OTC stocks are dangerous, but they may also be lucrative. They're excellent if you're seeking a different kind of investment, and they might be a perfect transition to other markets, even if you aren't aiming for anything extra.
If you're new to investing, almost every financial adviser will tell you to stay with well-known companies listed on the New York Stock Exchange or the Nasdaq. Because they are the flagship exchanges, they are interested in maintaining their good name. You'll come across OTC stocks or equity shares that trade on over-the-counter exchanges if you stay around for more than one inning.
Now I can bore you with several reasons why OTC stocks are risky. But, to save us both time, I strongly advise you to see The Wolf of Wall Street. In one critical scene, Jordan Belfort, the film's antihero, comes into a strip mall firm specializing in pink sheet stocks or companies that trade outside of major exchanges.
Belfort is on the lookout for work. Instead, he receives a life-altering "education," if you want to call it. It's possible to earn a lot of money in these stocks because of their often low share prices and extremely speculative character. However, the chances of this happening are slim. As a result, Belfort's immediate response is correct in the vast majority of situations. "Six cents a share? Come on， who buys this nonsense?"
"Mostly schmucks," as you would guess, is the response to the question. Having unloaded on OTC stocks, it's important to note that not all names are utterly insane. Former InvestorPlace writer Dan Burrows' comment that pink sheets are like undesirable neighborhoods is one of my favorites. Not all locals are shady, but these are the neighborhoods where actual criminals hang out, making you a target.
However, as I'll show, some businesses choose not to cope with the high costs of distributing stock on the NYSE or Nasdaq. Other companies have significant potential, but analysts and investors often neglect them because of the stigma of pink sheets. So, if you're willing to take a chance, here are some OTC stocks to explore.
I bring to you Volkswagen proof that not all OTC stocks to purchase are speculative garbage. VWAGY stock is related to other brands owing to the underlying company's sizeable corporate umbrella, making it one of the most well-known automobile brands.
Volkswagen is the king of four-wheeled desirability, from premium automakers like Audi and Porsche to exotic automobile manufacturers like Bugatti and Lamborghini.
And, before I get shouted at, Volkswagen also owns Ducati, a high-performance motorbike manufacturer. So, if it's quick, Volkswagen probably owns it.
VWAGY stock is generating headlines since the issuing business is a credible competitor for electric car makers. Like Lucid Motors, a target of Churchill Capital Corp IV (NYSE: CCIV), Rivals entering the area are drawn to the high end. After all, electric vehicles are costly, so focusing on upper-tier clients makes the most sense.
On the other hand, if you're Volkswagen, you have the resources and economies of scale to deliver EVs to the masses. Furthermore, VWAGY's efforts in solid-state batteries might pay off in the future, making it one of the most undervalued OTC stocks to purchase.
Daimler (DMLRY)
Because I own a Mercedes-Benz, I'm predisposed to Daimler's placement on this list of OTC stocks to purchase. But, bias or not, Daimler's stock has performed well, and DMLRY stock has increased by roughly 33%.
Plus, it's progressing in the right way, something I can't say about many of its EV rivals. Will Daimler be able to compete in an increasingly crowded market? Yes, I think so.
First, Mercedes-Benz is creating its own electric vehicle, Mercedes-EQ. Engineers may be the only ones who can see the platform's subtle flesh. Nonetheless, the conclusion is that Mercedes is taking a holistic approach to EVs, with electrification woven throughout the vehicle's design rather than simply the engine. Please look at the videos to acquire a better understanding of the EQ innovation.
Second, Mercedes has a social cachet that few other brands catering to the mass wealthy can match.
This is where my prejudice comes into play, but I feel Mercedes has the perfect combination of thrilling design and timeless elements. DMLRY is a stock to keep an eye on.
Mitsubishi Heavy Industries (MHVYF)
The Associated Press announced in October 2020 that the Japanese government had chosen Mitsubishi Heavy Industries as the major contractor for the development of the country's next-generation stealth fighter. The deal, which is expected to be completed in the 2030s, is critical for MHVYF shares because it might signify a total rethinking of Japan's military sector and Mitsubishi as a viable investment.
Since the high of MHVYF stock in 2013, the stock has been drifting down in a clearly defined bearish channel. It may, however, have reached rock bottom in October of last year, when the stealth fighter deal was awarded. But, can a single deal make all the difference for an industrial behemoth like Mitsubishi?
When you examine the geopolitical backdrop, MHVYF might be one of the most appealing OTC stocks to invest in. China has been exercising its military strength in recent years, seeking compliance from its Asian neighbors. Because Japan is the region's largest capitalist stopgap, it must possess the capability to oppose China's aggressiveness adequately.
In addition, the United States has shown to be an unproductive ally. Even under the Biden administration, the president looks too feeble to deal with today's hot-button topics. As a result, American friends will have to do it alone, cynically reinforcing the argument for MHVYF as an OTC stock to purchase.
Kawasaki Heavy Industries (KWHIY)
Most Americans associate Kawasaki Heavy Industries with high-performance motorbikes like the Ninja. Indeed, I considered purchasing a Ninja before deciding that the chance of being thrown off my bike was not worth it. Notably, the firm also manufactures off-road vehicles and jet skis, two modes of mobility that may perform well once we return to normal.
But, as exciting as that optimistic thesis is, that isn't why I'm talking about KWHIY stock. Instead, I'd want to learn more about Kawasaki's lesser-known industries, especially its military contracting work.
As a shipbuilder for the Japanese Coast Guard, Kawasaki is very significant in the current geopolitical situation. The Japanese government must react to China's assertion of its presence on the high seas and claims of territory left and right. It usually takes the form of the JCG dispatching its cutters.
Kawasaki is also a well-known submarine constructor, and Japan does indeed have a powerful submarine force. While it won't go toe-to-toe with China, it can use anti-access/area denial, or A2/AD, to significant effect. In the case of a war, Japan can thwart Chinese strikes, rendering their aggressiveness economically unsustainable.
Panasonic (PCRFY)
Panasonic was a credible rival to Sony in the years before Apple (NASDAQ: AAPL) transformed the consumer electronics sector. PCRFY stock might be considered the poor man's equivalent of SNE. In recent years, Panasonic has turned its focus to industrial and professional activities, while other competitors have established dominance in the consumer electronics industry. And it's because of this strategic repositioning, that this firm is one of the most interesting OTC stocks to look at.
For starters, Panasonic has long been a battery partner of Tesla (NASDAQ: TSLA). More major manufacturers will join the industry now that TSLA has shown that EVs have a concrete runway. This might put Tesla under a lot of strain, and however, it can provide PCRFY stock with new revenue streams. Furthermore, the interruption to global automotive supply chains caused by the new coronavirus epidemic has sparked significant consumer interest in electric vehicles.
Second, Panasonic is involved in various areas that are important to its business, including data center solutions, solar energy, Internet of Things connection, security systems, and intelligent mobility. While PCRFY may be in a terrible area, it's one of the OTC stocks you'll want to own for the long term.
Tencent (TCEHY)
Tencent, a sizeable technological company, has long been one of the few shining lights amid notoriously sketchy OTC stocks. The optimistic thesis for TCEHY stock, which was based on the booming Chinese economy, didn't simply focus on the country's 1.4 billion people. Instead, China has been aggressively investing in its technical infrastructure, enabling enterprises such as Tencent to prosper.
Of course, the strained relationship between the United States and China tempered expectations, and TCEHY stock took the brunt of the blow when the trade war began in earnest. Shares remained stagnant for most of last year until Washington and Beijing decided to take a step toward restoring dialogue and, ideally, reconciliation. But then the new coronavirus emerged, raising concerns about the virus's long-term survivability.
Unfortunately, the Trump administration has yet to recognize the election results, leaving us in uncertainty. However, the evidence shows that Joe Biden will be elected to the presidency. TCEHY is a stock to explore if you're hoping for geopolitical normalcy if that's the case.
Nestle (NSRGY)
Nestle, a Swiss global food and beverage firm, seems to be an American favorite. Nonetheless, you'd assume that with such a large global presence — Nestle is a favorite in many nations — NSRGY stock would be listed on a major U.S. market.
Nestle is modestly listed with some pretty bad OTC stocks, so the lengthy and cumbersome ticker symbol is the dead giveaway. However, don't let this deter you from investing in NSRGY. The stock has been up 8% in the last month, and it has been on the run since late February, and that's not bad for a typically low-risk investment.
The gradual return to normalcy might be a part of the trigger. The government just issued a very positive jobs report, revealing that total nonfarm payroll employment increased by 916,000 people.
True, there is still much work to be done, but at the very least, the job market is improving.
As more people reclaim their employment, they will be able to spend more on discretionary or luxury things. Nestle goods are a pleasant treat for customers now that we're no longer in a crisis.
Food and drinks are one thing, but Bayer (BAYRY) is another. However, one would think that Bayer, as one of the world's largest pharmaceutical companies, would be listed on the Nasdaq, if not the NYSE. We're talking about Bayer, after all! And, once again, you'd be mistaken.
This demonstrates the importance of never judging a book by its cover. Or, in this situation, never assume a publicly listed firm is terrible just because its OTC stock neighbors are.
Another oddity: BAYRY stock hasn't performed very well since 2015. On the other hand, speculative investors may want to keep Bayer on their radar due to two triggers. To begin, the business is collaborating with CureVac (NASDAQ: CVAC) to develop a coronavirus vaccine based on messenger RNA. Bayer aims to produce 160 million doses in 2022, which will go a long way toward mitigating Covid-19's long-term effects.
The idea is that, as the health crisis in areas like the United States fades, Bayer will be able to concentrate on its core pharmaceutical activities. Furthermore, with so much pessimism built in, BAYRY stock may have already reached the bottom.
Brands of Champignon (SHRMF)
We'll get into the weird stuff with the remainder of the OTC stocks. Please watch The Wolf of Wall Street again and imagine yourself in Jordan Belfort's shoes. These businesses are, to put it politely, high-risk, high-reward endeavors.
Champignon Brands is first on the insane list. The company's core business is mushrooms, and it's euphemistically labeled as a human optimization sciences supplier. I'm not talking about the sort you put on your pizza when I say mushrooms, and I'm referring to the psychedelic.
Before dismissing SHRMF stock as a risky bet, keep in mind that psychedelic medications have enormous medicinal promise. Although it is still a developing industry, public opinion is evolving in favor of drug decriminalization. After all, it was a campaign pledge made by Joe Biden and his running partner, Kamala Harris.
SHRMF also has a vital demand route. With millions of individuals in North America under tremendous stress due to the Covid-19 epidemic, it's feasible that the consumer market may be receptive to alternative therapies. It could require a lot of product evangelism, but there are a lot of options.
Ammo Inc (POWW)
Let me start by saying that Ammo Inc has the most brilliant (or cheekiest, if you're British) ticker symbol: POWW stock. I like it, even though I am quite prejudiced. Having another pure-play weapon and ammo firm to speak about allows me to talk about my favorite area without having to keep repeating myself.
Normally, I'd have to confess that the "freedom market," as it's known, has little appeal. Investors are increasingly interested in environmental, social, and governance (ESG) investments rather than self-defense enterprises. These are not, however, ordinary times. With societal upheaval causing some nasty clashes between groups with opposing views, now is a good time to stock up on Ammunition, well, ammo.
Furthermore, the Biden administration is likely certain to seek strong gun control measures. This will be more difficult if the Democrats lose control of the Senate. As a result, if leftist candidates win both Georgia runoff elections, POWW stock might soar.
OTC Markets Group (OTCM)
With all of this chatter about OTC stocks to purchase, you may as well consider purchasing all of the company's stock. That's correct; the financial market that offers price and liquidity data for hundreds of your favorite risky investments is now publicly listed. While I'm certain that OTC Markets Group won't achieve the kind of explosive growth that other of its exchange's brands have, OTCM stock is still worth considering.
The first is the notion of selling game tickets rather than wagering on a single side. Sure, betting on the game will increase your pure profit potential. However, by selling tickets, you guarantee yourself a profit. Of fact, the parallel falls short since OTCM stock, like any other investment, is prone to tremendous volatility.
However, this brings me to my second argument. If you haven't noticed, OTC stocks are trendy right now due to social media's expanding impact. A speculative transaction may take on a life of its own if it has a following. You're wagering that this tendency will continue if you buy in OTCM.
Josh Enomoto does not have any holdings (direct or indirect) in the securities mentioned in this article as of the date of publishing.
Josh Enomoto, a former Sony Electronics senior business analyst, has assisted in the negotiation of large contracts with Fortune Global 500 businesses. During the last many years, he has provided unique, vital insights into the investment markets and other areas such as legal, construction management, and healthcare.
"The Last Word"
While investing in OTC penny stocks might be dangerous, there are some successes. And the OTCQB has a better probability of identifying exceptional ones. And, in particular, the OTCQX.
However, if you're searching for something more speculative, the Pink market has some.
Be cautious and thorough in your research. Now it's your turn to invest!
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