Penny Stocks Are Risky But Have Far Outperformed Blue-Chips In 2021
There’s no secret that penny stocks are high-risk. But there’s something about these cheap stocks that give a sense of excitement. There are few places where you can buy something for $100 1 day and see that turn into $1,000 or more a few days later. The crazy part is, this year, that scenario has become very real on more than just a handful of occasions.
Now, obviously, all penny stocks don’t perform like that. But let me paint another picture here. Since the start of 2021, a popular benchmark for small-cap stocks, the Russell 2000 Small-Cap Index ETF (NYSE: IWM), has made light work of other benchmarks like the S&P ETF (NYSE: SPY), the Nasdaq ETF (NASDAQ: QQQ), and yes, even the Dow Jones ETF (NYSE: DIA). That’s also taking into account the fact that small-cap stocks have gotten beaten up since March 15.
Penny Stocks Are Outpacing Blue-Chips
As of the closing bell on March 30th, IWM was still up 10% year-to-date. Meanwhile, SPY was up only 5% YTD, the QQQ was down on the year, and the Dow came closest, up 7.9% YTD. So the market’s penchant for penny stocks and small-cap companies is clearly strong this year.
When it comes to penny stocks, it’s important to remember a few things. The first of which is that these are very volatile. That means prices tend to shift quicker than their blue-chip counterparts. Furthermore, a fair amount of cheap stocks are better traded in the short-term than held over time. That isn’t to say investing in penny stocks is bad. But if you choose to do so, looking at your account every day could get stressful.
In any case, since there’s obvious strength behind smaller stocks right now, it might be time to put a watch list together. Keeping risk in mind, here are 4 penny stocks gaining attention in the stock market today.
- Arcadia Biosciences Inc. (NASDAQ: RKDA)
- Lineage Cell Therapeutics Inc. (NYSEAMERICAN: LCTX)
- CASI Pharmaceuticals Inc. (NASDAQ: CASI)
- Endra Life Sciences Inc. (NASDAQ: NDRA)
Penny Stocks To Watch #1: Arcadia Biosciences Inc.
Shooting up by almost 25% on March 30th is the biotech company Arcadia Biosciences. The large spike in value on Tuesday presumably comes from the release of its fourth-quarter 2020 financial results. Before we get into them, let’s take a closer look at the company.
Arcadia focuses on advancing a science-based approach to making better crops and food ingredients. Its brand, known as GoodWheat, offers alternative ingredients for those who are more health-conscious. It also owns the brand GoodHemp, which produces genetically superior hemp products for sale on the open market. One of its most promising technological advancements is its ArcaTech product. This is an innovative and proprietary method used in growing crops.
In its fourth-quarter results, CEO Matt Plavan stated that “2020 was a remarkable year for Arcadia, as we achieved record revenues and greatly strengthened our financial wherewithal. We also established new direct-to-consumer sales channels, introduced new consumer products, and enhanced our IP portfolio, and fundamentally evolved to a viable commercial enterprise.”
In the fourth quarter, RKDA managed to bring in around $7.1 million in revenue. This is a substantial improvement from Q4 2019, where it only brought in $416,000. Additionally, it reported a net income of $9.98 million, up again from Q4 2019, where it held a loss of $6.2 million. With over $11.6 million in cash on hand, Arcadia looks like it has greatly improved its cash and financial situation.
There’s growing interest (no pun intended) in things like marijuana stocks and hemp has obviously gotten folded into that niche. With the rebound in RKDA stock on Wednesday following these results, it could be one of the pot penny stocks to watch next quarter.
2. Lineage Cell Therapeutics Inc.
Lineage Cell Therapeutics is another biotech company, but one that is more traditional than RKDA. On Monday, March 29th, Lineage announced that it used its leading product candidate to treat a patient suffering from Retinal Disease. Under a compassionate use approval by an Israeli University, Lineage will use its OpRegen therapy to treat an adult with AVMD.
Currently, OpRegen is considered to be an investigational cell therapy. It utilizes allogeneic RPE cells that are directly administered to the subretinal space. This is a big deal because it puts Lineage one step closer to the commercialization of OpRegen. While this is only one small step, it is a step in the right direction.
In 2021, Lineage has planned three clinical programs based on early findings. It uses its proprietary cell-based therapy platform to develop and manufacture its compounds. In addition to the study above, Lineage will engage in two other programs to treat acute spinal cord injuries and non-small cell lung cancer, respectively. Between the three programs, Lineage has received around $40 million in financial support.
This brings its total cash on hand in March 201 to over $57 million. The company states that these funds will help it to fund operations until 2023. Because its pipeline is so broad, investors could consider Lineage to be a highly diverse biotech penny stock. It will obviously take some time to build a commercial portfolio. However, it could be a penny stock to watch in light of these latest developments.
3. CASI Pharmaceuticals Inc.
CASI Pharmaceuticals is another biotech penny stock to watch. On March 30th, it announced its full-year 2020 financial results resulting in an over 10% gain by the end of the day. Wei-Wu He, Ph.D., CEO of CASI, stated that “despite the ongoing challenges presented by the pandemic, we are continuing to execute across each of our targeted initiatives, chiefly with respect to strategic growth through tactical business development, as evidenced by our recently announced in-licensing of a first-in-class VCP/p97 inhibitor for hematological malignancies and solid tumors from Cleave Therapeutics.”
CASI engaged in a $32.5 million public offering to continue developing its pipeline. Its current source of revenue is the sale of Evomela, which was launched back in mid-2019. Last year Evomela brought in around $15 million in revenue for the company. In a broad sense, CASI focused on the acquisition of products for use in hematology-oncology. Also, it acquires substances for other clinically unmet treatments.
It states that it has a commercial team of more than 80 marketing specialists working to sell its products. This financial statement shows that CASI was able to beat estimates by more than $0.30 million. While today’s gain can be attributed to speculation, CASI does have a lot of interesting work going on in its pipeline.
4. Endra Life Sciences Inc.
Endra Life Sciences works more in the biotech industry’s tech side than some of the companies mentioned above. It produces Thermo Acoustic Enhanced Ultrasound or TAEUS based products. This is a novel technology that could completely shift the way that medical imaging is completed.
Endra states that its TAEUS technology can be up to 1/50th the cost of traditional MRI imaging. This is a big development for both patients, and the medical field. While it may seem like a lot to ask a doctor to purchase a whole new MRI system, Endra’s TAEUS can be adapted to existing platforms. This means that the barrier to entry for medical professionals is quite low. In the past few years, Endra has worked to build up its patent portfolio.
Only a few weeks ago, it announced the addition of its 14th patent known as “Systems and Methods for Imaging Biological Tissue Structures.” While this is exciting on its own, this patent could serve to commercialize Endra’s products further. In addition to this, ENDRA announced in December the renewal of its collaboration agreement with the Healthcare Unit of the General Electric Company.
GE is a leader in the medical imaging systems market and has been for quite some time. Not only will this deal help Endra financially, but it validates the technology that it is working on. The way we see it, Endra has two paths to take for the future. On the one hand, it will continue to build up its pipeline of patents, adding more intellectual value to its business. On the other hand, Endra is continuing to build clinical partnerships in the field, thus growing the financial side. With a transparent and innovative business model, NDRA could be worth watching.
Are Penny Stocks A Good Investment?
Depending on your tolerance for risk and ability to manage a volatile position, some penny stocks are worth a closer look. Whether or not they’re a good investment is something you need to decide. However, start learning how to day trade, first. Some penny stocks may be volatile, but over time, the short-term volatility can result in a longer-term bull trend. If you’re interested in learning how to day trade penny stocks, check out some of these articles:
- Penny Stocks & Frequently Asked Questions From New Traders
- How To Buy Penny Stocks in 2021
- Penny Stocks & 5 Rules To Know Before You Buy