With the stock market ripping to record levels, traders continue seeking new opportunities. Penny stocks have become one of these niches identified for their uncapped potential. This year alone, there’ve been countless names that rally from levels under $1 to prices that stretch beyond $10 or more.
If you’re new to this volatile world of cheap stocks, however, you may be wondering about a few things. First, what are penny stocks? According to the Securities and Exchange Commission’s definition of penny stocks, these are shares of companies that trade for less than $5. Of course, the original thought is that we’re talking about “penny” stocks, so they should be trading for less than $1. At the end of the day, however you define them, the goal is the same. Make money and repeat the process.Are Penny Stocks Worth The Risk?
If you’re ready to dive in and start looking for penny stocks to buy, make sure, you do one last thing. Since these are so volatile and carry a much higher risk than your average Apple (NASDAQ: AAPL) or Microsoft (NASDAQ: MSFT), you should understand what that means for your personal trading style. In most cases, penny stocks tend to jump quickly and fall just as fast. It’s the thing that becomes a big attraction as well as a big deterrent in the market. Those who can take advantage of the big swings without getting greedy usually become the ones who succeed the most.
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Aside from the general volatility risk in the market, some stocks like OTC penny stocks have other factors that may or may not be in play. One of them is manipulation. If you’re watching things like Dogecoin, you’ve seen how manipulated things can get when the hype starts driving the reason people are buying something.
Similarly, OTC penny stocks are well-known for being the targets of “pumpy” tactics. So if you’re looking at these or penny stocks, in general, understand that there are plenty of risks involved. If you aren’t well-equipped to handle it, trading cheap stocks could be a bit difficult until you learn how to trade.Best Penny Stocks For May 2021?
If you’ve got a good understanding of trading and risk, then penny stocks may be a good option for you. With this in mind, we’ll take a look at a few trending stocks under $5 right now that could be interesting to watch in May 2021.Penny Stocks To Watch #1: Sesen Bio Inc. (NASDAQ: SESN)
One of the trends that have popped up in the stock market this year is a strong focus on healthcare and biotechnology. In fact, if you look at some of the hottest sectors, in general, you don’t need to look too far to see what I’m talking about. While the broader markets, including the S&P and Dow, reached fresh all-time highs, the Healthcare sector also experienced a blowout day. Take, for instance, the S&P Healthcare ETF (NYSE: XLV). It surged to fresh all-time highs, which could warrant having a closer look at some related companies.
Sesen Bio focuses on cancer treatments. The company’s Vicineum platform has been the main point of focus most recently. It’s designed to treat non-muscle invasive bladder cancer. There’s already been a Marketing Authorization Application submitted to the European Medicines Agency.
Furthermore, its partner, Qilu Pharmaceutical, obtained an Investigational New Drug Application in China for the treatment. This will allow the company to progress to the next step of conducting clinical trials and assess the efficacy of Vicineum in patients with this form of bladder cancer.What To Watch With SESN Stock
This month could be an important month for the company, in general. In fact, this week could be interesting. The reason being, Sesen delivers Q1 earnings on Monday. There will also be a business update given. Since Sesen is still a clinical-stage company, the market will likely place more of a focus on what guidance is given on the treatment pipeline. Depending on what’s said, it will be interesting to see how the market responds.
Also, keep in mind that Sesen just announced more progress ahead of a potential commercial launch of Vicineum pending US approval in August. The company added to its leadership team and engaged Syneoas Health for field sales in the U.S. This will also likely be a topic that the market could focus on.trivago N.V. (NASDAQ: TRVG)
One of the other trends in the stock market this year is “reopening stocks” or “epicenter stocks.” The simple definition for these centers around companies hit hardest by the pandemic shut-downs last year. Upon reopening and vaccine distribution, analysts like Tom Lee of Fundstrat have expressed that these beaten-down names could be the ones to flourish when economies reopen. These include everything from energy stocks to travel & leisure stocks.
In this case, Trivago could find itself on that list of reopening stocks to watch. If you aren’t familiar with the company, it manages its namesake website helping users book hotels. The famous catchphrase, “Hotel, Trivago,” became immediately popular once mainstream outlets began serving their ads.What To Watch With TRVG Stock
Despite some of the topsy-turvy actions in the travel and leisure industry, TRVG stock, along with many others, have recently caught a strong move in the market. Not only is TRVG up for the month, but year-to-date shares have also now climbed 58% at Friday’s close. The stock also briefly reached highs of $5.88 when the social media community made it one of the official Reddit penny stocks in January.
Needless to say, industry fundamentals and company appeal have resulted in a slew of new analyst updates. DA Davidson, Deutsche Bank, and Morgan Stanley have all boosted their price targets on the penny stock in the last week.ALFI Inc. (NASDAQ: ALF)
You also can’t forget the rampant momentum fueling the IPO market this year. We’ve seen many companies going public via direct offering, traditional IPO, and SPAC in 2021. The resulting trends have shown promise for many early investors. I should also mention that if you’re new to stocks, in general, IPOs present another layer of risk.
Early-stage investors usually have held shares for quite some time before the initial public offering. In that case, not all IPOs result in big moves in the market. Take, for instance, the Coinbase (NASDAQ: COIN) IPO. On day 1 of the stock’s public debut, shares rallied strongly after opening up considerably higher than where they were initially indicated. Since then, COIN stock has done nothing but slide lower.
On the flip side, you’ve also got plenty of other IPO stocks to watch that experienced much different moves in the stock market in 2021. ALFI Inc. is one of them. The company recently went public this month. It raised $15.5 million through its IPO, and since going public, shares have climbed as high as much as 49%. There was a bit of a pullback late last week, but aftermarket trading on Friday could be something to take notice of.What To Watch With ALF Stock
Shares of ALF stock shot up to $4.68 after the close on May 7th. This came on the same day ALFI announced new senior leadership for the company.
“We have clear revenue strategy for 2021, and we are honored to welcome Ron to our senior executive leadership,” said Paul Pereira, CEO of Alfi. “Ron’s passion for creating and driving a high-performance sales culture together with his long history in the global Digital Out-of-Home (“DOOH”) and Out-of-Home (“OOH”) advertising market, and deep understanding of our company, products and customers, makes him the ideal executive to drive revenue growth for the Company.”
ALFI focuses on machine learning technology allowing content publishers and brands to deliver targeted interactive ads to end-users.Final Thoughts On Penny Stocks
All-in-all, penny stocks can be a great way to leverage smaller amounts of capital to take advantage of bigger moves in the market. The vast majority of penny stocks don’t move hundreds of percentage points; that’s a given. But at the same time, is a “small” 20% or 30% move in a single day a bad thing? Considering the overall market has returned between 12% and 20% annually over the last half-century, these “small wins” from penny stocks don’t seem so small. Remember, risk and volatility can play a big role. So if you’re making your list of penny stocks to buy this week, keep that in mind.