Are These Penny Stocks Under $1 Worth The Risk?
This year has gotten off to a crazy start already and penny stocks could be to “blame”. Not only have the large-cap markets reached new all-time highs (again), so have smaller-cap markets. If you look at the Russell Small-Cap ETF (IWM) you’ll see what I mean. While the S&P’s SPY has traded relatively sideways this week, the IWM continues reaching new records. Wednesday saw the benchmark small-cap ETF hit fresh all-time highs yet again. This isn’t just the first “new record high”. The IWM has seen multiple days of new records in 2021. So where do we go from here?
If you’re a retail trader under the age of 40, you’re likely part of the “Robinhood Army”. Whether you use the app or not, it has become synonymous with younger traders credited with driving the surge of trading in penny stocks. However, whether you’re trading these stocks on Robinhood or other traditional platforms like Interactive Brokers, TD Ameritrade, or Etrade, you can’t ignore the fact that stocks under $1 are gaining huge interest right now, but why?
I don’t think it needs to be too complicated. When you’ve got stocks under $1, you’re talking about small price movements equating to larger percentage gains. Take Zomedica (NYSE: ZOM) for instance. It was one of the most actively traded penny stocks several days this year. Prices were hovering around $0.25 at the start of the year. January 12th saw the stock reach highs of $1.48. Even though ZOM only moved up $1.23, that was equal to a jump of nearly 500%.
As we know, nothing goes up forever. In this case, ZOM shares dropped the next day. That drop was roughly just 50 cents. But again, we’re talking about cheap stocks here. A drop like that slashed position values by 60%. With great risk comes great reward and when it comes to stocks under $1, volatility is a big factor.
Trading Penny Stocks Under $1
So should you trade penny stocks under $1? That answer is up to you and comes down to how you handle volatility. Are you shaken by a loss of 20% in seconds or do you weather the volatility? When it comes to big price swings, this is a very real scenario. Understanding how to trade penny stocks is very important when it comes to stocks like these. If you’re just expecting to invest and come back to a boatload of money in a few months, you may be sadly mistaken and holding the bag.
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Keep in mind that cheap stocks are cheap for a reason. They’re usually early-stage companies or ones that’ve fallen on hard times. Both of these scenarios were seen last year. If you remember the fall of companies like Hertz or the rise of companies like Novavax, you’ll understand my point. Needless to say, stocks under $1 are a hot topic and one that the Robinhood crowd is intently following. One problem is that cheap stocks like these tend to trade on the OTC. With Robinhood and Webull only allowing access to NYSE and NASDAQ stocks, it may be harder to find the companies like these.
With this in mind, we’ve got a list of NYSE & Nasdaq stocks under $1. Will they be top penny stocks to buy or should you avoid them due to the risk involved?
- Sonim Technologies Inc. (NASDAQ: SONM)
- Oragenics Inc. (NYSE: OGEN)
- Color Star Technology Co Ltd. (NASDAQ: CSCW)
- Genesis Healthcare Inc. (NYSE: GEN)
Sonim Technologies Inc.
If you look at Sonim’s chart, you’ll see that November and December have been very different compared to September and October. In almost a mirror image, Sonim shares slid from around 90 cents, down to $0.42 and now back to testing the $0.90 level this week. Why sparked this semi-V-shaped recovery?
Initially, Sonim reported a strong earnings beat at the start of November. The company came in with a loss per share of 10 cents, which was much stronger than estimates of a 19 cent loss per share. Even though sales missed for the quarter, there was plenty to take away from Sonim’s business update. Specifically, the company highlighted the launch of its RS60 and RS80 SmartScanner devices. These are geared toward customers in industrial, field service, and public safety settings. Obviously targeting frontline worker helped bring some exposure to the coronavirus relief efforts across the country and abroad.
Sonim’s whole business model revolves around mobility solutions in rugged settings. These solutions include mobile phones, tablets, and accessories for this specific niche. Late last year, the company expanded its distribution into Latin America via a deal with Acuraflow. In particular, Sonim is focused on accessing public safety, mining, and oil & gas customers.
While there haven’t been many new updates this year, Wednesday’s momentum is well above-average. Considering the progress heading into the new year, this could be one of the penny stocks under $1 to watch right now.
Another one of the penny stocks experiencing strong momentum is Oragenics. Unlike Sonim, Oragenics has reported some new updates at the start of the year that may be worth noting. The company entered into an agreement with Adjuvance Technologies for use of the adjuvant TQL1055 in Oragenics’ Terra CoV-2 COVID-19 vaccine.
In response to the development, Alan Joslyn, Ph.D., President and Chief Executive Officer of Oragenics said, “Following our Type B Pre-IND meeting with the FDA, we were asked to conduct additional preclinical animal testing for inclusion in our IND filing. Access to TQL1055 will permit us to generate the data necessary to continue development of the vaccine along our currently expected timelines.”
This came just after Oragenics raised $6.5 million to help provide new capital for the research and development of this vaccine. Additionally, the company explained that with this funding, it should be able to complete various preclinical studies this quarter. Though OGEN shares consolidated a bit over the last few days, the recent trend on Wednesday saw shares rebounding. Will this continue into the end of the week?
Color Star Technology Co Ltd.
If you’ve been a reader for the last few months, you’ll be familiar with Color Star Technology. There haven’t been any new headlines this year, however, momentum has been building heading into the new year. In particular, traders should note the recent event and strategic deals Color Star has become part of. At the end of 2020, the company launched an international version of its Color World App. This is Color Star’s application offering online performances, live streaming, online celebrity classes, and celebrity and influencer co-branded products. In a time where social distancing remains prevalent, digital entertainment has thrived.
What’s more, is that Color Star entered into a strategic partnership with 2 UAE companies just before 2021. What’s the significance of this? The two plan to collaborate on cultural performance, cross-border tourism, entertainment education, and brand promotion in the Middle East.
“Color Star strives to become a top global internet entertainment company. We have built strategic partnerships in Southeast Asia, Europe and America, and now in the Middle East. The launch of our Color World App on December 31, 2020 will further promote our geographic reach and provide strong technological and internet boost to our international presence,” commented Biao Lu, CEO of Color Star.
Genesis Healthcare Inc.
In a similar fashion to other stocks mentioned, Genesis has also seen a strong move in November and December. During that time, Genesis stock has climbed from around 44 cents to highs this week of nearly $0.77. The initial spark to this rally came as the company reported its Q3 earnings. Though it reported lower year-over-year results, the company’s follow up progress thereafter.
The company is one of the nation’s largest post-acute care companies providing services to more than 350 skilled nursing facilities and assisted/senior living communities in 25 states nationwide. Its subsidiaries supply rehab therapy to roughly 1,100 healthcare providers in 44 states, the District of Columbia and China. So, obviously the pandemic played a large role in Genesis’ model. One of its affiliated facilities was also one of the first in the U.S. to administer a COVID-19 vaccine to frontline workers.
This has helped give a boost to GEN stock over the last few weeks. What’s more, is that The company has appointed new leadership after its CEO and Director retired. This seems to have added to the momentum that the penny stock has seen this week. With pre-COVID levels being over $1.80, does GEN have a shot at recovery in light of the new vaccines circulating across the U.S.?
Are Penny Stocks Worth The Risk?
You’ve read about a few penny stocks under $1 that are trending this week. Despite the fact that many are trading higher on Wednesday, that can always change as we’ve seen with other stocks. ZOM stock mentioned earlier was one of the big winners earlier in the week. However, within a day’s time, it was also one of the biggest losers compared to its previous session.
No matter what, when it comes to volatile stocks, you’ll always want to have a plan and strategy in place. Set proper profit targets and an idea of where to set stop losses in case a trade goes in the opposite direction. If you’re just getting started, it may even be best to not trade at all and, instead, learn the basics of day trading first. But at the end of the day, the choice is always yours.