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What Are Penny Stocks & Should You Buy Them In 2023?

Should You Find Penny Stocks To Buy In 2023?
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Are Penny Stocks Worth It In 2023?

In this article, we’re going to go over some basics. We’ll discuss the definition of penny stocks, the pros & cons, plus some extra details you should know before jumping into the market.

What Are Penny Stocks?

A penny stock represents the stock of a company that trades for less than $5 per share. Many penny stocks are available to buy, and you can find them trading on major exchanges like the NYSE and Nasdaq. You can also buy penny stocks trading “over-the-counter” or “on the OTC,” a lower-tier exchange.

Since penny stocks trade at very low prices, the companies they represent are usually smaller in size. However, this isn’t always the case. If you look at Ambev (NYSE: ABEV) or Southwestern Energy (NYSE: SWN), for instance, the companies themselves are not that small.

The main attractions to penny stocks include a few things:

  1. You can buy many shares with smaller sums of cash.
  2. There’s an opportunity to invest in early-stage companies.
  3. Penny stocks allow traders & investors to leverage capital in exchange for the opportunity of exponential gains in the market.

But let’s also not forget with all investment vehicles, risk plays a large role too. Just as quickly as penny stocks go up, they can also come back down.

Penny Stocks & Volatility

The term volatility refers to the rapid fluctuations in the share price of stocks. When it comes to penny stocks, volatility is evident. If you’ve got a $1 stock that goes up just 10 cents, that equates to a move of 10%. Aside from monetary gains, that 10% move is substantial. If a stock like Apple (NASDAQ: AAPL) were to jump 10%, it would need to rise over $10 a share.

But penny stocks usually shift more than 10% in a given day. This year, there’ve been times where stocks under $5 have rallied several thousand percentage points between opening and closing bells. On a longer-term time frame, some penny stocks have climbed tens of thousands of percentage points over the course of a few weeks or months.

Take, for instance, GameStop (NYSE: GME), the talk of the stock market in 2021. In April of 2020, GME stock had traded as low as $2.57, well-into penny stock territory. Less than 1-year later, the penny stock had climbed to highs of $483, equating to a move of 18,693.77%.

5 Top Penny Stocks To Watch Today; Time To Buy?

But penny stocks don’t always need to go to highs of over $100 to see significant gains. Zomedica Corp. (NYSE: ZOM), an animal diagnostics technology company, saw its shares trading under 10 cents in November of 2020. A few months later, ZOM stock reached a high of $2.91 in advance of its first commercial product sale. Though the move was less than $3, it equated to 4,750%.

Advantages Of Penny Stocks

One of the biggest advantages of finding the best penny stocks to buy is the ability to turn a small investment into big money. The examples I gave above are just a few of the many big moves that penny stocks have made over the years. Now, all stocks under $5 don’t make such dramatic jumps. However, even on the lower end, traders can see 1-day moves of 30% or more on the lower end.

Considering that the market, as a whole, fluctuates a few percent each day & 10-12% on average per year, there’s an argument that can easily be made in favor of choosing penny stocks to buy above mainstream, blue-chip stocks. This creates a lot of excitement among investors and traders alike.

Another one of the advantages of penny stocks is investing in a public company at an early stage. I’ll be the first to say that smaller companies fail and can go to zero. But there have been many instances where penny stock companies have turned into market-leading conglomerates. This has presented a massive opportunity for investors who took positions at levels under $5.

Take, for instance, Novavax Inc. (NASDAQ: NVAX). It had been working on treatments for influenza. However, the 2020 pandemic created the early opportunity to eventually see the company become a competitor of Pfizer (NYSE: PFE), Moderna (NASDAQ: MRNA), Johnson & Johnson (NYSE: JNJ), and others. Novavax focused on creating a COVID-19 vaccine candidate along with hundreds of other biotech companies. However, those investors who saw the company’s platform and did their research would have seen the now $150+ stock trading below $5 when it just began its R&D. The stock even traded as high as $331.

Disadvantages Of Penny Stocks

You can’t have risk/reward without the risk. Are penny stocks high risk? Yes, when you’re talking about stocks under $5, the risks are high. Volatility can play an important and detrimental role when traders work against you. Just as quickly as the price can rise, it can fall, leading to big losses in the market.

The lower share price creates the impression that small moves can create big windfalls. But many traders take this idea and invest even larger sums of money with the “hope” of making even more. Never risk more than you can afford to lose because if that trade turns against you, it could mean a huge monetary loss.

How to Develop a Penny Stocks Trading Mentality

Also, liquidity can be a major disadvantage in many cases. Let’s say you found a company that is developing a novel cancer treatment. The research is positive, management is sound, the last Phase Trial update showed promise, and now you want to invest. Since penny stocks are not as actively traded as higher-priced stocks, liquidity can be a risk in itself. This refers to how active a stock is traded.

Liquidity Risk

If you want to invest $1,000 into that biotech company but it only trades $200-$300 a day, it may not be worth it because your investment would be much more than the stock’s average trading volume. The risk comes when it’s time to take profits. If there isn’t enough liquidity to sell your shares, you’re at the mercy of the market, which can mean not getting optimal pricing or not enough buyers to sell to.

Penny Stocks & Reporting Requirements

Another disadvantage is with OTC penny stocks. Since the OTC doesn’t require as much transparency in filings as the NYSE or Nasdaq, some companies don’t give the full picture. This makes it very hard to put together a sound strategy based on fundamentals. When you’re talking about investing in penny stocks vs. trading them, fundamentals play a bigger role than market momentum. If information isn’t publicly available, you can find it hard to gain the right insight to base your investment on.

The “Robinhood Risk”

This is something that not many people discuss, but it could pose a big risk to those looking for penny stocks to buy. Thanks to the surge in new retail traders, apps like Robinhood & Webull have grown in popularity. These platforms make it easy to trade penny stocks right from your phone. But there’s an underlying risk, especially when factoring in stocks under $5.

penny stocks on robinhood to buy sell chart

Both Robinhood & Webull, for the most part, only allow access to NYSE and Nasdaq-listed stocks. These exchanges require the companies listing on them to meet certain, basic things like trading above $1 and audited financials. If you’re looking for penny stocks on Robinhood that are under $1, the risk is that the companies won’t regain proper price levels and, in turn, get delisted from the major exchanges.

Even if you’re up on your investment, you run the risk of not having access to trading in your position. At the very least, Robinhood or Webull may only allow “closing transactions,” IE you can only sell shares.

Should You Buy Penny Stocks In 2023?

If you’re asking, “Are penny stocks worth it?”, there are plenty of reasons why penny stocks present great opportunities for traders and investors alike. Since we’re talking about stocks under $5 per share, the ability to pick up a sizeable position for not a lot of money gives smaller traders leverage they wouldn’t otherwise have if they bought blue-chip stocks like Tesla (NASDAQ: TSLA) or Amazon (NASDAQ: AMZN). The increased volatility also offers the ability to secure gains quickly, not having to wait months or years but days or hours in some cases.

This doesn’t come without plenty of risks, however. Volatility can work against you with quick drops instead of big jumps. As a result, while 20-50% moves higher are great, a similar move in the opposite direction can be a crushing blow to your portfolio.

Should you buy penny stocks right now? That will depend heavily on your personal risk tolerance and understanding of how to trade these types of stocks in the first place. If you’re just getting started, here are a few articles that may help get you some good information on trading penny stocks:

The post What Are Penny Stocks & Should You Buy Them In 2023? appeared first on Penny Stocks to Buy, Picks, News and Information | PennyStocks.com.

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One city held a mass passport-getting event

A New Orleans congressman organized a way for people to apply for their passports en masse.

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While the number of Americans who do not have a passport has dropped steadily from more than 80% in 1990 to just over 50% now, a lack of knowledge around passport requirements still keeps a significant portion of the population away from international travel.

Over the four years that passed since the start of covid-19, passport offices have also been dealing with significant backlog due to the high numbers of people who were looking to get a passport post-pandemic. 

Related: Here is why it is (still) taking forever to get a passport

To deal with these concurrent issues, the U.S. State Department recently held a mass passport-getting event in the city of New Orleans. Called the "Passport Acceptance Event," the gathering was held at a local auditorium and invited residents of Louisiana’s 2nd Congressional District to complete a passport application on-site with the help of staff and government workers.

A passport case shows the seal featured on American passports.

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'Come apply for your passport, no appointment is required'

"Hey #LA02," Rep. Troy A. Carter Sr. (D-LA), whose office co-hosted the event alongside the city of New Orleans, wrote to his followers on Instagram  (META) . "My office is providing passport services at our #PassportAcceptance event. Come apply for your passport, no appointment is required."

More Travel:

The event was held on March 14 from 10 a.m. to 1 p.m. While it was designed for those who are already eligible for U.S. citizenship rather than as a way to help non-citizens with immigration questions, it helped those completing the application for the first time fill out forms and make sure they have the photographs and identity documents they need. The passport offices in New Orleans where one would normally have to bring already-completed forms have also been dealing with lines and would require one to book spots weeks in advance.

These are the countries with the highest-ranking passports in 2024

According to Carter Sr.'s communications team, those who submitted their passport application at the event also received expedited processing of two to three weeks (according to the State Department's website, times for regular processing are currently six to eight weeks).

While Carter Sr.'s office has not released the numbers of people who applied for a passport on March 14, photos from the event show that many took advantage of the opportunity to apply for a passport in a group setting and get expedited processing.

Every couple of months, a new ranking agency puts together a list of the most and least powerful passports in the world based on factors such as visa-free travel and opportunities for cross-border business.

In January, global citizenship and financial advisory firm Arton Capital identified United Arab Emirates as having the most powerful passport in 2024. While the United States topped the list of one such ranking in 2014, worsening relations with a number of countries as well as stricter immigration rules even as other countries have taken strides to create opportunities for investors and digital nomads caused the American passport to slip in recent years.

A UAE passport grants holders visa-free or visa-on-arrival access to 180 of the world’s 198 countries (this calculation includes disputed territories such as Kosovo and Western Sahara) while Americans currently have the same access to 151 countries.

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Fast-food chain closes restaurants after Chapter 11 bankruptcy

Several major fast-food chains recently have struggled to keep restaurants open.

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Competition in the fast-food space has been brutal as operators deal with inflation, consumers who are worried about the economy and their jobs and, in recent months, the falling cost of eating at home. 

Add in that many fast-food chains took on more debt during the covid pandemic and that labor costs are rising, and you have a perfect storm of problems. 

It's a situation where Restaurant Brands International (QSR) has suffered as much as any company.  

Related: Wendy's menu drops a fan favorite item, adds something new

Three major Burger King franchise operators filed for bankruptcy in 2023, and the chain saw hundreds of stores close. It also saw multiple Popeyes franchisees move into bankruptcy, with dozens of locations closing.

RBI also stepped in and purchased one of its key franchisees.

"Carrols is the largest Burger King franchisee in the United States today, operating 1,022 Burger King restaurants in 23 states that generated approximately $1.8 billion of system sales during the 12 months ended Sept. 30, 2023," RBI said in a news release. Carrols also owns and operates 60 Popeyes restaurants in six states." 

The multichain company made the move after two of its large franchisees, Premier Kings and Meridian, saw multiple locations not purchased when they reached auction after Chapter 11 bankruptcy filings. In that case, RBI bought select locations but allowed others to close.

Burger King lost hundreds of restaurants in 2023.

Image source: Chen Jianli/Xinhua via Getty

Another fast-food chain faces bankruptcy problems

Bojangles may not be as big a name as Burger King or Popeye's, but it's a popular chain with more than 800 restaurants in eight states.

"Bojangles is a Carolina-born restaurant chain specializing in craveable Southern chicken, biscuits and tea made fresh daily from real recipes, and with a friendly smile," the chain says on its website. "Founded in 1977 as a single location in Charlotte, our beloved brand continues to grow nationwide."

Like RBI, Bojangles uses a franchise model, which makes it dependent on the financial health of its operators. The company ultimately saw all its Maryland locations close due to the financial situation of one of its franchisees.

Unlike. RBI, Bojangles is not public — it was taken private by Durational Capital Management LP and Jordan Co. in 2018 — which means the company does not disclose its financial information to the public. 

That makes it hard to know whether overall softness for the brand contributed to the chain seeing its five Maryland locations after a Chapter 11 bankruptcy filing.

Bojangles has a messy bankruptcy situation

Even though the locations still appear on the Bojangles website, they have been shuttered since late 2023. The locations were operated by Salim Kakakhail and Yavir Akbar Durranni. The partners operated under a variety of LLCs, including ABS Network, according to local news channel WUSA9

The station reported that the owners face a state investigation over complaints of wage theft and fraudulent W2s. In November Durranni and ABS Network filed for bankruptcy in New Jersey, WUSA9 reported.

"Not only do former employees say these men owe them money, WUSA9 learned the former owners owe the state, too, and have over $69,000 in back property taxes."

Former employees also say that the restaurant would regularly purchase fried chicken from Popeyes and Safeway when it ran out in their stores, the station reported. 

Bojangles sent the station a comment on the situation.

"The franchisee is no longer in the Bojangles system," the company said. "However, it is important to note in your coverage that franchisees are independent business owners who are licensed to operate a brand but have autonomy over many aspects of their business, including hiring employees and payroll responsibilities."

Kakakhail and Durranni did not respond to multiple requests for comment from WUSA9.

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Industrial Production Increased 0.1% in February

From the Fed: Industrial Production and Capacity Utilization
Industrial production edged up 0.1 percent in February after declining 0.5 percent in January. In February, the output of manufacturing rose 0.8 percent and the index for mining climbed 2.2 p…

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From the Fed: Industrial Production and Capacity Utilization
Industrial production edged up 0.1 percent in February after declining 0.5 percent in January. In February, the output of manufacturing rose 0.8 percent and the index for mining climbed 2.2 percent. Both gains partly reflected recoveries from weather-related declines in January. The index for utilities fell 7.5 percent in February because of warmer-than-typical temperatures. At 102.3 percent of its 2017 average, total industrial production in February was 0.2 percent below its year-earlier level. Capacity utilization for the industrial sector remained at 78.3 percent in February, a rate that is 1.3 percentage points below its long-run (1972–2023) average.
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Click on graph for larger image.

This graph shows Capacity Utilization. This series is up from the record low set in April 2020, and above the level in February 2020 (pre-pandemic).

Capacity utilization at 78.3% is 1.3% below the average from 1972 to 2022.  This was below consensus expectations.

Note: y-axis doesn't start at zero to better show the change.


Industrial Production The second graph shows industrial production since 1967.

Industrial production increased to 102.3. This is above the pre-pandemic level.

Industrial production was above consensus expectations.

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