Can you get rich by trading penny stocks?

While penny stocks represent a high-risk investment option and could potentially make shareholders lose a lot of money, that's not a golden rule. Some penny stocks could have high percentage returns. For example, if you purchase 10 shares of a stock at $1 per share and the price jumps by $1, your investment will double, as opposed to buying 10 shares at $100, in which case you'd only get a $10 profit from your $1000 investment.

How do I pick a good penny stock?

Before investing your hard-earned money in penny stocks, you need to take the following actions: Use only funds you can afford to risk. Understand the market conditions. Do some research on the company. Learn about share pricing and valuation.

How high can a penny stock go?

There is no limit on how high a penny stock can go. However, when reaching over $5 per share, it ceases to be considered a penny stock.

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5 Best Penny Stocks To Buy Now

November 15, 2024

5 min Read

Written by Daniela Rivera-Herrera

Edited by Joe Evans

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Despite their high risk and poor reputation, penny stocks are highly popular among investors. And while they are notoriously volatile, that doesn’t mean you can’t find a hidden gem every now and then.

If you’re interested in trying your luck investing in penny stocks, here are some worth keeping an eye on. Many of them are in the biotech, pharmaceutical, energy and tech industries.

Let’s take a closer look at some of the most underrated penny stocks you should consider stashing for later.

5 Penny Stocks To Keep on Your Watchlist

Penny stock trading has been heavily influenced by the meme stock phenomenon. While that trend has faded, some investors are still willing to really search for diamonds in the rough and take the risk on penny stocks with solid growth potential.

If you’re one of them, here are five of the best penny stocks to buy now.

1. Ur-Energy Inc. (NYSE: URG)

Ur-Energy is the lowest-cost uranium producer in North America. The Colorado-based company specializes in the acquisition, exploration, development and operation of uranium mineral properties. Its flagship project, Lost Creek, has produced 2.8 million pounds of yellowcake uranium, a precursor to enriched uranium, since 2013.

Statistic	Price
Market Cap	$448.73 million
Share Price	$1.24

2. Carisma Therapeutics Inc. (NASDAQ: CARM)

Companies in the clinical healthcare field are quite popular among penny stock investors. Carisma Therapeutics is a clinical-stage biopharmaceutical company focused on developing immunotherapies. During its 2023 merger with Sesen Bio (SESN), a provider of targeted fusion protein immuno-therapeutics for cancer treatment, Carisma attracted $140 million in venture capital from the likes of AbbVie, Penn Medicine and Merck & Co.

Statistic	Price
Market Cap	$36.65 million
Share Price	$0.94

3. Ceragon Networks (Nasdaq: CRNT)

Ceragon provides end-to-end high-capacity wireless connectivity to over 600 service providers and 1,600 private networks worldwide. Its customers span a wide range of industries, including oil and gas, utilities, internet service providers, local government, defense, healthcare and education.

Statistic	Price
Market Cap	$232.71 million
Share Price	$2.82

4. Esperion Therapeutics (Nasdaq: ESPR)

Esperion discovers, develops and brings to market medications to reduce the risk of the world’s No. 1 cause of death — heart disease. Its U.S. and Europe-approved products are Nexletol and Nexlizet, which are non-statin LDL-C reducers.

Statistic	Price
Market Cap	$416 million
Share Price	$2.10

5. Pixelworks Inc. (NASDAQ: PXLW)

Pixelworks is a semiconductor company that focuses on providing “end-to-end,” optimized video delivery. Its research and development activities center around video enhancement, increasing performance and functionality while conserving power. Products include a cinematic video platform, mobile displays, projectors and video streaming technology.

Statistic	Price
Market Cap	$48.64 million
Share Price	$0.83

What Exactly Is a Penny Stock?

Historically, in the United States, penny stocks were those traded for less than one U.S. dollar per share. However, that definition has recently evolved to include all shares trading under $5.

For those trading outside the U.S., the definition of these types of stock can vary. For example, in the U.K., stocks priced over £1 don’t fall under the penny stock umbrella.

In general, penny stocks are often classified as microcap stocks. These are usually associated with smaller-scale companies with a market cap of under $250 million.

Final Take

Penny stocks can be a good alternative for traders who lack the capital to make more substantial investments. Although they involve a higher risk than other options, stumbling upon a hidden gem is possible. Just remember to do your due diligence and tread carefully.

Advice

Penny stocks can make investors a lot of money, but can also make them lose a lot. Before trading these high-risk shares, it’s essential to do some research to avoid any unpleasant surprises in the long run.

Penny Stock FAQs

Here are the answers to some of the most frequently asked questions about penny stocks.

Can you get rich by trading penny stocks?
- While penny stocks represent a high-risk investment option and could potentially make shareholders lose a lot of money, that's not a golden rule. Some penny stocks could have high percentage returns. For example, if you purchase 10 shares of a stock at $1 per share and the price jumps by $1, your investment will double, as opposed to buying 10 shares at $100, in which case you'd only get a $10 profit from your $1000 investment.
How do I pick a good penny stock?
- Before investing your hard-earned money in penny stocks, you need to take the following actions:
  - Use only funds you can afford to risk.
  - Understand the market conditions.
  - Do some research on the company.
  - Learn about share pricing and valuation.
How high can a penny stock go?
- There is no limit on how high a penny stock can go. However, when reaching over $5 per share, it ceases to be considered a penny stock.

Daria Uhlig contributed to the reporting for this article.

Data was compiled after the close of trading on Nov. 14, 2024, and is subject to change. Information on analyst ratings was sourced from Yahoo Finance.

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