How Often Do Penny Stocks Double? Do They Even Succeed?


Penny stocks have always been somewhat of a controversy in the world of stocks. Whenever you hear stories about these stocks, they always seem to be about how a small investor turned wealthy after a mere few thousand dollars doubled after they invested in penny stocks.

Penny stocks do not double often, but every year there are at least a handful of them that do. Given the low prices of these stocks, even a small rise in the price – even a few cents – can double your investment. However, this doesn’t happen with most penny stocks.

This article will give you a brief introduction to penny stocks and the risks associated with them. Additionally, we have covered a small list of penny stocks that are expected to see some growth and also blue-chip stocks – the opposite of penny stocks – that will promise a doubling of your investment.

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An Introduction to Penny Stocks

So what are penny stocks? By definition, U.S. Securities Exchange and Commission recognizes penny stocks to be under $5, although you are likely to find that most of these shares fall in the below $2 range. The catch here is that penny stocks do not trade on large stock exchanges such as the New York Stock Exchange (NYSE) or NASDAQ. 

Instead, they are exchanged over the counter through OTC Bulletin Board (OTCBB) or Pink Sheets. This means companies trading penny stocks are not subject to any regulations or requirements, leaving them open several threats.

Scammers and Schemes

Penny stocks are unregulated, ultimately leaving them vulnerable to scammers who use methods such as pump and dump schemes and guru schemes that manipulate prices. For instance, they will create false advertisements and spread rumors about stocks they currently hold. 

Prices will rise, and investors will stock up on these in hopes of potential growth even though the chances of that happening are meager. As often is the case with penny stocks, companies may not even be making enough profits to cover costs. Once scammers have sold these stocks, they pocket the money and leave investors with worthless stocks.

Prices Fluctuate Too Often

Most investors like to take their money elsewhere because penny stocks are unreliable and unpredictable. This results in a small market of buyers and sellers. The few transactions they make are enough to have price levels swinging more than usual.

However, if you play it smart, this volatility will become the reason for your success. A ten-cent rise might double your investment, and a ten-cent fall may wipe it out as well.

Liquidation

Due to a lack of buyers in the market, penny stocks are not very liquid. You may have bought a large number of stocks on paper, but it will be challenging to find a buyer when it comes to selling them. Considering how much prices fluctuate, chances are you will sell at a loss.

Do I Invest in Penny Stocks?

Regardless of all these disadvantages, penny stocks exist for a reason. Their prices can double because of the same volatility that makes them risky. Some penny stock companies are the winners of tomorrow, these companies may have low market capitalizations, but they can turn into bigger stocks tomorrow. 

An indication of these stocks is their volume and trade prices. It is always smarter to aim for stocks with higher dollar prices and a higher trading volume of 100,000 shares per trading session. A couple of penny stocks in the healthcare sector are the most attractive and that may double by the end of 2021 and ahead, according to BTIG, are given below.

Venus Concept

This company provides services for medical aesthetics and hair restoration. Selling at $2.11 per share at the time of writing, Venus experienced a rise in sales in their second quarter. Although they struggled during the pandemic, BTIG has some confidence in their stocks.

Boxlight

A developer of technology solutions for interactive learning, Boxlight has its products used in 60 countries. They also recently acquired a new firm, Sahara Presentation Systems, that also provides interactive learning services.

Verb Technology

This is another cloud company that helps companies with applications such as webinars and e-commerce. This software is sold in nearly 60 countries, and while the company is still in its startup phase, the pandemic has called for companies to develop programs to connect people during work from their homes.

Blue-Chip Stocks and Why They Are a Favorite

Penny stocks do not double often. However, some stocks will give you twice the return on your investment more safely and reliably. Blue-chip stocks are common stocks of large companies with an authentic track record of profits and background checks. Although they are more expensive, they are more stable due to their size and the company’s growth. 

Typically, they have drawn out dividends to stockholders; however, there are always a few exceptions. They have a steady rate of return, which makes them popular among investors. Even when the stock market seems to fluctuate, and the economic situation faces a slump, these companies are still more likely to generate profits by the end of the year. 

They are a strong stock to make a part of your diversified portfolio due to their lack of volatility in price levels. Most of them continue to have a somewhat predictable pattern of rising or falling. Of course, blue-chip stocks are not the only stocks that promise a return. As an investor, you enjoy a variety of stocks that promise different levels of return. Below are a few examples of blue-chip stocks and stocks that are likely to double or result in a substantial profit.

Amazon

Known on the stock market as AMZN, Amazon is one company that has continued to grow regardless of what the situation is. Even in a global pandemic, people prefer ordering stuff online, which Amazon is perfect for. Currently, it is valued at $1 trillion. Jeff Bezos, the founder, is also the richest man in the world.

Coca-Cola Company

Traded on the market under KO, Coca-Cola is another reputable company known always to be thriving on the sales of its portfolio of beverages. The company is valued at $229 billion as of 2020. It is trusted by Warren Buffet among other investing heavy-weights.

Fastly

A cloud computing company based in America provides its services to popular social apps such as Pinterest and TikTok. Given the COVID19 pandemic, companies have felt the need to strengthen their online presence, so not only do they have a steady stream of new clients, but they also know how to retain their old ones.

Trupanion, Inc.

Known on the stock exchange as TRUP, Trupanion is an insurance company for companion animals that has seen a potential for high levels of growth. Pet ownership increases every year, meaning more and more people and looking to spend on their services.

Should You Invest in Penny Stocks?

If you wish to invest in a high-risk, high-reward asset, you can purchase penny stock with the right strategy. But ultimately, you have to ask yourself whether you are willing to risk your money in a penny stock with no predictable means of ensuring a return. 

If you are the type who enjoys the thrill of this volatile stock and do not care so much about losses as a part of your journey, penny stocks might just profit you. However, if you are risk-averse and enjoy comfort instability, we would recommend an investment in the more reliable blue-chip stocks that are more likely to double than a penny stock.

Author’s Recommendations: Top Trading and Investment Resources To Consider

Before concluding this article, I wanted to share few trading and investment resources that I have vetted, with the help of 50+ consistently profitable traders, for you. I am confident that you will greatly benefit in your trading journey by considering one or more of these resources.

Conclusion

Penny Stocks are cheap, and multiple factors can manipulate their prices. This makes them a risky asset to hold, but if you buy the stock under the right conditions and sell at the right time, you can double your investment.

BEFORE YOU GO: Don’t forget to check out my latest article – ‘Exploring Social Trading: Community, Profit, and Collaboration. I surveyed 1500+ traders to identify the impact social trading can have on your trading performance, and shared all my findings in this article. No matter where you are in your trading journey today, I am confident that you will find this article helpful!

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    Navdeep Singh

    Navdeep has been an avid trader/investor for the last 10 years and loves to share what he has learned about trading and investments here on TradeVeda. When not managing his personal portfolio or writing for TradeVeda, Navdeep loves to go outdoors on long hikes.

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