Penny Stocks Continue Heating Up Retail Trading Accounts
This year, a mix of momentum from penny stocks and retail traders grouping to “fight back at the suits” has triggered a unique market scenario. Where mom and pop traders were once considered “dumb money,” 2021 has been a much different case for the average trader.
This all came to a head when the great short squeeze of GameStop and more than a handful of other companies (including penny stocks) surged well-beyond all-time highs that were previously set. The Robinhood and Reddit armies triggered huge breakouts.
This year’s trading was already off to an interesting start, with small-cap companies leading the charge. Thanks to the new President, there has been a positive light shed on small businesses. In turn, we saw the small-cap markets surge. Case in point, the Russell 2000 Small-Cap Index ETF (NYSE: IWM) has far outpaced broader market ETFs like the S&P 500 (NYSE: SPY) and the Nasdaq ETF (NASDAQ: QQQ).
Just to give you an idea, year-to-date (including the recent pullbacks), the IWM is up 13% as of Tuesday’s close. The S&P’s SPY is only up 3% and the Nasdaq QQQ is actually down 1%, year-to-date. So where would you think the momentum is building right now?
In any case, March is off to a very volatile start. But that doesn’t negate the fact that penny stocks have remained a focus. With a clear strength in small-cap stocks right now, here are a few trending names captivating attention this week. Will they be on your watch list?
Robinhood Penny Stocks To Watch
- Express Inc. (NYSE: EXPR)
- Vislink Technologies (NASDAQ: VISL)
- GTT Communications Inc. (NYSE: GTT)
- Castor Maritime Inc. (NASDAQ: CTRM)
Penny Stocks On Robinhood To Buy [or avoid] #1: Express Inc.
Express Inc. was one of the companies on that list of Reddit penny stocks to short-squeeze earlier this year. In sympathy with GameStop, EXPR had also been identified as a company with heavy short interest. It’s also one of the epicenter penny stocks or “reopening stocks” that traders have been monitoring for a while as well. The apparel retailer had gotten struck thanks to last year’s pandemic. But a shift in focus to a more digital retail footprint has been a key to the company’s hopeful recovery.
This week, the company further emphasized its progress with the latest round of earnings. Express reported Q4 & full-year 2020 results on Wednesday. Though same-store sales were down 27%, the company delivered increased traffic and conversions to its eCommerce division. To this end, the company also announced a $1 billion plan for its eCommerce channel in 2024. The company was also able to reduce its four-quarter expenses significantly, versus last year.
“Over the past twelve months, we have effectively managed our liquidity while meaningfully advancing the EXPRESSway Forward strategy. We took appropriate action and made progress despite extraordinary circumstances and market conditions,” said Tim Baxter, Chief Executive Officer. “We are well-positioned to accelerate in 2021. I expect sales to continue improving sequentially each quarter, and that we will return to positive EBITDA in the back half of the year.”
With this progress, the market has reacted favorably to the news so far. The biggest question will be centered around the company’s ability to execute on its growth initiatives.
#2: Vislink Technologies
Vislink has been one of the penny stocks to watch for most of the year. Even though shares spiked up big and pulled back recently, VISL stock is still up significantly from the start of the year. Furthermore, those who pay attention to technical levels will see that the 50-Day Moving Average has conveniently acted as support during that time. Year-to-date, VISL shares are up 145% as of Tuesday’s close.
One of the core points of focus for the “reopening trade” has been communications and entertainment. Vislink develops products to enhance broadcast systems and related data. Expanding upon this model, Vislink announced that it joined the European Broadcasting Union’s 5G in Content Production Group this week.
“5G connectivity will be a key component in achieving the Connected Edge. The live production use case requires unique specs like high uplink capacity and very low latency,” said Mickey Miller, CEO of Vislink. “We look forward to being part of the working group that will help bring broadcast requirements to the 5G roadmap and ecosystem.”
We’ve discussed the idea of 5G penny stocks before. Given the rapid expansion of this technology and deployment globally, companies like Vislink could be the ones to watch right now.
#3: GTT Communications Inc.
Sticking with the focus on communications stocks, GTT Communications has also come into focus. The company provides cloud network solutions to its customers. This week GTT announced that Charter Schools USA, through its 10jin Solutions partnership, selected GTT to upgrade network infrastructure with “software-defined wide area networking” to allow more remote learning flexibility.
As we know, eLearning has become a big focus of the market this year. Social distancing and lockdown measures forced most of the world to adapt to the times. Schools took up a digital approach to education, and communications companies have quickly shifted focus to building upon this digital infrastructure.
Like Vislink, as the world reopens, some of the pandemic-era trends won’t necessarily go away. They will likely evolve into somewhat of a hybrid model. In this light, companies like GTT could be ones to watch from a digital infrastructure perspective.
#4: Castor Maritime Inc.
One of the penny stocks under $1 that we talked about yesterday was Castor Maritime. We discussed CTRM stock in light of the “reopening trade” and its focus on global commerce. The shipping company had also just announced the delivery of its newest vessel, the M/V Magic Venus. It also came with a new charter agreement. According to Castor, “The M/V Magic Venus is expected to commence employment under a time charter agreement on or about March 5, 2021, with a daily gross charter rate of $18,500 and an expected term of between minimum five to about seven months.”
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Wednesday morning, CTRM stock broke above that $1 threshold for the first time in weeks. The move also came after another fresh update from Castor, which seems to have become an early catalyst. The company announced another vessel acquisition. This time it was a 2010 Korean-built Kamsarmax dry bulk carrier for a purchase price of $15.45 million. Delivery of the vessel is expected next quarter.
“We are very happy to announce our seventh vessel acquisition in 2021 with the addition of another Kamsarmax dry bulk vessel, our fourth, to Castor’s fleet. Our focus remains on deploying our capital and growing our fleet through timely acquisitions of vessels across shipping segments.”Petros Panagiotidis, Chief Executive Officer of Castor
As the world continues to reopen and things like oil and gas remain an actively shipped commodity, shipping stocks like CTRM could be ones to watch right now.stimulus reopening pandemic sp 500 nasdaq stocks etf small-cap russell 2000 penny stocks epicenter social distancing lockdown recovery oil european
Las Vegas Strip faces growing bed bug problem
With huge events including Formula 1, CES, and the Super Bowl looming, the Las Vegas Strip faces an issue that could be a major cause for concern.
Las Vegas beat the covid pandemic.
It wasn't that long ago when the Las Vegas Strip went dark and people questioned whether Caesars Entertainment, MGM Resorts International, Wynn Resorts, and other Strip players would emerge from the crisis intact.
In the darkest days, the entire Las Vegas Strip was closed down and when it reopened, it was not business as usual. Caesars Entertainment (CZR) - Get Free Report and MGM reopened slowly with all sorts of government-mandated restrictions in place.
The first months of the Strip's comeback featured temperature checks, a lot of plexiglass, gaming tables with limited numbers of players, masks, and social distancing. It was an odd mix of celebration and restraint as people were happy to be in Las Vegas, but the Strip was oddly empty, some casinos remained closed, and gaming floors were sparsely filled.
When vaccines became available, the Las Vegas Strip benefitted quickly. Business and international travelers were slow to return, but leisure travelers began bringing crowds back to pre-pandemic levels.
The comeback, however, was very fragile. CES 2022 was supposed to be Las Vegas's return to normal, the first major convention since covid. In reality, surging cases of the covid omicron variant caused most major companies to pull out.
Even with vaccines and covid tests required, an event that was supposed to be close to normal, ended up with 25% of 2020's pre-covid attendance. That CES showed just how quickly public sentiment — not actual danger — can ruin an event in Las Vegas.
Now, with November's Formula 1 Race, CES in January, and the Super Bowl in February all slated for Las Vegas, a rising health crisis threatens all of those events.
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The Las Vegas Strip has a bed bug problem
While bed bugs may not be as dangerous as covid, Respiratory Syncytial Virus (RSV), Legionnaires’ disease, and some of the other infectious diseases that the Las Vegas Strip has faced over the past few years, they're still problematic. Bed bugs spread easily and a small infestation can become a large one quickly.
The sores caused by bed bugs are also a social media nightmare for the Las Vegas Strip. If even a few Las Vegas Strip visitors wake up covered in bed bug bites, that could become a viral nightmare for the entire city.
In late-August, reports came out the bed bugs had been at seven Las Vegas hotel, mostly on the Strip over the past two years. The impacted properties includes Caesars Planet Hollywood and Caesars Palace as well as MGM Resort International's (MGM) - Get Free Report MGM Grand, and others including Circus Circus, The Palazzo, Tropicana, and Sahara.
"Now, that number is nine with the addition of The Venetian and Park MGM. According to the health department report, a Venetian guest reported seeing the bloodsuckers on July 29 and was moved to another room. An inspection three days later confirmed their presence," Casino.org reported.
The Park MGM bed bug incident took place on Aug. 14.
Bed bugs remain a Las Vegas Strip problem
Only Tropicana, which is soon going to be demolished, and Sahara, responded to Casino.org about their bed bug issues. Caesars and MGM have not commented publicly or responded to requests from KLAS or Casino.org.
That makes sense because the resorts do not want news to spread about potential bed bug problems when the actual incidents have so far been minimal. The problem is that unreported bed bug issues can rapidly snowball.
The Environmental Protection Agency (EPA) shares some guidelines on bed bug bites on its website that hint at the depth of the problem facing Las Vegas Strip resorts.
"Regularly wash and heat-dry your bed sheets, blankets, bedspreads and any clothing that touches the floor. This reduces the number of bed bugs. Bed bugs and their eggs can hide in laundry containers/hampers. Remember to clean them when you do the laundry," the agency shared.
Normally, that would not be an issue in Las Vegas as rooms are cleaned daily. Since the covid pandemic, however, some people have opted out of daily cleaning and some resorts have encouraged that.
Not having daily room cleaning in just a few rooms could lead to quick spread.
"Bed bugs spread so easily and so quickly, that the University of Kentucky's entomology department notes that "it often seems that bed bugs arise from nowhere."
"Once bed bugs are introduced, they can crawl from room to room, or floor to floor via cracks and openings in walls, floors and ceilings," warned the University's researchers.
spread social distancing pandemic
Americans are having a tough time repaying pandemic-era loans received with inflated credit scores
Borrowers are realizing the responsibility of new debts too late.
With the economy of the United States at a standstill during the Covid-19 pandemic, the efforts to stimulate the economy brought many opportunities to people who may have not had them otherwise.
However, the extension of these opportunities to those who took advantage of the times has had its consequences.
A report by the Financial Times states that borrowers in the United States that took advantage of lending opportunities during the Covid-19 pandemic are falling behind on actually paying back their debt.
At a time when stimulus checks were handed out and loan repayments were frozen to help those affected by the economic shock of Covid-19, many consumers in the States saw that lenders became more willing to provide consumer credit.
According to a report by credit reporting agency TransUnion, the median consumer credit score jumped 20% to a peak of 676 in the first quarter of 2021, allowing many to finally have “good” credit scores. However, their data also showed that those who took out loans and credit from 2021 to early 2023 are having an hard time managing these debts.
“Consumer finance companies used this opportunity to juice up their growth at a time when funding was ample and consumers’ finances had gotten an artificial boost,” Chief economist of Moody’s Analytics Mark Zandi told FT. “Certainly a lot of lower-income households that got caught up in all of this will feel financial pain.”
Moody’s data shows that new credit cards accounts that were opened in the first quarter of 2023 have a 4% delinquency rate, while the same rate in September 2022 was 4.5%. According to the analysts, these levels were the highest for the same point of the year since 2008.
Additionally, a study by credit scoring company VantageScore found that credit cards issued in March 2022 had higher delinquency rates than cards issued at the same time during the prior four years.
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Credit cards were not the only debts that American consumers took on. As per S&P Global Ratings data, riskier car loans taken on during the height of the pandemic have more repayment problems than in previous years. In 2022, subprime borrowers were becoming delinquent on new cars loans at twice the rate of pre-pandemic levels.
S&P auto loan tracker Amy Martin told FT that lenders during the pandemic were “rather aggressive” in terms of signing new loans.
Bill Moreland of research group BankRegData has warned about these rising delinquencies in the past and had recently estimated that by late 2022, there were hundreds of billions of dollars in what he calls “excess lending based upon artificially inflated credit scores”.
The Government's Role
Because so many are failing to pay their bills, many are wary that the government assistance may have been a financial double-edged sword; as they were meant to alleviate financial stress during lockdown, while it led some of them to financial difficulty.
The $2.2 trillion Cares Act federal aid package passed in the early stages of the pandemic not only put cash in the American consumer’s pocket, but also protected borrowers from foreclosure, default and in some instances, lenders were barred from reporting late payments to credit bureaus.
Yeshiva University law professor Pam Foohey specializes in consumer bankruptcy and believes that the Cares Act was good policy, however she shifts the blame away from the consumers and borrowers.
“I fault lenders and the market structure for not having a longer-term perspective. That’s not something that the Cares Act should have solved and it still exists and still needs to be addressed.”
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Inflation: raising interest rates was never the right medicine – here’s why central bankers did it anyway
We need to start cutting rates, but there’s something that has to happen first.
Inflation remains too high in the UK. The annual rate of consumer price inflation to September was 6.7%, the same as a month earlier. This is well below the 11.1% peak reached in October 2022, but the failure of inflation to keep falling indicates it is proving far more stubborn than anticipated.
This may prompt the Bank of England’s Monetary Policy Committee (MPC) to raise the benchmark interest rate yet again when it meets in November, but in my view this would not be entirely justified.
In reality, the rate hikes that began two years ago have not been very helpful in tackling inflation, at least not directly. So what’s the problem and is there a better alternative?
Right policy, wrong inflation
Raising interest rates is the MPC’s main tool for trying to get inflation back to its target rate of 2%. The idea is that this makes it more expensive to borrow money, which should reduce consumer demand for goods and services.
The trouble is that the type of inflation recently witnessed in the UK seems less a problem of excessive demand than because costs have been rising for manufacturers and service providers. It’s known as “cost-push inflation” as opposed to “demand-pull inflation”.
Inflation rates (UK, US, eurozone)
Production costs have risen for several reasons. During the COVID-19 pandemic, central banks “created money” through quantitative easing to enable their governments to run large spending deficits to pay for furloughs and other interventions to help citizens through the crisis.
When countries started reopening, it meant people had money in their pockets to buy more goods and services. Yet with China still in lockdown, global supply chains could not keep pace with the resurgent demand so prices went up – most notably oil.
Oil price (Brent crude, US$)
Then came the Ukraine war, which further drove up prices of fundamental commodities, such as energy. This made inflation much worse than it would otherwise have been. You can see this reflected in consumer price inflation (CPI): it was just 0.6% in the year to June 2020, then rose to 2.5% in the year to June 2021, reflecting the supply constraints at the end of lockdown. By June 2022, four months after Russia’s invasion of Ukraine, CPI was 9.4%.
The policy problem
This begs the question, why has the Bank of England (BoE) been raising rates if it’s unlikely to be effective? One answer is that other central banks have been raising rates. If the BoE doesn’t mirror rate rises in the US and eurozone, investors in the UK may move their money to these other areas because they’ll get better returns on bonds. This would see the pound depreciating against the US dollar and euro, in turn increasing import prices and aggravating inflation.
Part of the problem has been that the US has arguably faced more of the sort of demand-led inflation against which interest rates are effective. For one thing, the US has been less at the mercy of rising energy prices because it is energy self-sufficient. It also didn’t lock down as uniformly as other major economies during the pandemic, so had a little more space to grow.
At the same time, the US has been more effective at bringing down inflation than the UK, which again suggests it was fighting demand-driven price rises. In other words, the UK and other countries may to some extent have been forced to follow suit with raising interest rates to protect their currencies, not to fight inflation.
How harmful have the rate rises been in the UK? They have not brought about a recession yet, but growth remains very weak. Lots of people are struggling with the cost of living, as well as rent or mortgage costs. Several million people are due to be hit by much higher mortgage rates as their fixed-rate deals end between now and the end of 2024.
UK GDP growth (%)
If hiking interest rates is not really helping to curb inflation, it makes sense to start moving in the opposite direction before the economic situation gets any worse. To avoid any damage to the pound, the answer is for the leading central banks to coordinate their policies so that they cut rates in lockstep.
Unless and until this happens, there would seem to be no quick fix available. One piece of good news is that the energy price cap for typical domestic consumption was reduced from October 1 from £1,976 to £1,834 a year. That 7% reduction should lead to consumer price inflation coming down significantly towards the end of 2023.
More generally, the Bank of England may simply have to hope that world events move inflation in the desired direction. A key question is going to be whether the wars in Ukraine and Israel/Gaza result in further cost pressures.
Unfortunately there is a precedent for a Middle East conflict leading to a global economic crisis: following the joint assault on Israel by Syria and Egypt in 1973, Israel’s retaliation prompted petroleum cartel OPEC to impose an oil embargo. This led to an almost fourfold increase in the price of crude oil.
Since oil was fundamental to the costs of production, inflation in the UK rose to over 16% in 1974. There followed high unemployment, resulting in an unwelcome combination that economists referred to as stagflation.
These days, global production is in fact less reliant on oil as renewables have become a growing part of the energy mix. Nonetheless, an oil price hike would still drive inflation higher and weaken economic growth. So if the Middle East crisis does spiral, we may be stuck with stubborn, untreatable inflation for even longer.
Robert Gausden does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.recession unemployment economic growth reopening bonds monetary policy mortgage rates currencies pound us dollar euro governor lockdown pandemic covid-19 recession gdp interest rates commodities oil uk russia ukraine china