Five Disruptive Penny Stocks That You Should Watch
The market is blowing up and it’s getting near impossible to find disruptive companies that aren’t already overbought! In this video, I’ll show you how to find the undiscovered penny stocks changing our daily lives. I’ll show you how to narrow your list of penny stocks and a two-step process for quick analysis. Then, I’m revealing five disruptive penny stocks that you need to be watching!
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What are Disruptive Penny Stocks?
There is a new class of investment opportunities available which can make both you and the companies profiting from them very wealthy.
First, what are disruptive penny stocks? Put simply, disruptive penny stocks are those that have been traded over-the-counter or on the pink sheets and whose price has fallen below $0.01 per share. In most cases these shares once traded at higher levels, often far higher than today’s prices, but for one reason or another they ended up trading at levels well below $0.50 per share before being delisted.
Disruptive penny stocks have been derided by some Wall Street types who claim that there is no real value to be found among them because their shares trade under $1.00 which in turn means they have fallen well below their liquidation value.
We believe this is not true. While most disruptive penny stocks may be trading under their liquidation values per share, there are many of these companies that have a very real, and sometimes large, potential for profit available to shareholders who choose to enter into a position with the company prior to its price rebounding substantially above $0.50 per share again, assuming no further reverse splits occur (many of which do split 1 for 4 at certain levels).
Nation, the best companies are those that can disrupt their market, steal market share and use a first mover’s advantage to produce those triple-digit returns for investors.
The problem is, lately most of the disruptive companies are already hugely popular stocks and even more overpriced! Palantir Technologies didn’t even issue shares until it was a $15 billion company and is now trading for 68-times its annual sales…even on that kind of disruptive growth, the company would need to grow its sales by 3,400% to bring its valuation down to the average for S&P 500 companies!
And it’s the same with virtually every new disruptive company! Snowflake issued shares as a $70 billion company! Unity Software was a $20 billion company before investors could buy shares. The company is expected to double its revenue in the three years to 2023…but is already trading for 25-times those expected sales!
How to Find Penny Stocks That Can Change Your Life
The only chance you have as an investor at finding this kind of disruptive growth without paying an arm and a leg for it is in the penny stocks nobody is watching yet. Small-cap companies with an edge AND flying under Wall Street’s radar.
In this video, I’ll show you how to find those disruptive penny stock companies and how to analyze these so you only invest in the best stocks. Then I’ll reveal five game-changing penny stocks to watch for your portfolio!
What do you think will be the most disruptive technology or change over the next 10 years? What are you watching in penny stocks to get ahead of the next trend?
Strategies to Find Undiscovered Penny Stocks to Buy
I use two strategies to find those undiscovered penny stocks to buy. First I’ll start with a simple stock screener and I’m looking for companies under about $250 million market cap. That might not seem like a penny stock company but it’s miniscule compared to the average large cap company at $10 billion.
I’m also looking for strong sales growth. The company doesn’t have to be profitable yet and most of these penny stocks won’t be, but you want to see that sales growth as a proof of competitive advantage…that this new upstart has competitive advantage to steal market share from the established players.
The other method of finding penny stocks to buy, and this is something you can do in any investing theme, is to mine ETF funds for their ideas. For example, the Invesco S&P SmallCap Information Technology ETF, ticker PSCT, invests in 74 tech stocks of small and mid-cap companies. Every ETF is going to have a Portfolio or Holdings link, you just click here and can see every stock held in that theme to start your research.
Analyzing these companies comes down to finding that competitive advantage and a market large enough to really drive sales growth. This is where it helps to really understand an industry or a sector of the economy. Spend some time to understand the standard business model and range of products in an industry so when a disruptive product comes along, you’ll be the first to recognize it!
Consider Looking Into Other High Potential Options
But having a great product isn’t enough if there’s no one to buy it. You also want to look for large addressable market. Very few companies are ever going to control more than 5% to 15% of their total market. You’ve got outliers like Google and Amazon but most companies would kill to have even 5% of the total market sales for an industry.
That means, if you want that $100 million company to 10X your money someday, grow to that billion-dollar market cap or higher…it better have a ten- or twenty-billion market where it can grab that market share and grow.
Using this process for finding and then analyzing penny stocks, you’re going to narrow down your list to a handful of stocks you can research further. For that, I’ve found five stocks to watch right now.
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Five Game-changing Penny Stocks to Watch for Your Portfolio
First here is NEXE Innovations, ticker NEXNF here in the U.S. market or NEXE on the Canadian exchange. The company is $168 million newly commercialized maker of biodegradable coffee pods and while coffee pods might not sound like a growth market, coffee consumption is $102 billion and the single-use capsule industry is a 50-plus billion units annual market expected to reach nearly $30 billion in sales by 2025.
The market is there. The U.S. at-home market alone is $15.6 billion and growing 5% a year and NEXE Innovations is adding that ESG component to disrupt the industry. Traditional coffee pods take up to 500 years to decompose and even the soft bottom pods can take two years and cause plant toxicity. Nexe pods are designed to completely decompose in 35 days with no toxicity.
The company had its IPO about a month ago so not a lot of financial data yet but it has funded capacity and production in place to reach 220 million pods annually by the end of the year. Nexe has $14 million from a recent financing round and recently doubled its operating footprint with a plant expansion.
Next is Resonant Inc, ticker RESN, a $335 million RF filter foundry company with strong sales already.
The company has designed its XBar filter that is becoming the leading solution for high frequency 5G applications and is a supplier to the world’s largest RF filter manufacturer.
Sales of $9.4 million expected this year are triple the 2020 revenue of $3.2 million and the one strategic partner could represent a $100 million annual market opportunity alone. The company ramped up to 4.1 million units in the most recent quarter, a 163% increase from the prior year.
Resonant is working on that foundry business model, so it’s going to be a critical component in the supply chain for 5G RF filters…a market that is going to explode here over the next few years.
$164 million Avinger, ticker AVGR, is a great penny stock in the healthcare market, one of my favorite sectors for the year.
The company developed an image-guided occlusion crossing system for intravascular imaging called the Tigereye along with several other products in development. The system is designed for patients with peripheral artery disease a 20 million-person market in the U.S. alone with an estimated $500 million spent on 200,000 procedures annually.
The company launched its Tigereye in the U.S. and Germany last quarter with plans to expand the U.S. release this year. Revenue was posting high double-digit growth before the pandemic and should bounce back to that pace soon. This year’s sales are expected to top $11.4 million for 34% growth over last year and keep building from there.
PlayAGS, ticker AGS, was up 80% from our August recommendation and is still higher by 33% and a second opportunity to get back in.
The $194 million electronics provider for the gambling industry has obviously taken it hard over the last year but the market looks to be rebounding fast. AGS estimates that nearly fifteen thousand of its sold products, about 87% of the machines, were active by the end of the third quarter.
The average selling price in Q3 was flat year-over-year which is a good sign it can hold up that price even against lower demand.
The company has over $113 million in available liquidity through cash and a loan revolver, so plenty of financial flexibility. Sales this year are expected to rebound 30% to $217 million from just $167 million last year.
Fortress Biotech, ticker FBIO, is another penny stock I’ve been watching lately the $326 million biotech has most of its established products in dermatology but a strong pipeline of products across oncology, gene therapies and rare diseases as well.
The company already has five commercial products, which is rare for a small biotech, but these are driving $43 million in annual sales while the Fortress develops the rest of its pipeline.
Revenue increased 17% over the last year and the dermatology segment, it’s largest producer, is growing sales at a 29% pace over 2019. The company has two candidates in phase three trials with potential revenue of $790 million from Tramadol alone. Some other standouts here, a $175 million market on its CUTX candidate for Menkes disease and two others with sales potential in the hundreds of millions.
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The pipeline is there and the company has over $218 million in balance sheet cash. That’s against just $55 million in debt, so plenty of cash survivability here for development.
Investing in penny stocks is very promising, but you also need to carefully research about the stocks and follow their movement. I have given you this narrowed list of five disruptive penny stocks that can high potentially offer you the best returns. Look into them and never waste a dime.
Read the Entire Penny Stocks Series
5 Penny Stocks to Buy that Nobody is Watching5 Best Penny Stocks Under $1 to Buy Now5 MicroCap Penny Stocks to Watch [Stocks under $5]7 Penny Stocks to Buy Now for the Commodities Super-Cycle5 Penny Stocks to Keep Buying Even as Shares Fall