Penny Stocks: Best Penny Stocks to Buy Today

Last Updated: July 30, 2021

Table of Contents

• Penny Stocks
• What are penny stocks?
• Some Updates
• Things to know about penny stocks
• Key features about penny stocks
• Why deploy investments in penny stocks?
• Risks of investing in penny stocks
• FAQ

Penny Stocks

Wondering what are penny stocks? There is an extensive penny stocks list that you can peruse in this regard. Of course, you may have already heard of penny stocks NSE and the best Indian penny stocks being covered as part of investment sessions, programs and the like. However, before you delve deeper into which penny stocks to buy today and the top global and Indian penny stocks, make sure that you know more about these types of stocks and what they essentially stand for.

What are penny stocks?

Before zeroing in on the penny stocks to buy or the best penny stocks, it is important to know what they essentially mean. Penny stocks are basically stocks of smaller companies or entities which trade for lower than $5 for each share. This is the globally recognized definition that you should keep in mind. Although some penny shares do trade on bigger exchanges like the NYSE (New York Stock Exchange) and others, most of them trade through OTC (over the counter) transactions without any trading floor. Quotations are also processed electronically. This is one factor that you should remember while checking out any Indian penny stocks list above all else.

Some Updates

There are several important updates that may influence the best penny stocks to buy in your list and penny share prices among other factors. These are global updates concerning the top 10 penny stocks and even multi bagger penny stocks for 2020-21. EVC (Entravision Communications Corporation), the Spanish language market leader, has witnessed 40% of growth and the market is coming in sync with the nice turnaround at the company with growing sales volumes and a healthy 14.55 P/E ratio. The stock is one of the best value for money propositions globally at the moment. Entravision stocks may take a mini break from their growth and investors may book profits likewise. The shares may drop from current peaks in the short term although stocks may eventually go higher than $7 in the long haul.

Leading provider of online education, Zovio Inc or ZVO, has gone up to $7 for each share sometime earlier. Yet, the stock often has issues in holding onto higher price thresholds, owing to various factors including a dip in sales. Yet, ZVO may have ample muscle through activities like coding boot camps and stronger financial ratios to help it keep growing again. The stock has gone up by approximately 22% since it was re-examined at May-end. Shares are expected to ultimately go up to $3.50 and higher. Holding onto this global penny stock may be a smart move for investors who remain patient.

5G player AMPG (AmpliTech Group, Inc) is another interesting penny stock which saw growth of 30% in the mid-month period. A pullback happened thereafter, which was not very surprising with investors simply opting for short-term profits as per several experts. The company is already posting several new deals and has huge potential according to industry reports. The financials are decent and those investors who feel that a revolution may happen in the 5G space should carefully consider their decision to hold onto this one. Creative Realities Inc. (CREX) is another penny stock worth watching out for. Creative Realities Inc. or CREX makes digital advertising solutions for several entities throughout North America. The interest in this stock has arisen owing to the recent statements from the company’s CEO, Rick Mills.

He stated that the company wishes to discuss a vital pending contract and this could ensure $6 million in extra revenues for every quarter for at least 4-6 upcoming quarters in succession. As stated earlier by the CEO on the prior call, the results will depend upon execution of the contract and the customer decision to launch. The contract may commence fulfillment in the third quarter and the initial rollout may be slower owing to constraints linked to supply. Taking into account that sales have worked out to $4.99 million over the last two quarters and $5 million, it means that when the contract gets implemented, revenues may double every quarter for the period mentioned, assuming that the same level stays for other sales. The stock is currently trading at roughly $2.23 per share and there is an element of risk although three consecutive positive EBITDA quarters indicate that the company is finally coming back on track with the country recovering steadily from the pandemic and its impact. With the order book growing, higher cash volumes for future growth and attractive high-profile deals to follow, CREX prices may grow by anywhere between 50-75% from the current trajectory as per reports.

Things to know about penny stocks

Before you delve deeper into the best penny stocks to buy now or the latest penny share list, you should keep analyzing what penny stocks will mean in the Indian context. There is always a penny stocks list 2020-21 that you can follow along with debt free penny stocks. These are forms of market traded securities which draw nominal pricing. The securities are mostly given by companies which have lower market capitalization rates. Hence, they are also known as nano cap stocks, small cap stocks and micro cap stocks, depending upon the market capitalization levels of the company. The market capitalization rate of the company is worked out on the basis of the product of the present price of its shares or the stocks and the number of shares outstanding, i.e. the NAV (net asset value) of shares x number of outstanding stocks. 

On the basis of this factor, companies are already indexed throughout recognized stock exchanges like the Bombay Stock Exchange (BSE) and the National Stock Exchange or NSE. Penny stock based lists are often contained in the lower sections of stock exchanges or stock exchanges which are not as well-known. Large cap entities are those with market capitalization of Rs. 20,000 crore or higher, small cap companies are those with market capitalization below Rs. 5,000 crore and mid cap companies are those with market capitalization between Rs. 5,000 and Rs. 20,000 crore. Penny stocks will hence be linked to companies which have market capitalization lesser than Rs. 5,000 crore.

Key features about penny stocks

Some of the major features are given for your perusal-

Higher Returns- The stocks offer comparatively higher returns than other types of securities. These shares are majorly issued by micro and small cap companies with huge growth potential. Penny stocks are also riskier, taking into account the sheer response intensity in relation to fluctuations in the market.

Illiquid Nature- Penny stocks are mostly illiquid by nature, taking into account the fact that companies issuing the same are comparatively unpopular as per experts. It becomes challenging to find individual buyers for these stocks, hence offering lower liquidity at the time of emergencies.

Lower Costs- Penny stocks in India are mostly priced at thresholds lower than Rs. 10 and hence you may buy a considerable amount of stock units from the list with a comparatively smaller investment.

Unpredictable Prices- Penny stocks may not draw suitable pricing at the time of the sale. It may lead to zero or lower profit margins. At the same time, these stocks may draw prices that are considerably higher as compared to the cost, leading to a sizable profit.

Why deploy investments in penny stocks?

Penny stocks are securities with ample risks and rewards. Companies issuing these stocks may grow into bigger entities in future while yielding returns that are above average or fail at the initial stage itself, incurring sizable losses in the bargain. You should still consider keeping penny stocks in your investment portfolio. Firstly, some of the penny stocks have considerable potential for evolving into multi-bagger stocks in the future, meaning shares which have yields in multiples of the amount for investments. If any particular security earns double of its investment amount, it is known as a double bagger and if the returns are ten times of the value of investment, it will be known as a ten-bagger. Inclusion of these stocks in the portfolio may lead to a considerable increase in prospects of earning returns and they may surpass performance of mid and large cap funds likewise.

Penny stocks are also comparatively inexpensive and investing is a cheaper affair. You can invest without losing a big chunk of your corpus. You only have to allocate a smaller portion of the investment portfolio for buying penny stocks in India, giving you ample resources to keep investing in other secure channels while lowering associated risks considerably.

Risks of investing in penny stocks

Considering the sheer scale at which the companies providing these stocks usually function, they are more vulnerable towards huge risks. These stocks are considerably dependent upon market conditions for value growth. Along with basic risks of investing in any market linked security, there are other types of risks linked to penny stocks as well. Some major risks include the following:

Limited nature of information- Taking into account that most companies issuing these penny stocks are basically start-ups, there is always limited information available on financial reliability and sound nature of operations along with growth prospects in the future, past market record and other factors. Individuals may end up investing in them without proper knowledge. Hence, it is vital to do research thoroughly into the penny stock list before deploying any investment accordingly.

Scams & Issues- Scams in the penny stock segment have been widespread globally and throughout international financial markets. The pump and dump method has been seen earlier, where scammers and entities purchase a sizable amount of penny stocks, leading to sudden inflation in values, drawing more investors to these stocks. Yet, once buyers have invested in these stocks in bigger numbers, the scammers and entities will then dump their shares. This leads to an instant reduction in values and this is followed by losses as investors attempt to sell off the same.

Hence, it is important to carefully peruse any list of Indian penny stocks while also gathering ample information on the companies in question. Get all data on the stability of the company, growth prospects in the future, past track record and overall financial stability. Transparent companies will provide ample information on these parameters to investors.

FAQ

• Q: Can you make money on penny stocks?
  A:

  Yes you can make money on penny stocks, if you take the right decisions. However, you may lose money as well. Investors should only invest in companies which are profitable. Investing in penny stocks is not like trading in regular stocks. You should know all vital information about the companies in question before taking the plunge. 

• Q: What is penny stock in India?
  A:

  Penny stocks indicate the common shares issued by smaller public entities which trade infrequently, thereby limiting overall liabilities or the number of ready buyers within the marketplace. Penny stocks are traded in India for amounts of Rs. 10 or lower per share.

• Q: What is the best penny stock?
  A:

  The leading penny stocks as per several experts include the GEE Group, Document Security Systems Inc, New Gold Inc, Meten EdtechX Education Group Ltd and Acasti Pharma Inc. 

• Q: Are penny stocks high-risk?
  A:

  There is a common perception in the stock market and with regard to riskier penny stocks, possibilities of future rewards will naturally be lower. Several penny stock companies may go bankrupt or fail at the initial stages of their journey itself. Conversely, they may transform into bigger companies with considerable rewards for early investors in the bargain. Taking the right decisions is dependent upon available market knowledge regarding these entities. Penny stocks are mostly issued by smaller companies while costing Rs.10 or lower per share. They may attract more interest from several investors who wish to inch closer to the ground floor price threshold. Penny stocks have higher risks than normal levels including higher probability of losses, lack of transparency regarding company information and lower liquidity levels. This does contribute towards making them comparatively high-risk investments although you can buy a larger amount of shares with a smaller initial corpus.