning investors and sending any investment they made in the company up in smoke.
That’s why for our purposes, we’ll be sticking to penny stocks traded on the major exchanges. Being able to analyze the financial statements is the big difference between a straight gamble and an informed investment.
Three Perfect Penny Stocks to Buy Now
Regardless of whether a company’s financial information is available or not, it’s worth noting that trading in penny stocks still comes with risk. There’s inherent uncertainty when a company is trading for less than $5.
The trick to investing in penny stocks is figuring out whether they’re trading at a discount… or floundering on their way to being delisted. And despite the fact that most of the markets are trading at or near all-time highs, there are still plenty of good deals out there.
Here are three penny stocks with lots of upside potential and strong enough financials to last until their time to shine comes.
- Ambev (NYSE: ABEV)
- OncoSec Medical (Nasdaq: ONCS)
- Conduent (Nasdaq: CNDT)
First on the list is the Brazilian brewer Ambev. With a market cap of more than $38 billion and more cash than debt, Ambev has steadily reported profits despite the pandemic. Drinking is on the rise in Brazil. And alcohol consumption has a good track record of holding up – even during a recession.
Nonetheless, U.S. investors have shied away from this Latin American heavyweight. And that’s pushed its stock to rock-bottom prices. In the short run, it does make sense. Most beer – especially in South America where its products dominate – is served in bars and restaurants. And that end of sales activity has stalled and will probably continue to do so for a while longer. But in the long term, Ambev is poised for a strong comeback. It controls an estimated 55% of the beer market in Brazil. In surrounding areas of Latin America, it controls as much as 90% of the beer market. Ambev has also made good strides in diversifying its product line. It now provides soft drinks, energy drinks, bottled teas and water.
As competitors like Molson have cut their dividends and are doing their best to conserve cash, Ambev remains in the black and is in a strong position to ride out the pandemic. And with its stock price trading at a 10-year low, it should come roaring back once bars and restaurants open back up again.
Based out of New Jersey, this biotech firm operates on the cutting edge of immunotherapy cancer treatments. While much of this sector has been dominated by news surrounding coronavirus vaccinations, OncoSec has been quietly moving forward on its robust therapy pipeline. And it’s doing so using its proprietary plasmid DNA delivery platform.
There is a lot of speculation that its cancer treatment candidates will provide safer and more effective treatment options. In Phase 2 trials, OncoSec’s TAVO treatment in conjunction with pembrolizumab proved to make a huge difference in patients with late-stage melanoma. It also has promising treatments for breast cancer and solid tumors in the works. If any of these treatments makes it to market, OncoSec shares won’t be trading for pennies for long.
Since being spun off from Xerox (NYSE: XRX), shares of Conduent have seen a lot of ups and downs. And they’re currently sitting in the midst of a down. The pandemic and subsequent work-from-home trend hasn’t done this business-processing service many favors. But it’s not all doom and gloom. Earnings per share and revenue are down slightly year over year. However, they’re nowhere near the levels analysts anticipated. Despite the pandemic, Conduent’s new business signings have been a surprising bright spot. The company increased its customer base with $623 million in new signings – an increase of more 90% compared with the previous year’s.
The company has also partnered with Buoy Health and IBM Watson to help manage coronavirus-related challenges in the workplace. While this won’t provide a significant boost in revenue, it does illustrate Conduent’s agility. This, paired with successful cost-cutting measures, is set to put shares of Conduent right back to where they were a couple of years ago.
Penny Stocks: The Bottom Line
Penny stocks are many investors’ first entry point into the stock market. After all, they’re cheap and they’ve got a lot more room to go up than down. But they also come with their fair share of risk. And with that risk comes the chance for greater reward.
For new investors, the three stocks above offer a perfect entry point. If you’re ready to take the plunge but are still unsure about how to invest in penny stocks, it’s never been easier. All you have to do is open up a brokerage account, put some money in and start trading.
If you decide penny stocks just aren’t right for you, though, we’ve still got you covered. There are tons of investment opportunities out there if you know where to look for them. And if you’d like a daily dose of market news delivered to your inbox, be sure to sign up for the Investment U e-letter below.
About Matthew Makowski
Matthew Makowski is a senior research analyst and writer at Investment U. He has been studying and writing about the markets for 20 years. Equally comfortable identifying value stocks as he is discounts in the crypto markets, Matthew began mining Bitcoin in 2011 and has since honed his focus on the cryptocurrency markets as a whole. He is a graduate of Rutgers University and lives in Colorado with his dog, Dorito.