Friday, May 15, 2009
5 Penny Stocks to Buy Now
By Jamie Dlugosch, Editor, InvestorPlace.
A Great Buying Opportunity in Low-Priced Stocks
Last December I wrote about the Top 5 Penny Stocks to Buy Now. At the time, I suggested that readers could enhance returns by speculating on stocks with market caps of less than $500 million. By taking a chance on these beaten-down stocks, investors could reap a huge reward.
And now six months later, we can see how true that statement really was. Four of the five stocks have generated positive returns, with three of the four up more than 50%. Only one stock is down, posting a small loss of just 6%.
Those are fantastic returns and are even more remarkable considering that they have been generated during a time when the market has fluctuated greatly.
The market meltdown has created a great buying opportunity in low-priced stocks. Keep in mind that I'm not talking about non-listed pink sheet garbage. These are real companies with some on the list with market caps of more than $250 million.
Here is an update on my top five penny stocks…
Penny Stock 1 WPT Enterprises Inc. (WPTE)
The company that kicked off the recent craze in Texas hold 'em poker with its franchise World Poker Tour became a low-priced stock due to its inability to sufficiently monetize its brand equity.
While other companies shunned U.S. law with online poker sites that operate illegally in this country, WPT Enterprises Inc. (WPTE) made the decision to stay out of the U.S. online poker market. At the same time, interest in poker appears to have peaked based on attendance at last year's flagship event, The World Series of Poker. In addition, a global recession impacted even so-called recession-proof companies, including those involved in the gaming space.
In December, WPTE traded at 52 cents per share. Since then, the stock is up more than 50% to 79 cents per share. In its recent earnings report, WPTE announced that its season seven was doing well on the FSN Network and that the company inked a deal for season eight on the same channel.
Although the company shuttered its WPT China effort, its clubWPT.com continues to grow. The company is engaged in discussions with customers and other parties in order to best leverage the WPT brand. The translation is that the company may be sold. If so, it will be at a higher price than 79 cents per share.
Penny Stock 2 TriQuint Semiconductor (TQNT)
If you believe that the economy will eventually recover to begin a new growth cycle, investing in technology makes sense. While the rest of the market is struggling to move higher in 2009, the technology-heavy Nasdaq is well into positive territory.
Within technology, the semiconductor space is really seeing stocks surge higher in value. That is certainly the case with TriQuint Semiconductor (TQNT). The stock is up more than 65% so far in 2009. Even so, the stock is still down more than 50% from where it traded in early September 2008.
Assuming the next business cycle lasts the typical four years, the recent move in TQNT could be just the beginning. This is a stock that has the potential to triple in value or more. The timing is right, and the valuation is attractive.
It's a must-own penny stock for those looking for such risk exposure.
Penny Stock 3 ION Geophysical Corp. (IO)
Oil prices are on the rise again. As a result, it's highly profitable for oil companies to increase exploration activities. Serving that market is ION Geophysical Corp. (IO).
Thus far, IO is the one stock that has failed to yield any gains in 2009. Shares are down approximately 6%. This includes being down more than 10% on Wednesday of this week due to a less-than-stellar earnings and future guidance report.
The market appears to be missing the mark. IO is a lagging indicator on the economy. When oil prices are falling, lower prices will adversely impact IO results for months after. It should be no surprise then that the company is struggling with oil prices dropping hard over the last 10 months.
That said, oil has been trending higher this year. Such a state should bode well for IO, and the company did say that they are seeing more land-based exploration activity as of late.
It may be late in coming, but I expect IO to do very well in the last half of this year as oil prices continue to rise.
Penny Stock 4 U.S. Home Systems Inc. (USHS)
Another lagging stock on this list has been U.S. Home Systems Inc. (USHS). The stock is very thinly traded and down nearly 10% this year. The credit crisis has negatively impacted USHS as many of its sales are done on credit through its relationship with Home Depot (HD).
This week, the company announced that sales decreased during the first quarter as loan approvals fell to 79%. USHS lost 13 per share in the period.
Fortunately, it would appear that the economy is turning. When it does, look for USHS to move higher. The company's relationship with Home Depot has been challenging as that partner has struggled, but ultimately a recovery will take hold, and with such a strong partner like Home Depot, the future looks bright for USHS.
Penny Stock 5 Osteotech (OSTE)
The baby boomers are aging, and yet they want to remain active. That bodes well for Osteotech (OSTE), a maker of biologic products for orthopedic and spinal surgeons.
Shares of OSTE are up 70% since December, and according to analysts who follow OSTE, the stock has much more upside as profits are expected to come in 2010. Last quarter, OSTE lost 10 cents per share, and even though analysts expected a smaller loss, OSTE's share price held up well given future expectations.
But the past is the past, and demographics being as they are, profits should be forthcoming in coming years. OSTE has the potential to reach double-digit figures in a very short period of time. OSTE represented the high risk, high reward opportunity perfect for those interested in penny stocks.
Good investing, Kingsley.