Most investors are familiar with the Dow Jones Industrial Average (DJIA) and the S&P 500. These broad indices are widely used gauges of U.S. large-cap stock performance. But what about benchmarks that track penny stocks?
There are of course popular indices like the Russell 2000 and the S&P 600 which are collections of small cap companies. Moving further down the capitalization spectrum, S&P Dow Jones has its own take on the micro caps in the DJ U.S. Micro Cap Index. The average market cap among its 1,200-plus constituents is $220 million.
For penny stock investors looking to assess how well the smallest of the small are performing, the DJ Micro Cap Index is a good place to start. Through the end of April 2021, it was up 23.9% year-to-date on a total return basis which includes dividends. By comparison, the S&P 500 is up 11.3%.
Another good place to get a read on how penny stocks are doing is the OTCQX Composite. It contains roughly ten times as many stocks that trade in the over-the-counter (OTC) market where most penny stocks reside. The OTCQX also includes companies from all over the world. This index is at an all-time high and tells a similar tale of micro cap outperformance.
So now that we have some tools to learn about the health of the micro cap markets, the question is: why is David slaying Goliath by such a wide margin in 2021?
For starters, the market has picked up where it left off late last year—in risk-on mode. Although there have been some bumps along the way, investors have grown increasingly comfortable with the prospects of a global economic recovery. In turn, they have become more willing to take on risk. What better place to go than the OTC market.
That brings us to our second reason. There’s company in misery, but there’s also company in happiness. The swaths of stay-at-home retail investors signing on to various trading platforms have brought more people to the OTC markets. More players swimming in the penny stock pool leads to more bid orders naturally lifting penny stock prices.
Perhaps the biggest source of micro cap outperformance is the economic environment we are heading into. From the depths of the pandemic-led recession, small businesses that survived are now thriving. As consumers worldwide clamor to get back out there and spend on everything from retail to restaurants, many upstart companies are expected to experience some extraordinary growth.
The story is the same across many business-to-business (B2B) markets. Businesses are also poised to ramp spending on things like cloud computing, e-commerce platforms, and manufacturing innovation to stay competitive in the post-COVID world.
Bottom line, small, nimble companies tend to outperform their more mature, but stodgy large cap counterparts in times of economic prosperity. And that’s why it’s a great time to be a penny stock investor.
Let’s take a look at four intriguing penny stocks that have the wind at their back.
PENNY STOCKS TO WATCH #1 BTCS
We’ve written about BTCS on several occasions as a play on the cryptocurrency craze. The company is one of the first to enter the digital asset market and one of few stocks that offer exposure to blockchain technology.
BTCS offers a transaction verification service that makes sure Bitcoin and Ethereum transactions are legit. It is also working on a new analytics platform that enables a single view of cryptocurrency trades that take place on different exchanges. This is a much-needed service for crypto investors especially come tax time.
In mid-March, BTCS announced continued progress with its Ethereum 2.0 transaction verification service. The operation has been expanded to 240 nodes all of which are now generating revenue for the company.
For the crypto newbies among us, nodes are points on a cryptocurrency computer network that can verify blocks and transaction data. BTCS stakes, or validates, blockchain transactions that lead to the receipt of staking rewards.
Its Ethereum 2.0 staking operation has validated more than 7,000 transactions which equate to $1.1 million of potential revenue per year. Gross margins in this business are above 95%, so as BTCS continues to scale the operation, the profit level it can produce is exciting.
BTCS is not stopping there. It plans to develop a staking-as-a-service, a very different SaaS that allows crypto traders to do staking of their own in return for a fee. The fee is typically a percentage of the expected staking rewards.
CEO Charles Allen recently stated, “In addition to the ongoing development of our proprietary data analytics platform, we plan to develop a staking-as-a-service platform that will provide additional revenue growth opportunities as “proof-of-stake” verification protocols become increasingly widespread.”
Early last month, BTCS bolstered its credibility in the world of crypto by adding Litecoin creator Charlie Lee to its Board of Directors. Mr. Lee is a former Google and Coinbase employee and widely considered a visionary in blockchain technology.
Then on April 22, Mr. Allen purchased another 7,009 BTCS shares at approximately $0.81 to add to his existing 2 million share position.
BTCS has trended lower since its January 2021 peak above $3. The downturn has been in relatively low volume which makes this buy the dip opportunity more palatable.
PENNY STOCKS TO WATCH #2 HCMC
Soon after we detected some serious momentum in HCMC on February 2nd, the stock rallied above $0.006. It went on to return to its early February level but has since gotten a second wind.
After a period of below-average volume, investor interest in HCMC is picking back up. On May 3rd, the stock was pushing higher in more than twice the 90-day average trading volume.
HCMC ran earlier this year as more traders and investors discovered the company’s patent infringement lawsuit against Philip Morris USA, Inc. and Philip Morris Products S.A. in connection with their product known and marketed as “IQOS®.” The lawsuit was filed in the United States District Court For the Northern District Of Georgia.
HCMC’s lawsuit includes claims that Phillip Morris is infringing HCMC’s patent rights in connection with IQOS®, an alternative tobacco product marketed and sold by Phillip Morris. Philip Morris claims that it is currently approaching 14 million users of its IQOS® product and has reportedly invested over $3 billion in its smokeless tobacco products. Philip Morris has been very open about their ongoing transition from traditional fully combustible cigarettes to their modified risk tobacco products, including IQOS®.
Recently, HCMC has returned to investors’ favor since announcing the re-launch of TheVitaminStore.com, an online asset it initially acquired as part of its takeover of three Paradise Health & Nutrition stores in Florida. In addition to vitamins, the Paradise stores sell a range of grocery, personal care, and household items through the Healthy Choice Markets subsidiary.
The website sells a variety of national vitamin and supplement brands in addition to Ada’s branded products which were previously only available in HCMC’s natural and organic grocery store Ada’s Natural Market. The reincarnation of TheVitaminStore.com will enhance HCMC’s e-commerce presence which includes an online storefront on Amazon.com.
Healthier Choices Management (HCMC) has generated a lot of investor buzz this year. HCMC has an opportunity to capitalize on growing consumer interest in health and wellness, a trend that was only accelerated by the pandemic. Investors are hoping to ride this trend to big gains which are certainly possible with HCMC trading for a fraction of a penny.
HCMC also operates nine retail outlets in the Southeastern U.S. that sell e-liquids, vaporizers, and other vaping-related products. Investors have been buzzing about the company’s exposure to the cannabis space. Its patented Q-Cup technology does what the K-Cup does for coffee only with cannabis and CBD concentrates. Along with the Q-Unit device, this product holds growth potential as an “on-the-go” way for people to enjoy medicinal or recreational vaping.
A list of the most popular OTC stocks of 2021 would have to put HCMC near the top. The stock’s ultra-low price tag has attracted many bidders driving it up more than 2,000% year-to-date.
The healthy uptick in volume to kick off May 2021 could make HCMC a good choice for speculative momentum investors.
PENNY STOCKS TO WATCH #3 OZSC
Many OTC stocks climbed to impressive peaks early in the year but have since taken a breather. OZSC certainly falls into this category.
On January 27th, we noted a big move in OZSC that turned out to be just the beginning. The once sub-penny stock skyrocketed as high as $0.50 as investors clamored to get their hands on anything clean energy-related in the aftermath of President Biden’s inauguration.
The weak hands have since departed and may now be feeling regret with OZSC regaining momentum in recent days.
Late last month Ozop Energy Solutions (OZSC) re-energized its shareholder base by announcing a $600,000 order for its microgrid generator system. The first-in-class system includes energy generation, storage, and switchgear equipment that will be used in a groundbreaking commercial real estate project.
The near Net Zero carbon emission initiative involves the construction of a commercial office property in Maryland. Through the use of a natural gas generator, an AC solar photovoltaic system, and a pair of EV charging stations, the microgrid is forecast to reduce annual energy usage by 1.3 million kWh and lead to over $4 million in cost savings over the life of the project.
OZSC thinks this is just the beginning. That’s because Grid & Energy Masterplanning (GEMM) with whom OZSC has a strategic alliance, sees $10 million worth of similar projects being launched this year. If this projection rings true, OZSC would have a major source of revenue growth on its hands as GEMM’s preferred equipment supplier.
The orders have continued to flow in. On April 30th, OZSC announced a $2.1 purchase order from Yingli Green Energy Americas. Under the agreement, OZSC will distribute four containers a month of Yingli’s solar photo-voltaic panels, the main component of the company’s solar energy system.
With two sizeable orders in less than two weeks, investors appear to be jumping back into OZSC. If more orders follow, this stock could head to the sun.
PENNY STOCKS TO WATCH #4 RNVA
RNVA has seen some unusual volume in recent days that penny stock investors should take note of.
Less than a year removed from its stunning 1-for-1,000 reverse stock split, RNVA may finally be coming to life. The Tennessee-based hospital operator is in the midst of a much-needed organizational restructure. At the beginning of the year, it reached an agreement to merge its software and genetic testing interpretation businesses with InnovaQor which trades on the OTC under the INOQ symbol.
Two months later, RNVA announced that the deal was off. That’s because TPT Global Tech (OTC: TPTW) with whom INOQ had a licensing agreement to develop a next-gen telehealth platform, failed to agree to final closing terms. RNVA then said it would consider filing an SEC Form 10 to allow its software and genetic diagnostic businesses to trade as a separate entity.
RNVA CEO Seamus Logan, commented, “Rennova is disappointed that the previously disclosed agreement with TPT Global Tech, Inc. could not be finalized successfully. We believe we can quickly execute a plan of separation of our software assets, an opportunity that achieves the same outcome for our shareholders as previously intended, and build a successful healthcare software provider that meets the needs of a modern healthcare sector.”
For now, RNVA still holds the software business along with its core rural hospital business and two physician offices. Interestingly, its hospital side of the business has some investors buzzing the most. Some say that if government funds make their way to rural hospitals such as those owned by RNVA, the company could have the resources to bring in more revenue.
You have to go out four decimal places to get to RNVA’s price. Based on the recent volume spike, this penny stock may be worth the price.
As we keep saying, there are always opportunities in the markets and it’s our job to find hot penny stocks for our subscribers. Huge gains can be made in such a short amount of time.
If you like any of these 4 penny stocks, our best advice is to be patient and throw bids in below the market. Buying dips and selling rips as swing trades remains the best strategy.
It’s also important to look for penny stocks that have yet to run. There are plenty of opportunities out there and we screen hundreds of penny stocks each week looking for the best alerts for our subscribers.
Remember, all it takes is one or two to become a winner and you’ve crushed the market indices for the year.
As always, good luck to all (except the shorts)!
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Disclosure: We have no position in any of the securities mentioned. We wrote this article ourselves and it expresses our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article. Insider Financial is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This article is not a solicitation or recommendation to buy, sell, or hold securities. This article is meant for informational and educational purposes only and does not provide investment advice.