You don’t need a financial expert or anyone of any credentials to tell you why penny stocks are so appealing. That’s akin to explaining how the dazzling lights and sounds of Las Vegas might lure in tourists from out of town. It’s patently obvious. These speculative names are priced cheaply (on paper) and offer the potential of astounding gains.
Of course, most money advisors will recommend you stay away from penny stocks. I’m not a financial advisor and most importantly, I’m not your financial advisor. While I may present ideas, it’s your responsibility to perform due diligence, especially when you’re dealing with speculative trading opportunities. You won’t find hardly any professional steer you in this direction because such equity units can go bad in a hurry.
So before we navigate these treacherous waters, let’s discuss the dangers of penny stocks. Better to determine now if you should engage this market segment than later after you’ve lost a ton of money. Mainly, what makes this sector risky is that you’re dealing with the unknown. Though you can accrue significant profitability if you get it right, chances are, most if not all picks end up souring badly.
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Even when your target penny stocks rise in value, you’re not necessarily a winner. That’s because of a little thing people call the bid-ask spread. Essentially, this is both an indicator of liquidity and risk. Narrower spreads, such as in blue-chip equities, are high volume and relatively low risk because you can always find a buyer for your stock.
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On the other hand, wider spreads are low volume and high risk because you’re not guaranteed the availability of buyers to buy your stock. Thus, your asking price must come down to attract buyers, which really cuts into your profitability. You can’t just win with these penny stocks, you’ve got to win big.
Syros Pharmaceuticals (NASDAQ:SYRS)
Gold Royalty (NYSEAMERICAN:GROY)
Platinum Group Metals (NYSEAMERICAN:PLG)
Vislink Technologies (NASDAQ:VISL)
Allied Esports Entertainment (NASDAQ:AESE)
Sonim Technologies (NASDAQ:SONM)
First Graphene (OTCMKTS:FGPHF)
Will any of the above names make you wealthier? I have no idea. But I’ll be blunt: probably not. In fact, you should not engage with any of these penny stocks without realizing that all of them could fail. That’s right — a 100% failure rate. If you can accept that, then maybe — just maybe — you’re ready for these speculative ideas.
Story continuesPenny Stocks For June: Syros Pharmaceuticals (SYRS)A close-up concept image of a tiny glass vial with a strand of DNA in it.
No set definition exists regarding what qualifies as penny stocks. However, the general consensus is that any equity unit under $5 earns this somewhat dubious title. Therefore, I fully admit that Syros Pharmaceuticals, at the time of writing price of $5.94, stretches this definition. Still, I want to include SYRS stock because it’s on many speculators’ radar.
I suspect, though I’m not completely sure, that it has to do with Syros’ specialty in gene therapy; specifically, through controlling how genes are expressed which determine its type and function. The company’s underlying therapeutic pipeline has profound implications for how we address cancer and genetic diseases.
Also, as we (thankfully) move away from the novel coronavirus pandemic, the pharmaceutical/biotechnology industry will benefit from increased demand as the broader healthcare narrative shifts back from the acute (Covid-19) to the chronic (cancer, long-term diseases).
Of course, one of the risks is that the SARS-CoV-2 virus rears its ugly head again, which would be problematic for SYRS stock. Also, you should note that while Syros achieved strong year-over-year revenue growth in the first quarter of 2021, sales slipped sequentially from Q4 2020.
Still, if you like the narrative of advanced gene therapies, you should put SYRS on your list of penny stocks to consider.
Gold Royalty (GROY)A gold bar along with some coins made of precious metals. gold stocks
Source: allstars / Shutterstock.com
I’m somewhat familiar with the next name on our list, Gold Royalty, because I covered its initial public offering for Benzinga. Gold Royalty is a wholly owned subsidiary of GoldMining (NYSEAMERICAN:GLDG), which in its own right is one of the penny stocks to consider. After all, GLDG found itself up almost 15% at one point over the trailing month.
But what really appeals to me about GROY stock is, as its brand suggests, its underlining royalty business. As I wrote for Benzinga:
“Structured as a royalty company, Gold Royalty features a significant advantage over traditional gold miners and gold-exploration firms. Rather than incur direct exposure to the underlying asset and a particular project’s success, royalty firms instead provide much-needed capital for mining and exploration enterprises. In return, they receive a portion of the project revenue as contractually stipulated.”
Currently, the storyline for GROY stock stems from the return of the fear trade. For one thing, the major indices incurred some wobbles recently, which trigger alarm. Also, interest in speculation could be dying off, as evidenced by the cryptocurrency collapse. If so, that’s a problem because speculation is rampant these days.
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However, the volatility of gold prices is also one of the biggest risk factors for GROY. Therefore, while the fundamentals might make sense, you can still lose money on precious metals-based penny stocks.
Penny Stocks For June: Platinum Group Metals (PLG)A pile of platinum rocks.
I love precious metals so I’m going to let my bias show here with my next idea: Platinum Group Metals. Invariably, because of the wildness of this sector, you don’t want to invest too much of your portfolio here. And when you do, you want a majority of your holdings in gold, which has universally accepted intrinsic value and as such, relatively strong volume and overall fungibility.
But as you get acclimated to the dark side of the moon, you may want to consider venturing into the other precious metals, platinum and palladium. Both are industrial metals, historically featuring heavily in the automotive industry as the materials used to make catalytic converters. Because of their rarity and utility, though, they’re also vital for national security interests.
This gets very complicated because these metals will be vital for future innovations, such as the eventual mass integration of electric vehicles. As you know, China competes heavily in this market (although I do have some opinions about this). Additionally, Russia dominates the palladium market. So we got some big industries in the platinum/palladium equation that could boost demand and therefore, PLG stock.
Nevertheless, the risk factor for Platinum Group Metals is again the volatility of the underlying market. Only invest in penny stocks in this space if you’ve got the stomach to handle instability and disappointment.
Vislink Technologies (VISL)Various sports equipment like a football, soccer ball and volleyball on green grass.
Specializing in high-quality live video production and delivery, Vislink Technologies initially fell apart during the onslaught of the coronavirus pandemic. But quickly thereafter, VISL stock made a big comeback. Indeed, this was one of the top-performing penny stocks for the second quarter of last year.
True, the coronavirus imposed a dark cloud over Vislink because of its potential impact on live events, particularly sports. As you know, this caused yet another consumer shift from cable TV to streaming services. Without sports, what’s the point of cable?
However, as it became clear that professional sports leagues were committed to bringing back athletic entertainment safely and responsibly, the narrative for VISL changed dramatically. Further, we all got a taste of Vislink’s acumen from the last Super Bowl. If you thought that this year’s coverage seemed to bring people closer to the action, you weren’t imagining things: that was Vislink’s technology hard at work.
Thus, it would seem that the deflation in investor demand following the Super Bowl would be a discounted opportunity. Personally, I’m thinking about adding VISL to my portfolio.
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Still, it’s a risky venture because video production is a competitive arena. Further, as Morning Consult reported, fewer younger people are as sports-crazed as older demographics.
Penny Stocks For June: Allied Esports Entertainment (AESE)Gamer Playing and Winning in First-Person Shooter Online Video Game on His Personal Computer
Source: Gorodenkoff / Shutterstock.com
But what are young people interested in these days? If you answered video games, you’d be correct. According to Grand View Research, the global video game market achieved a valuation of $151 billion in 2019. Further, by 2027, the sector could generate revenue totaling over $291 billion. Basically, video games will become a bigger economy than the nation of Chile.
Further, young people aren’t just interested in playing video games, they’re interested in watching others play. Though it might sound like an oxymoron to baby boomers, in contemporary circles, you can utter the phrase “professional gamer” without a hint of irony. And that’s where Allied Esports Entertainment comes into the picture.
Basically, Allied Esports brings together the best of both worlds — the rocking, relevant movement of esports and the energy that can only come from live arenas. While that might also seem like an oxymoron (who wants to leave their home to play video games?) it’s actually not. Esports is not only a viable revenue-generating industry but a pop culture phenomenon.
Still, the risk with AESE stock is the lingering impact of the pandemic. If circumstances worsen, that will likely dampen high-contact businesses. Therefore, approach penny stocks in this market segment with caution.
Sonim Technologies (SONM)Hands holding smartphone at night with car lights and street in background
Okay, so you may have noticed that this list of penny stocks did not include opportunities that would literally categorize as such. With the next two ideas, that all changes, beginning with Sonim Technologies.
In the world of connectivity technologies, manufacturers focus on integrating as many attributes into as sleek and small of a physical space as possible. With Sonim Technologies, this company has an almost opposite approach. Rather than zero in on size, Sonim specializes in durability and reliability.
Its phones and handset communication devices may not win beauty pageants. However, what they do offer is the capability of reaching out to others under a variety of circumstances. Therefore, Sonim products offer incredible relevance to frontline workers, first responders and any professional operating in mission-critical industries.
Better yet, SONM stock was one of the most astounding penny stocks between late October of last year until around mid-February of this year. Yes, shares have come down substantially since then. But that also opens the door for a speculative opportunity.
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Of course, this makes SONM incredibly risky as well. Fundamentally, calls for greater accountability in law enforcement has caused many officers to quit. That could be a severe impact for Sonim down the line.
Penny Stocks For June: First Graphene (FGPHF)A digital illustration of 3D graphene molecules.
I’m saving the most speculative idea for last. But don’t think that I have negative feelings about First Graphene because of all the penny stocks on this list, this is the one that I own. Of course, you shouldn’t get carried away because of this fact. You should always perform due diligence, whether I have skin in the game or not.
With that caveat out of the way, let’s get into the good stuff. At the heart of this narrative is graphene, a “wonder material” that is a mere one atom thick. As you might imagine, it’s the thinnest material known to man, yet has 200 times the strength of steel. It has profound implications across the board of industry, ranging from bolstering concrete and thermoplastic resilience to its use in next-generation batteries and long-term energy storage solutions.
However, the graphene market has no current standardization and therefore, it’s incredibly difficult to regulate. Thus, there’s an unfortunate plethora of fly-by-night operations that claim specialization in graphene but without provenance.
What makes First Graphene different is that the company is focusing on research and development first before rushing to the commercial market under the measure-twice-cut-once principle. Still, FGPHF stock has serious substance as the underlying company previously secured partnerships with mining industry giants BHP (NYSE:BHP), Fortescue (OTCMKTS:FSUGY) and Rio Tinto (NYSE:RIO).
One warning, however: graphene is still in its early phase so you should buckle up for a wild ride.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Josh Enomoto held a LONG position in FGPHF and the precious metals mentioned above. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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