Are These Reopening Penny Stocks On Your April 2021 Watch List?
Penny stocks are some of the highest risk assets out there. But in 2020, they became some of the most popular. One of the biggest reasons had to do with the pandemic sell-off in February and March. The shock of a global shutdown triggered a huge flight out of stocks and into cash.
How do penny stocks come into play? Many of the leading names in different industries fell to levels below $5 per share. Stocks that were never thought of as “penny stocks” were, in fact, exactly that. The crazy part is many still have yet to recover. Travel, leisure, entertainment, and even energy were some of the hardest-hit last year.
Fast-forward to 2021, and vaccine distribution has brought about a new trend for “reopening stocks.” Many of these are in the same industries there were hit hard last year. The idea, however, is that if the economy begins reopening thanks to lower case numbers, “reopening stocks” could benefit greatly.
Are Reopening Stocks A “Buy” Right Now?
There’s been plenty of volatility to account for over the last few weeks. Most of the major indexes dropped hard to close out in the first quarter of 2021. In light of the latest jobs figures, however, optimism is helping to push certain stocks higher. Many of these, coincidentally, are your typical consumer-driven industries.
What’s more, in the jobs report last week, the numbers indicated something interesting. It’s probably something that anyone looking at this “reopening trade” could make a note of. While nonfarm payrolls rose by 916,000 in March, the gains were strongest in leisure and hospitality. In light of expanded vaccine adoption, it looks like these industries are starting to rehire or put people full-time.
Seasonality aside, travel, leisure, and hospitality are things most people were deprived of for the last year. In light of this new data, now could be the time to start looking at a few penny stocks that may benefit from the reopening trade.
- Express Inc. (NYSE: EXPR)
- Rave Restaurant Group Inc. (NASDAQ: RAVE)
- Harbor Custom Development Inc. (NASDAQ: HCDI)
- Sunlink Health (NYSE: SSY)
- 88 Energy Limited (OTC: EEENF)
Penny Stocks To Watch #1. Express Inc. (NYSE: EXPR)
Express Inc. has gotten swept up in several trends this year. Initially, EXPR was part of the list of “epicenter penny stocks” or “reopening stocks” to watch. Brick and mortar retail was hit last year. But the company focused on developing its online retail footprint to make it more of a brick-and-click model. This helped give the company a boost in its last quarter. On top of this, it provided such strong growth that Express has put together a separate plan to enhance its online offerings further.
It was also part of the “short-squeeze” or “Reddit penny stocks” trend last quarter. Heavily shorted stocks became the target of retail traders who congregated on social media outlets like Reddit, putting together trading ideas and ultimately rallying behind certain companies.
EXPR was one of these stocks, and it ended up running as high as $13.97 in January. Since coming back down, shares have held a strong support level around the 50-day moving average. This has been a technical level that EXPR stock hasn’t broken below in months.
With an uptick in physical retail stores reopening and fresh stimulus funds in people’s hands, many stocks within this industry have become targets. On April 5th, shares of EXPR stock jumped to highs of $4.20, marking a year-to-date move of more than 350%.
2. Rave Restaurant Group Inc. (NASDAQ: RAVE)
Leisure and hospitality jobs are on the rise. So it would make sense that related stocks are in focus. Rave Restaurant Group has climbed significantly since the start of the 4th quarter last year. The company operates, owns, and licenses pizza restaurant franchises under the Pie Five Pizza Co and Pizza Inn brands. In addition to the reopening trade sentiment helping boost certain stocks, Rave’s financial performance is something to take note of as well.
In its latest quarterly update, the company recorded a net income of $102,000. Compared to the net income of $14,000 thousand in the same period of the prior year, this significantly increased. In addition to that, income before taxes was $104,000 for the second quarter of fiscal 2021. This didn’t compare to $10,000 for the same period of the prior year.
Clint Fendley, Vice President of Finance of RAVE Restaurant Group, Inc. explained, “Our focus on cost controls yielded another quarter of profitability as the income before taxes for the six months ended December 27, 2020 was $182 thousand. RAVE’s cash balance of $6.3 million further bolsters our position as we deal with the lingering effects of the pandemic while working to revitalize both of our brands. Although we have experienced modest store closures, the closures have been less than we expected when the pandemic began and are a credit to the tenacity of our franchisees.”
In light of this growth trend, restaurant stocks like RAVE have come back into focus in April.
3. Harbor Custom Development Inc. (NASDAQ: HCDI)
Real estate has become another hot topic in the stock market. Low rates and a piping hot housing market have helped keep the momentum going. Harbor Custom Development has experienced a bit of a mixed year, nonetheless. Shares slid early but have since begun picking up steam.
The company itself is involved in all aspects of the land development cycle. This week Harbor announced entry into a purchase and sale agreement acquiring roughly 1.85 acres of land in Tacoma, Washington, for $2,000,000. The purchase is expected to close on or before May 22, 2021. The company plans to develop an 80 unit condominium site catering to first-time homebuyers in Tacoma. These units will be 1 and 2 bedrooms priced between $300,000 and $400,000.
“Tacoma represents an ideal location for Harbor Custom Homes (R) to increase our Western Washington footprint and address the significant need for affordable housing in Tacoma. As home prices continue to escalate due to record low inventory levels, first-time homebuyers are often priced out of the market.”
Sterling Griffin, President and CEO of Harbor
This deal comes just a few days after Harbor announced the sale of 50 lots in Washington State to Lennar Northwest for $7 million. Given the momentum in the housing market and the surge in first-time homebuyers right now, HCDI could be one of the reopening penny stocks to watch.
4. Sunlink Health (NYSE: SSY)
Another “outside the box” reopening stock could be Sunlink Health. Given that people are beginning to do more things in person, healthcare could be an industry that sees more visits being schedule with actual people instead of over the phone or online.
Sunlink has several subsidiaries that own and operate healthcare properties and businesses in the U.S. Each of these is focused on connecting patient needs with healthcare teams. The company most recently announced a revised capital strategy for one of its operating units, Trace Regional Hospital. Its Trace Forward Capital Plan was implemented, totaling approximately $2 million. This will expand, upgrade, and improve its physical plant, patient care, ancillary services, and support areas.
Specifically, the plan includes an 8-bed expansion of its Pathways Care Program and a geriatric behavioral health service, among other things. It will also bring Pathways to 26 beds. This is all expected to get buttoned up by the end of June.
Given the timing of this and the likely anticipation of in-person visits increasing, SSY could be another one of the reopening penny stocks to watch this quarter.
5. 88 Energy Limited (OTC: EEENF)
Another area of interest has been energy. Whether it’s green energy or traditional oil and gas, energy stocks are on fire right now. 88 Energy operates roughly hundreds of thousands of acres targeting oil on the North Slope of Alaska.
Specifically, since entering into a binding agreement with Burgundy Xploration, the company has expanded its “Project Icewine” acreage to roughly 231,000 net acres at the end of last year. Fast-forward to the end of Q1, and 88 Energy highlighted several key developments that the market has focused on. The final condition related to the Umiat Oil Field acquisition was completed cement work that was previously associated with plugging and abandoning 2 historical wells. This Field is a historic oil discovery that was initially made in 1945.
Given the current state of the energy industry as a whole, oil and gas stocks are at the center of the reopening trade. While 88 may still be in the early stages, it’s worth mentioning that smaller oil and gas penny stocks have gained attention lately. For EEENF in particular, there is a very active focus on the company from social media users. So it’s also important to understand that the “hype factor” could also play a role with this penny stock, in particular.
Is It Time To Buy Reopening Penny Stocks?
Obviously, the world felt the pressure just as much as many of these penny stocks last year. In light of the high level of optimism thanks to vaccine distribution, the markets follow this “reopening trade” closely. But emotions could also play a bigger role right now in comparison to the actual fundamentals, including the time it will take to return to pre-pandemic operating levels.