Penny stock is a stock that sells for less than $5 per share, however some do sell for cents. Mainstream investors avoid penny stocks because there is usually a reason why a stock trades for such a low share price — and it is generally not good.
Penny stocks are frequently highly speculative companies promoted by stock marketers as "pump and dump" shops or brokerages that try to drive up the price of a stock so they can sell at a considerable profit while leaving others holding the bag.
Yet, due to the success of a single product, some penny stocks do manage to become long-term winners. Some of the market's most well-known stocks have previously traded for $5 or less per share. When you see those the names on this list, you'll wish you had bought them when they were penny stocks.
Jeans by True Religion (traded on NASDAQ: TRLG)
True Religion Jeans is a great penny stock success story.
In the early to mid-2000s, it traded for less than a dollar per share. However, Towerbrook Capital Partners bought the company for $32 per share in 2013. Long-term investors profited handsomely from the over 5,000 percent rise. True Religion declared bankruptcy twice in 2017 and then again in 2020.
Apple Inc. (NASDAQ: AAPL)
Apple wasn't always one of the world's most powerful tech companies. For years, almost no one had heard of the company.
AAPL was a legitimate penny stock in the early 2000s, trading for under 80 cents per share.
AAPL shares are currently trading for over $370 as of this writing.
This stock has grown to become one of the world's largest corporations, with a return of over 46,750 percent.
But no one could have guessed 20 years ago that it would become such a success story. Every firm like Apple has hundreds of tech penny stocks that fail.
Ford has a market capitalization of 27 billion dollars. However, as of mid-2020, its stock is still trading at roughly $7 per share.
As a result, it is a very uncommon corporation. While it's still a penny stock in terms of price, it's also one of the world's most well-known vehicle manufacturers.
Why is it included on this list? To demonstrate a rare case in which the stock price does not accurately reflect the company's performance.
It's a penny stock success story because it doesn't seem to be doomed to fail like so many others. On the other hand, it's never been a big mover, and it doesn't pique my attention.
I favor massive spikes, such as those made by Bravada International Ltd. (OTCPK: BRAV). On July 30, I made a $4,375 profit on my first green day OTC bet, which went up on the news. * (*Please note that my best pupils' results are atypical, and individual outcomes will differ.
The majority of traders lose money. My best pupils and I have benefited from many years of devotion and hard work. Trading is dangerous by definition. Do your homework and never take on more risk than you can afford to lose.)
Turtle Beach Corporation (NASDAQ: HEAR)
This graph demonstrates why I advise my students to aim for singles rather than being overly aggressive.
For some traders, short-selling penny stocks can be a profitable strategy. Many of these dubious low-priced stocks are doomed to fail. But, as with HEAR, they don't always work.
These deals may wreak havoc on short sellers' accounts.
This ticker may be familiar to traders from 2018. HEAR rose from about $2 to over $30 per share in months due to overly aggressive shorts and genuine news.
Examine this graph to learn what you can do with penny stocks. Certain transactions aren't worth it.
If you're low on cash, don't go for home runs. The bad transaction might be the end of your trading career. Because of the insane short squeezes, I'm mainly avoiding shorting these days. The tight squeeze must be respected!
Monster Beverage Corporation (NASDAQ: MNST)
Yes, Monster Energy Drinks was formerly a shady penny stock firm before becoming a staple in supermarkets and convenience shops.
It traded for less than 6 cents a share in the early 2000s.
It is now trading at above $70 per share as of this writing. This ticker has returned 142,761 percent throughout the years.
A $1,000 investment would be worth almost $1 million today at its lowest point. That's a strong candidate for the title of most profitable penny stock.
Don't succumb to FOMO. It took a long time for something to flourish, and it might have easily failed.
Mylan N.V. (NASDAQ: MYL)
MYL is a pharmaceutical firm with over $8 billion in market capitalization. The chart below shows lows of just under $6 a share, so it's not strictly a penny stock.
However, this is a bold step. Runs ranging from $6 to over $70 per share are uncommon, and this is still an excellent example of a successful penny stock, in my opinion.
MYL is now trading at roughly $16 per share, which is not at all-time highs. It is, however, an excellent example of a low-cost stock that has created a reputation for itself over a few years.
It has, however, lost a lot of its worth. Remember that hoping and waiting isn't a plan.
Plug Power Inc. (NASDAQ: PLUG)
PLUG is an excellent illustration of penny stock potential, particularly in this very unpredictable market. Take a look at the graph:
You must be prepared for this turbulence. Get "The Volatility Survival Guide," a free resource, and study up!
PLUG is a case of history repeating itself. It had an initial run from 11 cents to over $12 per share in 2014, and it has risen from $3 to over $10 per share by 2020. It currently has more than $2 billion in market capitalization, placing it in the mid-cap stock category.
Aggressive short sellers are responsible for most of the movement. Shorting a stock like this every time it rises is a bad idea because it doesn't always stop.
And although you may have missed out on PLUG, you may still benefit from it.
My student Jamil's book, "The Complete Penny Stock Course," may also teach you the principles of my approach to penny stocks. It answers a lot of the questions I receive regarding this topic.
You've undoubtedly heard of AMD if you're a computer enthusiast, and it is now one of the world's biggest chip producers.
AMD was selling at less than $2 per share in 2015, and it's now worth more than $70 a share, making it one of the most profitable penny stocks.
AMD currently has a market capitalization of $87 billion, making it a large-cap stock. Penny stocks have the potential to grow into legitimate businesses. However, you must be fortunate. And then wait another 20 years.
I don't appreciate making educated guesses about which firms will succeed. Are you a novice when it comes to penny stocks? Here's where you can get my free guide.
Medifast Inc. (NYSE: MED)
MED is a candidate for the title of "most successful penny stock." The firm attained an all-time high of $246.97 per share in 2018 after trading for around $2.30 per share in 2005.
Its 10,000% increase is amazing. However, it took 13 years.
Do you really want to wait that long?
Consider Jack Kellogg, one of my best pupils. Jack is in his early twenties and has amassed a fortune of over $750,000. He studied the regulations and took the time to learn them. His trading career spanned a few years rather than tens or even twenties.
Novavax Inc. (NASDAQ: NVAX)
Last but not least, I've included one of the most profitable penny stocks. This year's NVAX was a big success.
Thanks to the wild volatility of the coronavirus market, this pharma bet went from $3.54 at its low to over $150 per share at its highs in about a year.
What is the issue? When newbie traders see this, they assume that all penny stocks and biotechs would follow suit.
Don't be fooled by the hoopla!
Maybe one or two out of every 500 penny stocks on the stock market will accomplish this. Most of the time, these corporations use toxic funding to fund their selfish CEOs.
Now let's shift gears and talk about one of the year's most successful penny stocks. Why? Former runners are eligible to run again, and Penny stocks that soared in 2019 may be able to do it again. Prepare yourself by brushing up on your expertise.
Blackberry (BB)
Both as a stock and as a corporation, Blackberry has had a wild ride. The firm was once known as Research in Motion, and it rose to prominence in the late 1990s as the creator of the Blackberry smartphone and tablet series.
The corporation underwent a remarkable rise and collapse before rebranding and rebuilding near the end of the previous century, earning the moniker "Crackberry" for its addictive properties. It has evolved into a software and services firm. Despite this, following a meteoric climb to nearly $147 in 2008, the stock has mostly traded around $10 per share, with a low of $5 in early 2020. A brief rise fueled by a short-squeeze drove shares back over $28 before plunging to their present level.
Sirius XM Radio (SIRI)
SiriusXM Radio is a unique example of a penny stock that has achieved success while maintaining a low share price. As of April 12, SiriusXM stock was trading at about $6.23 per share, making it a near-penny stock. However, shares have soared compared to the 10 cents per share or so you might have paid for SiriusXM in 2009.
Back in the dot-com boom, the business was a Wall Street favorite, with the stock reaching $66.50 in February 2000, just before the bubble burst. SiriusXM management is still clawing its way back, but it is confident about the future, forecasting $8.35 billion in revenue in 2021.
Axsome Therapeutics Inc. (AXSM)
Axsome Therapeutics Inc. is a penny stock that follows a more typical route than others on our list. Axsome's stock fluctuated between $2 and $5 per share during 2017 and 2018, and it has very seldom traded over $10 per share before that.
Then, in 2019, the stock skyrocketed 3,600 percent, finishing at an all-time high of $106.24. The favorable findings of a clinical study of its AXS-05 medication for depressive disorders significantly impacted the stock's performance. However, encouraging findings from studies of the company's narcolepsy and migraine treatments, AXS-12 and AXS-07, boosted the stock. Now that the stock has risen to higher levels, a move of that size is less likely to occur in the future.
Amazon (AMZN)
May be Amazon is not the first name that comes to mind when thinking about penny stocks, but it, like market leader Apple, was once a bargain.Amazon's stock was just $1.50 when it went public in 1997, a long cry from the hundreds of dollars it now trades for. Amazon's stock price has been divided three times since its IPO, similar to Apple's.
The company split its stock 2-1 on June 2, 1998, 3-1 on January 5, 1999, and 2-1 on September 1, 1999, after going public at $18 per share on May 15, 1997. If you exclude the impact of splits, your Amazon shares would now be worth more than $40,000 apiece if you had purchased $18 per share at the IPO.
2 Indicators That a Penny Stock Is Worth a Fortune
Examine the Foundations
Before investing in a penny stock, investors should conduct thorough due diligence. Investing in the troubled Walter Energy Co., for example, would have seemed to be a solid investment. Walter Energy, after all, had reached a high of $143.76 per share in 2011.
Those that purchased Walter Energy when it was $0.16 were still burnt, since the firm went bankrupt shortly after. An investment in Inovio Inc. (INO), which was trading around $1 in 2008, provided investors with many chances to exit over $10 in 2009 and 2013 through 2020. The underlying differences between these two equities are striking.
Walter was a well-established corporation in the metallurgical coal industry, which was elderly and vulnerable to cyclical demand and political pressures. When world leaders pledged to reduce greenhouse gas emissions, it put even more downward pressure on Walter Energy, which was already suffering from a global coal supply glut and weakening Chinese demand.
In 2016, Walter sold its assets to two different corporations. Inovio, on the other hand, is a speculative biotechnology play with a strong cancer vaccine portfolio and great takeover potential. Although there hasn't been a takeover as of 2020, the stock continues to drop precipitously and then experience massive upward swings that shortly fade.
When studying penny stocks, you should carefully compare any prospective profits against the company's basic considerations, such as debt, cash flow, takeover possibility, and Porter's Five Forces of Competition. Before you consider purchasing a stock, you need have a comprehensive understanding of why it is currently trading at its present price.
Analyze the Life-Cycle of the Industry
A penny stock trader should look to do an industry life-cycle analysis in addition to analyzing a company's balance sheet. Some penny stock companies are still in the "pioneering phase" of their industry." The presence of a large number of small-sized competitors in the space, novel products and concepts, and low customer demand for the products characterize this initial phase.
Due to the speculative nature of this period, which is marked by a slew of start-up firms (particularly in tech or biotech), all of which have high costs and little-to-no sales to date, most of these companies will trade at extremely low prices.
The "growth phase" follows this initial phase "Many of these businesses will gain more market attention as a result of this, and their sales and demand will skyrocket.
The late-1990s tech boom (and meltdown) is a classic illustration. Many IT businesses began as penny stocks, only to see their market caps and values skyrocket as investors flocked to anything linked to the then-new notion of the Internet.
Final Thoughts
Penny stocks are by their very nature exceedingly volatile and speculative. Penny stocks are vulnerable to manipulation and fraud because they trade on OTC exchanges or through pink sheets, where listing criteria are inadequate.
The possibility for high profits, however, is a great draw, luring risk-takers into investing in these products. Despite the fact that many penny companies fail, a diligent fundamental examination and the selection of solid management teams might lead to the discovery of the sought diamond in the rough.
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