The stock market can be a gamble. The secret: It doesn’t always have to be! Penny stocks can be a good bet and if you go into your trading with the right information, you might even win big.
Robinhood is one of the most accessible apps for traders, and that’s why we’ve made a short recap on the best penny stocks on Robinhood.
Millions of traders around the world have been influenced by the idea of earning money with penny stocks. Recently, traders have been able to taste what penny stocks are capable of, thanks to the big breakouts in stocks like AMC, GME, and CEI.
If you are discussing cheap stocks like these, you should know that they don’t need to jump hundreds of dollars to provide large returns.
The stock market is a stomping ground for tens of millions of new traders who seek to make money through it. Robinhood allows investors with limited capital and an understanding of options but who want to leverage their capital to buy stocks for “pennies.”
In the past, the OTC market offered the most popular when it came to stocks under $1. However, you can still find penny stocks on Nasdaq and NYSE trading literally for pennies!
In recent days, the Dow Jones and S&P 500 have reached new highs. But, contrary to popular belief, September and October have been tough months for the markets. The month of October has been particularly volatile. A wide-ranging correction is looming, so investors are buying penny stocks.
Understandably, an investor might be hesitant to add new stocks at this stage. If this applies to you, perhaps penny stocks are more appealing to you.
Are you searching for cheap stocks to buy on Robinhood? You have a variety of choices. Here are five stock picks that have gained significant traction this week and could be high on retail traders’ watch lists, according to NASDAQ:
- Cinedigm (NASDAQ: CIDM)
- Vaalco Energy (NYSE: EGY)
- Globalstar (NYSEAMERICAN: GSAT)
- Mind Medicine (NASDAQ: MNMD)
- Romeo Power (NYSE: RMO)
5 Best Penny Stocks On Robinhood
Cinedigm (NASDAQ: CIDM)
Since the start of the year, numerous penny stocks have struggled. That is not the case for CIDM stock. The shares of this media and streaming company, which rose during the meme stock waves, have improved.
Cinedigm’s year-to-date growth is up 256.7%. Soon, it may not be able to achieve another 256.7%. However, given the extent to which it has scaled up its streaming operations? One more big move higher would not be out of the question.
There is a possibility that the big media and tech conglomerates will dominate the streaming business. Independent names like Cinedigm have a difficult time grabbing market share because of this. However, in the past year, the company’s subscriber numbers and streaming ad revenues have seen triple-digit percentage growth based on its success in acquiring content libraries and offering a wide array of ad-supported and subscription-based streaming channels.
With revenue projected at $49.3 million this fiscal year (ending March 2022), it has plenty of room to grow. CIDM stock may soar in value if it continues to do so, delivering impressive growth numbers. A share price of $5 per share would be a significant increase from today’s $2.40.
Vaalco Energy (NYSE: EGY)
In 2021, oil and gas penny stocks have seen incredible returns after recovering from pandemic declines and getting back to multi-year highs. Yet investors who are a bit late to the party may miss out on a lot of easy money.
EGY stock, for example. During the past year, shares of this small exploration and production company with assets in West Africa have gained 83% and more than 214% over the last 12 months.
Despite its gains over the past year, it may seem as though it does not have much room for further growth. However, in this inflationary environment, oil and gas prices are likely to remain high, so it is likely to produce $1.36 per share in earnings next year, just as projections predict it will happen in 2022.
Moreover, news that the company recently replaced the production, storage, and offloading unit at its Etame site in Gabon hints at lower costs and higher earnings in the future.
Achieving results in-line with expectations may be enough to send the stock above $5 per share in light of the recent price of around $3.25 per share.
Globalstar (NYSEAMERICAN: GSAT)
A flurry of trading has been going on in Globalstar’s shares since August. What’s the reason? A potential partnership with Apple (NASDAQ: APPL) has been rumored. Late August and early September, it reached prices above $2.50 per share because of news of this acquisition.
Nevertheless, after Apple has not specifically stated whether its iPhone 13 will be able to connect to satellites, these hopes have been dashed. It’s not something that is expected from this company anyway. As a result, GSAT shares dropped to around $1.50 per share.
However, as my InvestorPlace colleague Chris MacDonald recently wrote, Globalstar/Apple rumors are back. A new wave of hope and hype has emerged. This small satellite service provider may still sign on the tech giant as a customer. But even if the deal is not in the works, that doesn’t mean skipping out on Globalstar is a good idea.
This stock remains in orbit with several promising catalysts, as Louis Navellier discussed in a recent article. This is in relation to the possibility of acquiring a large IoT (internet of things) contract with an alternative energy company. This would allow the company to unlock the value of its “hidden assets” on its balance sheet as well. As well as its C-band spectrum, it has a substantial tax loss carryforward. This could be another penny stock that breaks free from this status, so expect further wild price movement.
Mind Medicine (NASDAQ: MNMD)
On April 27, it briefly reached levels above penny stock prices. The price of Mind Medicine (Mind Med) shares has fallen back to the low single digits ever since. Investors may continue to be disappointed in the company’s attempts to become an FDA-approved treatment for psychedelics such as LSD.
However, MNMD stock, in the long run, has the potential to become worth materially more than what it trades for today, even though it may not set the world on fire in the next month or even next year. If the research it is conducting today leads to therapies and treatments, it can commercialize.
MindMed’s main project at the moment is Project Lucy. It explores the possibility of using LSD to treat anxiety. Using comparable anxiety treatments like Prozac as a guide, this research may lead to a pharmaceutical product generating billions of dollars in annual revenue.
Furthermore, the company’s pipeline includes promising candidates that could soon become blockbusters. Although it is a pre-revenue company with a market capitalization of $866.1 million, it may seem expensive to some. However, what if Mind Medicine is worth many times that amount in years to come? Buying some for $2.35 a share could be worth it!
Romeo Power (NYSE: RMO)
In contrast to the four stocks discussed above, RMO has not been a penny stock for that long. Stock in the electric vehicle (EV) battery play started off trading above $20 per share after going public via a merger with a SPAC (special purpose acquisition company) late last year.
In the spring of 2020, excitement regarding incoming President Joe Biden’s clean energy agenda fueled the off-the-charts bullishness for electric vehicles and related plays. Its share price has plummeted to around $4.77 per share due to dialed-back expectations for how fast vehicle electrification would happen, coupled with disappointing quarterly results.
Currently, it’s unclear whether Romeo Power will reach the high expectations set while the SPAC deal was still pending. The company is competing with companies such as Microvast (NASDAQ: MVST) in the emerging commercial EV battery market. Despite that, it has only moderate short-interest (26% of outstanding float), so any positive news could send it bouncing back in a big way.
How about this example? It might emerge from penny stock territory if Congress passes its infrastructure bill. Investing in this “green wave” play may be appealing to investors bullish on the electrification trend.
Considerations when Investing in Penny Stocks
There is a reason why companies become penny stocks. A company’s performance can be affected by declining market share (or a declining market), decreasing profitability, economic shocks, changes in customer tastes or preferences, poor management, or anything else affecting the company’s performance over time.
Penny stocks carry several risk items you should be aware of before investing:
- Lack of liquidity:
Thinly traded penny stocks may have low volatility and low trading volumes. Because of wide bid-ask spreads and low availability and demand, you might not be able to sell the shares quickly or at fair prices.
- Relaxed accounting standards:
There have been instances when penny stocks have gone into the doldrums due to poor financial decision-making or even poor (or fraudulent) accounting. Investing in stocks that drop quickly may indicate that news has surfaced about a company cooking the books or taking risks that are simply too risky.
- Large and persistent insider sales:
Insiders may sell stock even under ideal circumstances in some cases. For example, you might do this to diversify your holdings beyond just holding company stock, to finance a major purchase, to pay college tuition (or pay off student loans), or for any number of reasons. Nonetheless, insiders who sell material amounts of the stock relative to their full holdings without notice could signal something negative about the stock. Occasionally, this could also indicate insider trading.
- Fundamental change in business conditions or circumstances:
It could occur because a competitive advantage was lost unexpectedly, like a patent or a key supplier. A regulator may also have imposed a harsh penalty or prohibited an organization from operating in a particular market.
Furthermore, these factors, if weighed and assessed correctly, could result in well-timed market purchases for penny stock traders, resulting in handsome profits.
Investing involves a wide range of possible outcomes, so it is impossible to guarantee success, so you are the one who determines whether it will happen!
Partner at Vega Capital Management - a private funds management company.
An experienced portfolio manager with 10+ years of proven and reputable track record in investment management and financial analysis. Currently, a partner at one of the fastest-growing private fund management companies in southeast Europe, Kiril has been tending to a loyal international base of client-investors and partners. When he is not crunching numbers and increasing his client’s wealth, he reminisces about his Michelin-star restaurant cheffing years and fondness of the culinary arts.