Penny stocks are risky but may make you wealthy with little money. The S&P 500 has 15–20% annual volatility (standard deviation), but penny stocks are riskier because their volatility might exceed 50%.
An investor who timed a buy properly may make millions. Monster Beverage (NASDAQ:MNST) is an example. Launching in 2002, the energy drink maker traded below $1 for a long time. A smart investor could buy 50,000 Monster shares for $5,000 at $0.10. Years later, you have $2.5 million from a $50 share sale.
After falling below $2 during the 2008 financial crisis, Ford (NYSE:F) was able to recover without government assistance, and its stock price rose last, finishing at $12. Moreover, AMD (NASDAQ:AMD) stock has returned over 941% after trading around penny stocks in the early 2010s.
But when profits are included, the S&P 500 has gained almost 10% yearly over the long term, whereas penny stocks returned 20% between 1990 and 2009 according to the Journal of Financial Economics, so there is a need to temper the excitement as well.
Based on this information, penny stocks should be screened for good financials and prospects, discounted valuation, and high-growth categories like electric cars and AI-enhanced filmmaking.
Ayro (AYRO)
Ayro’s (NASDAQ:AYRO) electric car, Vanish, has started its production readiness review. This step ensures that the car is ready for both low-rate initial production and full-rate production. The Vanish is an eco-friendly car for city service and fleet management.
As it completes this important step, Ayro continues to attract interest after securing several important deals since the start of 2024. In January, Ayro got its first order from the U.S. government for its utility low-speed electric car, boosting its credibility. In addition, one Fortune 100 company bought 40 of the company’s low-speed electric cars capable of customization.
Plus, through homologation, the Ayro Vanish meets safety standards in the US and Canada, making it easier to enter these areas. The business is also part of the Transport Canada Appendix G Pre-clearance Program, which makes it easier to bring cars into the country.
As a result of the pre-orders and notable milestones, Ayro’s valuation has risen substantially among penny stocks, rated a “buy” with a target price of $2.5, which is considerably higher than the last close of $0.7825.
Ideanomics (IDEX)
Ideanomics (NASDAQ:IDEX) is down 53% due to investors punishing it for pricey cash burn difficulties, providing a strong contrarian penny stock opportunity.
Recent financials from IDEX show that its sales increased by 5,200% year-over-year, EPS improved by 90%, and net profit margin increased by 99%. These numbers back the bull case even more.
Ideanomics also finished buying VIA Motors, an American company that makes all-electric industrial cars. With this buy, Ideanomics wants to grow its business of providing electric cars to businesses. Ideanomics Energy’s charging systems will combine with VIA’s electric work trucks.
Solectrac, an electric tractor company that is part of Ideanomics, also announced that it was changing its business plan to focus on direct sales to customers and building ties with key stores. The goal of this move is to get farms to get power and use government programs that help them.
Ideanomics owns WAVE Charging, which just recently hired Macy Neshati as General Manager to help the company grow and improve its place in the market for wireless charging in business vehicles.
Ideanomics’ Energica Motor Company has teamed up with Electra Vehicles to use AI-powered technology to make electric motorcycle batteries work better. This is in line with EV goals. The partnership’s goals are to improve range, make batteries last longer, and make driving more fun in general.
Pixelworks (PXLW)
Pixelworks (NASDAQ:PXLW) innovates its TrueCut Motion platform, which enhances movie experiences with powerful motion editing capabilities. DreamWorks Animation’s recent film, “Kung Fu Panda 4,” displays how effectively this technology can match motions across screens.
A new PXLW processor has AI-based super-resolution, up to 4x resolution and frame rate enhancement, and high-efficiency graphics to make games more engaging. It strives to provide realistic images while conserving power and keeping the device cool over extended games.
Several popular items use Pixelworks’ technology. It recently enhanced Sharp’s AQUOS sense7 plus smartphones’ visuals by increasing frame rates and display performance.
Top projector companies employ Pixelworks’ display processing solutions to provide high-quality pictures for large events, schools, and home movies.
Pixelworks receives praise for its tech. The Lumiere and Hollywood Professional Association gave awards for technical success to the TrueCut Motion platform, which shows how important it is in the world of motion pictures.
On the financial side, Pixelworks announced healthy first-quarter 2024 earnings. The firm matched analysts’ projections and slightly above sales estimates at $16.05 million with a -7 cent EPS. However, the company’s stock has fallen 30% since the start of the year, yet analysts rank PXLW a “strong buy,” with a $2.5 target implying a 177% upside.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.