Image source: Pixabay
Since penny stocks are largely considered ‘contrarian investment options’ in financial portfolios, we will dispense with the formalities and jump right into it. The global markets are in a state of flux, what with geopolitical considerations (pandemic, US elections, potential reversals of major trade policies, et al).
While the mainstream world watches the likes of AAPL, MSFT, FB, TWTR, TSLA, and others with bated breath, there are other stocks flying under the radar so to speak. Known as penny stocks, they trade at under $5 a pop, and they have the potential for outsized gains. Owing to their extreme volatility, and relatively low volume of trading, price swings are an all too common occurrence with these OTC stocks.
With thousands of penny stocks traded as pink sheets, and over-the-counter, it’s only worth considering a small percentage of top performing entities. In this post, we will explore the possibilities with stocks like SPCE: NYSE, DFFN: NASDAQ, and NYSEAMERICAN: EMAN. It is foolhardy to simply buy or sell financial instruments without conducting due diligence. These stocks have shown merit, and are strong contenders for further profit potential in November.
SPCE: NYSE – Virgin Galactic Holdings Inc
Source: Trading View (SPCE: NYSE)
Virgin Galactic Holdings Inc (SPCE:NYSE) is certainly not a penny stock, but it’s a relatively low-priced option with a clear trajectory. Priced around $22.27 per share, the stock has shown lots of upside potential. For the year to date, it has been relatively flat, but its recent performance is where the money is at. Between October and November 2020, this stock’s price has whipsawed like a rollercoaster; hellbent on plunging into an abyss, only to reverse course and accelerate up the slope once again.
From a high of $24 + in late October to a low of around $17 in early November, there have been plenty of profit-taking opportunities with this stock. Granted, it is rated as overvalued, with a market capitalization of $5.219 billion. However, it has steadily risen in November, presenting traders with a rather low-cost option with upside potential. The kicker comes in with the latest analyst report about Virgin Galactic Holdings Inc, on November 11, 2020.
While the analysts expect the stock to perform poorly, the price action on the market is showing a different trajectory, with the stock rising steadily. The analysts expect 2021 revenues to hit $24 million. While EPS will take a hit, traders may use this opportunity to short the stock and cash in on the downside. Either way, there is enough volatility in this option to warrant a closer look. Many traders decided to buy on the dip and catch the wave on the way up, but right now it looks like it hit a peak, and it could be on its way down.
Remember: The trend is your friend when you’re watching stock prices.
DFFN: NASDAQ – Diffusion Pharmaceuticals Inc
Source: Trading View (DFFN: NASDAQ)
Diffusion Pharmaceuticals Inc currently trades on the NASDAQ at around $0.71 per share. This is a true penny stock in every sense of the word, and certainly one of the best penny stocks at this time. The company has a market capitalization of around $45.432 million, and is deemed overvalued by analysts. The short-term, mid-term, and long-term projections for the stock are bearish, which is attested to by the above chart.
Clearly the price action on this one is bearish with futures trading to the downside. The stock has endured mixed performances since 2019, beating expectations in Q4 2019, and in Q1 2020, only to miss earnings expectations in Q2 2020, and Q3 2020. The stock’s 1 year price target is $2.75, which seems a long way away given the strong bearish trend we are seeing.
There are a few notable trends evident from the stock’s price in 2020. When it spikes, it rallies dramatically, only to see profit takers cashing in by offloading. This presents opportunities to buy on the dip which is exactly what has been taking place several times in the last few months.
The stock has been trending lower since it spiked in August, with lower deviations between highs and lows, as time has progressed. This indicates a degree of stabilization. The technical indicators for the stock indicate that it is a strong. This clinical stage company creates a product known as Trance Sodium Crocetinate. The latest news from the company – its Q3 2020 financial results – are paraphrased as follows:
‘… Strengthened leadership team with additions and appointments to key management positions… Ended quarter with $21.9 million in cash and cash equivalents… Announced dosing of first two patients in phase 1B clinical trial…’
For the year-to-date, the stock is up from approximately $0.51 to its current price of around $0.71. So, while it is trending bearish over the short-term, it is still a net gainer for 2020.
NYSEAMERICAN: EMAN – eMagin Corporation Optical Systems
Source: Bloomberg NYSEAMERICAN: EMAN
EMAN:US has performed markedly well for the year-to-date, more than doubling in value in an unsettled market. The stock has a 52-week trading range of $0.14 on the low end, and $1.90 on the high end. At its current price of $1.10 per share (Monday, 16 November 2020) the company has a market capitalization of $74.25 million. The stock reported a spectacular 1-year return of 214.29%. The company’s third-quarter earnings, fuelled in large part by strong military sales have largely offset the commercial sales of the company. As a provider of defense industry night-vision goggles and gear for F-35 helmets, EMAN’s Q3 revenues came in at $7.3 million, down $0.6 million from the same period in 2019.
The company admittedly raked in lower figures owing to the pandemic. It is uncertain which way the company stock will go, given that there will be a change in the White House on January 20, 2021. If the Biden administration chooses to sequester military funding, the stock could go south, prompting calls for overwhelmingly bearish futures contracts. If it’s business as usual in 2021, and the Pfizer vaccine, Johnson & Johnson vaccine, and others go into widescale production and distribution, we could see a strong reversal in the price and value of this opportunity.