A penny stock is generally considered a company whose share price is less than $5. Frequently, but not always, they are small- to micro-cap companies that trade over the counter (OTC). These are companies whose share price may preclude some classes of investors from holding them, which contributes to increased volatility and potential opportunity. The following six non-OTC companies have outperformed the S&P 500 in the past week and month, but also have some modicum of fundamental strength.
As a fundamental investor, the general strategy is to buy companies at a discount. When you consider widely followed mega caps like Apple and Amazon, it can be hard that they are mostly fully priced unless the earnings outlook shifts like it has since their earnings announcements. However, even strong positive surprises can’t cause dramatic rallies in the price because they are so big and so widely held. Therefore, some of the biggest opportunities for undervaluation and explosive opportunities are with smaller cap companies and especially penny stocks.
The focus of this list to identify non-OTC stocks is to find companies that have liquidity. The concept of liquidity is the ability to get in and out at a competitive price. The use of stop losses can be tricky if there is a sudden drop during normal trading hours called a “fast market” or an overnight gap in the price. The companies listed have at least 100,000 shares and $2 million in value traded daily.
From an outperformance perspective, the idea is to identify companies that are outperforming. In this case, the companies listed have outperformed the S&P 500 over the past week and the past month. This is an indication of money flowing into these names and can be confirmed by increased volume during the rallying phases.
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Here’s five outperforming penny stocks to add to your watchlist.
Penny Stock #1: Park City Group, Inc (NASDAQ: PCYG)
Park City is a software-as-a-service company whose ReposiTrak Compliance and Food Safety Solutions marketplace enables customers to manage relationships with suppliers and reduce legal risk of supply chain providers. The company primarily serves grocery, convenience store, and specialty retails industries. PCYG recently broke out from a long-term support with near-term potential to test $6.
Penny Stock #2: cbdMD Inc (NYSEAMERICAN: YCBD)
CbdMD is a producer and distributor of various cannabidiol (CBD) products including tinctures, capsules, bath bombs, gummies, topical creams, animal treats and oils. The pet line of products operates under the Paw CBD brand name. This company hits a couple areas that have been hot spots for consumers during the pandemic. That is pets and natural remedies. While CBD companies haven’t exactly been hitting it out of the park from an earnings perspective, this company has posted a non-GAAP profit in the past two quarters and has over tripled in price since before the last earnings announcement.
Penny Stock #3: United Microelectronics Corp (NYSE: UMC)
UMC operates semiconductor wafer foundries across the world. While it provides circuit design, mask tooling and fabrication, they also manufacture specific products for the solar and LED industries. The price has exploded over the past few weeks and is trading at levels last seen in early 2010.
Penny Stock #4: Support.com, Inc (NASDAQ: SPRT)
Support.com fits in the cloud and internet of things (IoT) space that has done so well over the past few months. They offer support services, software, and cloud-based software for helping companies with the support interactions using their own or a third-party support. The price recently broke to a new 52-week high on significant volume just ahead of its earnings report on August 12.
Penny Stock #5: Wipro Limited (NYSE: WIT)
Wipro is an India-based company that operates three segments in IT services, products, and India State Run Enterprise Services. The company serves a broad array of industries from banking, financial services, insurance and consumer business to the energy, natural resources, and utilities industries. WIT had a huge breakout following its July 14 earnings and recently broke out to a new 52-week high.