Penny stocks fascinate new and experienced investors alike. They offer the exciting possibility of catching a greatly undervalued stock as it rises to a large multiple of its depressed purchase price. For most purposes, a penny stock is one that sells for as little as one penny. The SEC rule is that they must sell for five dollars or less, many other standards are lower than five dollars; for example, some investment houses consider a three dollar or less rule. A common characteristic of penny stocks that they trade over the counter or pink sheets, and that the companies have a past or present struggle with liquidity. The trading action in some penny stocks can be intense and widely held. The increases in value can be dramatic.
Five of the Hottest Penny Stocks
Five items that should be in any discussion of hot penny stocks are Genetic Technologies, Miller Energy Resources, Atlantic Power Corporation, Prima BioMed Ltd. (Nasdaq: PBMD), and Cincinnati Bell Inc. (NYSE/CBB). These stocks have shown outstanding growth in 2015 and occupy potentially strong positions in expanding market sectors.
• Genetic Technologies Ltd. (Nasdaq ADR: GENE) began the year at $0.40 per share and rose to $3.68, that represents a 93 percent yield. Based in Australia, this life sciences company offers tests for many of the prevalent forms of cancer and neurological diseases. A recent development and company news, they plan to open new breast examination and treatment facilities that will offer tests to high-risk patients.
• Miller Energy Resources Inc. (NYSE: MILL) is an exploration and [production company based in Knoxville, Tennessee. Its stocks began 2015 at $1.27 to finish recently at $ 2.02 per share; this was an increase of 65 percent on a year to date of report basis. Based in Knoxville, Tenn., Miller is an independent energy exploration and production company that searches, develops, and operates oil and gas reserves in Alaska.
• Atlantic Power Corporation (NYSE/AT) is an electric power provider serving the Eastern US and Canada. It recently sold off its wind power unit to streamline operations and to work with increased cash flow. It uses clean sources of power generation and has worked to reduce debt and leverage.
• Prima BioMed Ltd. (Nasdaq: PBMD) shares have risen by 76 percent to $1.18. The company makes commercial applications of medical and biotech products. It is an Australian based company that develops immunocellular products for cancer treatment and therapy. It recently got approval from the EMA on developing its main product for the treatment of breast cancer.
• Cincinnati Bell Inc. (NYSE/CBB) provides communications solutions to consumers in the Greater Cincinnati Area. Already the areas large telephone provider, it offers high-speed internet, video, and voice services. FIOPTICS was a fast-growing area for the company. It increased subscribers by 28 percent on a year to year comparable basis for its Internet, telephone, and entertainment packages.
Hedging Against Volatility
Widely held stocks and those with high trading volumes are less vulnerable to manipulation by insiders. Sometimes called pump and dump, persons with a stake in the stock can do things to inflate its price artificially. By causing a rush to buy the stock, the price and the value of their holdings will increase. To guard against volatility in penny stocks, many investors do not hold them longer than needed to get a positive margin. Selling the stock is easier when there are many active buyers trading the stock.
Penny Stocks and Investment Strategy
Penny stocks may require different treatment than other parts of an investment portfolio. When a penny stock rises in value and provides a positive margin, the investor gets an opportunity to take profits and increase the cash position. One can consider this a great chance to close an investment, and use the stronger cash position to find other rising stars.
Getting the Most from Penny Stocks
Many experts urge caution when buying penny stocks, and many new investors start with them because of the low prices. Penny stocks are far more volatile than other stocks due to the regulatory environment and the vulnerability to manipulation by insiders. When selecting penny stocks, many experts urge caution and to look for certain characteristics. They suggest stocks that are near yearly highs and have large trading volumes. Learning about the issuer is the indispensable step when making penny stock investments. Growth often depends upon business circumstances such as company trends, opportunities, and valuable innovations.