What are the top 10 penny stocks to buy in 2017? Out of thousands of stocks that are trading at price levels below $1.00, it can be hard to identify winning picks, especially since it’s no secret that the companies behind penny stocks may be involved in scams or other shady endeavors that will cause investors to lose money. However, one easy way to identify penny stocks that have the potential to bring in high returns is to follow smart money investors.
That’s what we do at Insider Monkey. We follow around 700 hedge funds and other large institutional investors and analyze their quarterly 13F filings to identify their collective sentiment towards thousands of stocks. We use the data mainly as part of our investment strategy that has returned over 45% since February 2016, including beating the market by five percentage points between mid-February and mid-May of this year. We share our stock picks with our premium subscribers quarterly; don’t miss your chance to subscribe before our next batch of picks are released.
Aside from picking stocks as part of our strategy, we can also see the number of investors that are bullish on individual stocks, and by comparing this data on a quarter-by-quarter basis, we can identify trends and see how these funds’ perception towards different companies changes.
When it comes to penny stocks, they are included in the top-right quadrant in the risk-reward coordinate system, which means that they are highly risky, but can also generate substantial returns given the right circumstances. Therefore, it can be worth it to invest in penny stocks and there are examples of people who have made fortunes this way. For example, Timothy Sykes managed to earn over $1.6 million by the age of 21 by day trading penny stocks. However, for every few investors that scored big, there are hundreds if not thousands of those that lost a lot of money by trying to venture into the penny stocks area of the market (think of it as the seedy underbelly of a thriving town).
So, the key when it comes to trading penny stocks is to do your homework and carefully research each potential investment. For large companies, research is easy due to the availability of information, while for tiny companies, whose shares trade at very low prices, they are often surrounded by a bit of mystery. That’s especially true for stocks that are trading over-the-counter, because, by law, they are allowed to disclose less information to the public. In addition, such companies can be artificially promoted by scammers looking to boost their price so they can then dump the stock for huge returns. Since investing is a “zero-sum” game (i.e. for every winner there is a loser), it’s very easy to lose your head and fall for one of these schemes.
So, the rule is generally to stick to penny stocks that are traded on major exchanges. Penny stocks that are trading on the NYSE and Nasdaq are usually stocks of companies that went through troubled times which led to their decline. Subsequently, sometimes the market overreacts and/or doesn’t see the potential in these companies. However, through detailed research and careful analysis, big investors are able to identify catalysts that could send these stocks higher, which is why it is a good idea to follow them.
With this in mind, let’s take a look at the top 10 penny stocks to buy in 2017. The stocks that were selected registered an increase in the number of bullish investors during the first quarter. Earlier this year we wrote a similar list of 5 Penny Stocks to Buy Now, stocks which were the most popular among the funds in our database at the end of 2016, but companies from that list were not included in this one, as one of them was acquired and the others have conducted reverse stock splits in order to avoid being de-listed. Check out the list starting on the next page and good luck with your penny stock investing.