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Penny stocks don’t actually need to cost a penny. The Securities and Exchange Commission refers to penny stocks as any under $5.

Penny stocks often (but not always) move independently of the market and trading strategies for these stocks can be very different than how more expensive ones are traded.

Of important note is the risk you take from penny stock investing. While making money with penny stocks can be hugely profitable, it can just as easily be costly from a capital preservation perspective.

In other words, before proceeding with penny stock investing in earnest on some of the best stock trading apps, you should also be aware of the significant risks involved with penny stocks.

Because these stocks carry inherent risk and volatility (the movement in a stock’s price over short periods of time), it is possible to lose your entire investment held in a penny stock for any number of reasons and why I do not recommend them as one of the best investments for young adults.

That being said, penny stock trading is a useful way to experience the stock market with smaller investment amounts.

While I recommend learning how to start investing money with quality blue chips or low-cost index funds, penny stocks can also be a great way to experiment investing with small amounts of money.

If you’re interested in penny stocks, Robinhood may be a great place to trade them. The app has millions of users who have created portfolios largely focused on penny stocks.

Another great option to consider is the Robinhood alternative named Webull, as this app appeals to veteran and novice traders alike.

For instance, Webull offers $0 trading commissions like Robinhood, but it also allows:

  • shorting stocks
  • an abundance of technical tools and research
  • info on insider sales, company revenue data, earnings-per-share (EPS), and much more data for fundamental analysis
  • stock screeners

Signing up for Webull is quick and easy and even offers a chance to earn a sign up bonus (learn how to get free stocks when you make a qualifying initial deposit at account opening).

To learn more about penny stocks, keep reading. We’ll cover rules for trading these stocks, the risks involved, tips for trading penny stocks as well as some of the most popular penny stocks on Robinhood and Webull (the top 10 penny stocks, in fact) worth having on your watchlist this year.

Editor’s Note: This article is accurate as of July 4, 2022.

Special Rules for Penny Stock Trading

Because penny stocks carry different characteristics than most securities listed on major exchanges, they also carry special rules from the SEC.

In particular, brokers like Robinhood and Webull must adhere to Section 15(h) of the Securities and Exchange Act of 1934.

Specifically, the SEC rules state this includes the following requirements for broker-dealers:

  1. approve the customer for the specific penny stock transaction and receive from the customer a written agreement to the transaction;
  2. furnish the customer a disclosure document describing the risks of investing in penny stocks;
  3. disclose to the customer the current market quotation, if any, for the penny stock; and
  4. disclose to the customer the amount of compensation the firm and its online broker will receive for the trade

I highlight these rules to state how risky penny stock investing can be. Due to their unique risk profile, the SEC provides special steps broker-dealers must take to ensure interested investors are aware of the risks involved.

Make sure you understand the risks involved before investing a substantial amount of your wealth in any penny stock portfolio.

Important Factors to Consider when Investing in Penny Stocks

man looking at financial statement

Companies don’t become penny stocks without valid reason. This could be from declining market share (or a declining market), decreasing profitability, economic shocks, change in customer tastes and preferences, poor management, or any other factors affecting a company’s performance over time.

When investing in penny stocks, some specific factors to consider include the following risk items:

  • Lack of liquidity: Some penny stocks might be thinly-traded and have low volatility. As a result, you might lose the ability to sell the shares quickly or at fair prices due to wide bid-ask spreads and low availability/demand for shares.
  • Relaxed accounting standards: Some penny stocks got into the doldrums as a result of poor financial decision-making or even poor (or fraudulent) accounting. Be aware of stocks which drop quickly as news may have surfaced around the company cooking the books or making entirely too-risky bets on how to run their business.
  • Large and persistent insider sales: In some instances, insiders selling stock would happen even in the best of circumstances. This might be for the desire to diversify away from just holding company stock, financing a major purchase, paying college tuition (or paying off student loans), or any number of things. However, when insiders sell material amounts of stocks relative to their full holdings without notice, this could indicate something negative in the stock. In some cases, it could also be indicative of insider trading.
  • Fundamental change in business conditions or circumstances: This could be from unexpected loss of a competitive advantage like loss of a patent or failure of a key supplier. Further, this could also be the result of a regulatory body imposing harsh penalties or prohibitions from operating in certain markets.

On the other hand, these factors, if weighed and assessed correctly, could result in well-timed market purchases which result in handsome profits for penny stock traders.

Realize, as investing entails a broad spectrum of possible outcomes, no amount of success is guaranteed in investing.

It’s far more common for major companies to become and remain penny stocks than for them to turn around entirely and resume their previous share prices.

In fact, many companies that become penny stocks often trade to worthless values, triggering you to have a major tax deduction when you write off the full value of your lost capital.

In the case of penny stocks, some infamous trading practices can catch traders by surprise.

One market-manipulating scheme is referred to as “pump and dump,” which occurs when the market believes a company to be a “hot” stock for its favorable financial conditions or developments.

When the market buys the stock news and then the company’s stock, the hype pushes the stock to far higher prices on heavy volume.

However, other investors may know the story to be false (perhaps because they spun the story themselves) and sell their shares at this higher price to lock in outsized gains before the price drops drastically.

For those who bought on the news at higher prices, when the price falls and they sell, they will lose their money.

Instead, savvy investors should always conduct their own due diligence on a company before investing in its stock.

Doing so will allow you to determine for yourself whether the company offers a viable product or service, management has a good track record or set of decisions it recently made to turn the company around, or the financials make a compelling investment.

Consider taking a look at these best stock picking services to narrow your search.

Does Robinhood Have Penny Stocks?

robinhood sign up

Yes. Robinhood offers trading in penny stocks if these are traded on major exchanges like the NYSE or NASDAQ.

If the stocks, or index funds on Robinhood are traded only over-the-counter (OTC), these are not eligible for trading on Robinhood..

Does Webull Have Penny Stocks?

webull sign up

Yes. Webull offers stock trading in U.S.-listed equities, index funds and American Depository Receipts (ADRs), or a negotiable certificate issued by a U.S. depository bank which represents  stock in a foreign company’s stock.

These penny stocks must be listed on a major exchange like the NASDAQ, NYSE, American Stock Exchange, or other equivalent.

In an instance where a security does not trade on a major exchange and only on over-the-counter (OTC) markets, Webull does not offer traders the ability to buy and sell these equities.

Webull also offers short selling on certain penny stocks, subject to certain rules and limitations. You can use a margin loan to increase your short selling (or buying) power.

Webull charges interest on these loans and the rates appear to fall in line with most rates offered in the industry with rates varying based on the amount of money borrowed in your margin account.

The interest charged on these margin loans are one of the ways how Webull makes money and how Robinhood makes money.

Making Money with Penny Stocks Tips

More important than anything else is to the best stock research and analysis apps before buying penny stocks.

Each stock is different and is affected in various ways by current economic trends. You want to follow some of the standard strategies below when trading penny stocks.

→ 1. Choose Penny Stocks with High Volume Trading

When a stock has high volume trading, that means it’s traded often. Contrastingly, low volume stocks aren’t traded often.

You want shares traded regularly so you can sell them to willing buyers when you’re ready.

Selling quickly can help you lock in your profit when the time is right or cut your losses short if it comes to unexpected volatility.

→ 2. Make a Plan and Don’t Trade with Emotion

Decide ahead of time how much money you are willing to lose if a stock that previously rose is crashing. You can create a stop loss to sell once a stock falls to a designated price. If your stock falls to your stop price, it automatically triggers a sell limit order.

For example, you buy several shares of a stock at $1. The price rises to $1.50 per share, but then starts crashing.

You should consider setting up a limit sell order at $1.25. If the stock then dips down to 90 cents, you would be happy you made gains first.

You can always buy some at the new lower price if it’s a stock you expect to go back up.

Alternatively, a trailing stop loss will sell a stock after it drops a certain percentage, so you don’t lose far more money when you aren’t watching the market.

These tools are designed to make it so you don’t lose all of your unrealized gains.

→ 3. Sell Stocks Quickly

In general, penny stocks aren’t meant to be long-term investments. They’re better suited for short-term gains. Rather than trying to double your money, it’s usually better to sell them off sooner.

Yes, you might miss out on profits, but without selling you might end up with a loss instead of any gain at all.

Top Penny Stocks on Robinhood and Webull

Penny stocks can be volatile, so make sure to check current stock prices and trends before purchasing.

It’s also a smart move to see if there are any recent announcements or news stories that just came out about a stock you’re considering.

Below are popular Robinhood and Webull penny stocks that are making people pay attention.

As a note of caution, these stocks are not investment recommendations and any investment decision should be made carefully before proceeding. When factoring in that these are penny stocks, your caution and risk tolerance should be only moreso.

Get Real-Time Penny Stock Trade Alerts with Tim Sykes’s Profit.ly

tim sykes penny stocks sign up

Penny stocks present an appealing opportunity to buy when a stock trades for a low value in the hopes of making quick money when it moves up suddenly.

But far more important in the penny stock investing world is considering the question of “What can I lose?” than “How much can I make?” With penny stocks, you likely don’t think about the investing opportunity in quite this way.

Instead, you might change your stock buying process to include only buying stocks with a built-in margin of safety.

This represents the gap between what you paid for the stock and what it is actually worth. When you pay less than the stock is worth, you have a positive margin of safety and see a undervalued stock.

Likewise, when you pay more than the stock is worth, you have a negative margin of safety and have overpaid. All things equal, you’d prefer to buy the value stock at a bargain than overpaying for another.

This entails looking at tangible asset values and buying at a significant discount to the underlying business value.

You can uncover penny stock picks with an investment research service like Tim Sykes’s Real-Time Penny Stock Trading Alerts Service.

The service provides daily recommendations based on proprietary screening tools and criteria on penny stocks they believe will perform well for your trades.

The service also includes the ability to access a library of over 7,000 videos to train you on how to trade penny stocks and potentially replicate Tim’s success.

Note: Trading penny stocks entails risk. No service has perfect knowledge of market movements and your capital is at-risk. Proceed with caution when investing in volatile investments and make sure you understand the risks involved before placing trades with real dollars. Consider opening a paper trading account with Webull to test trades recommended by Tim Sykes prior to making an actual investment.

1. Genius Brands (GNUS)

genius brands

Genius Brands International, Inc. (GNUS) has several major updates on the horizon that are making many expect the stock price to continue rising.

The company recently announced its partner Mattel, Inc. will be debuting Genius’s new toy line at Walmart stores. The toys are called Rainbow Rangers and will feature characters from the Rainbow Rangers series currently airing on Nick Jr.

Genius Brands’ Chairman & CEO, Andy Heyward, recently reminded everyone, “I think it is particularly important in these times to note that kid’s entertainment viewing is one of the few areas of commerce that is actually growing!”

2. Eros International (EROS)

eros international

Eros International (EROS) provides a top streaming service in India called Eros Now. Recently, they announced two new partnerships. When partnerships arise between well-known brands, stock prices often rise.

One of Eros’s new partnerships is with Freecharge. Freecharge customers can now have access to Eros Now’s content library for 35% off the standard annual subscription price.

Visa is also starting a partnership with Eros. Visa cardholders in India can get a 50% discount on annual subscriptions to Eros Now.

Eros has roughly 30 million paying subscribers worldwide, so there is plenty of room for growth as India alone has a population of over 1.3 billion.

Another factor to consider is that Fox Corporation and ViacomCBS have been trading higher and when multiple companies within the media industry are showing positive results, it can lift related stocks.

3. MoSys (MOSY)

mosys home page

MoSys (MVIS) is a semiconductor design and fabrication firm based in San Jose, CA. The company operates as a fabless semiconductor company focused on the development and sale of integrated circuits (ICs) for the high-speed networking, communications, storage and computing markets.

The company operates in an industry with limited supply, allowing manufacturing firms to increase prices and thus profit potential. Consider MoSys as an interesting penny stock semiconductor play, though it might not stay a penny stock for long.

4. AgEagle Aerial Systems (UAVS)

AgEagles’s (UAVS) website declares that they are “taking agriculture intelligence to the next level.” The company’s goal is to advance aerial imaging data collection and analytics technologies to improve environmental sustainability.

On Robinhood, there are over 30,000 accounts holding shares of AgEagle.

This is over triple the amount held last month. According to InvestorsObserver, AgEagle gets a 93 rank in the industrials sector, putting it near the top for that sector.

Between embracing the trend of environmental sustainability and being near the top of the industry sector, it’s not difficult to see why UAVS is such a popular stock on brokerages like Robinhood and Webull.

5. Waitr (WTRH)

waitrWaitr (WTRH) is a food delivery service in ten southern U.S. states. When the pandemic broke out, Waitr made sure to offer no-contact delivery and provide masks, gloves, and hand sanitizer to employees.

They also continued to pay any workers who contracted the virus or needed to be quarantined.

While their order activity decreased a bit mid-March, they rebounded and have been progressing. Long-term, this stock might go down when people start going out to eat more and ordering food less.

However, in the short-term, there may be a chance for the stock to rise.

6. Cyclacel Pharmaceuticals (CYCC)

Cyclacel Pharmaceuticals Inc. (CYCC) is a biotechnology company that targets various phases of cell cycle control to develop drugs and treatments for cancer and other serious diseases. The firm is based in Short Hills, New Jersey and Dundee, Scotland.

Cyclacel Pharmaceuticals recently announced they were studying CDK inhibitors as a potential way to reduce inflammation and lung injury in COVD-19 patients.

This is in collaboration with the University of Edinburgh. Following the announcement, the stock started soaring. It has now settled down low enough to be considered a penny stock again. If their studies lead to positive results, stock prices may rise again.

7. Colony Capital Inc. (CLNY)

colony capital

Colony Capital (CLNY) is a global real estate and investment management firm based in Los Angeles, California. Historically, the company’s stock hasn’t been low enough to be considered a penny stock.

However, along with other real estate investment trusts (REITs), the stock has gone down. That is, until a new announcement.

Digital Colony, the infrastructure investment platform of Colony Capital, announced the strategic decision to recapitalize Beanfield Metroconnect, a telecoms infrastructure provider based in Canada.

Part of this transaction involves Beanfield acquiring Aptum Technologies, a global hybrid cloud and managed services provider. This acquisition will allow Beanfield to improve connectivity services that connect Toronto and Montreal.

According to Beanfield CEO Dan Armstrong, “In today’s environment, the need for connectivity has only grown as networks experience unprecedented demand.”

Also in higher demand is Colony Capital’s stock following the recapitalization announcement. It may be worth watching if that trend continues.

8. Village Farms International Inc. (VFF)

village farms

Village Farms (VFF) is one of the largest vertically integrated greenhouse growers in North America. They distribute produce to national grocers in the United States and Canada.

They have been showing their company values and getting positive press by feeding over 10,000 families in Texas through donating to state and local food banks and pantries.

In addition to produce, Village Farms is also in the cannabis industry. They have a majority ownership position in Pure Sunfarms, one of the largest cannabis operations in the world.

The company also intends to become a vertically integrated leader in the United States hemp-derived CBD market. If the cannabis industry rises, Village Farms stock might too.

Bonus 1: Pitney Bowes Inc. (PBI)

Pitney Bowes (PBI) is a technology company that provides e-commerce fulfillment, office mailing, shipping and returns, presort services, and more. It’s best known for its postage meters and other mailing equipment. This company has been around for 100 years and supports over a million businesses.

Not only is Pitney Bowes likely to stick around, but it might also expand as more people are buying online and shipping demands rise. They’ve already opened new distribution centers on the East and West coasts. If their profits go up, it’s expected stock prices will follow suit.

Bonus 2: AMC Entertainment (AMC)

AMC Entertainment (AMC) is the largest movie theater chain in the world. Because most people aren’t going to movie theaters right now, the stock price has fallen. You might have seen the market mania of late with several meme stocks like AMC, GME, EXPR, NOK and more ascending to the heavens.

A lot of that hot air has left the stock and now only hopes for a COVID-19 vaccine rollout and a return to date nights at the theater.

In the past, rumors swirled that Amazon may have wanted to acquire AMC Entertainment and that could cause a jump in prices. Amazon could get some significant advantages from acquiring them.

For example, by putting their own films in theaters, they would be unarguably eligible for Oscars, which they’ve won before, but not without controversy. Even if AMC doesn’t get acquired, when theaters start opening again, business is likely to improve and that affects stock prices.

How a Real-Time Penny Stock Alerts Service Can Help

tim sykes penny stocks sign up

For those interested in investing in penny stocks more rigorously should consider a real-time penny stock alerts service like Tim Sykes’s Real-Time Penny Stocks Alerts.

The company provides SMS, email and push notifications to keep you up-to-date on penny stocks the service feels provide trading potential. Build watchlists, interact with others in chatrooms to discuss trade ideas and watch videos to learn how to trade penny stocks like Tim Sykes.

You can use the service to receive up-to-the-minute penny stock alerts and use trading platforms like Robinhood and Webull to place trades.


Final Thoughts

People love penny stocks because of the high percentages these stocks can rise, making them investments that earn a great return—if you pick them well. However, that also means they can have significant falls, so it’s essential to do your research before investing.

For reasons laid out above, Webull makes it simple to invest in penny stocks because no fees cut into your profit margins.

Further, consider researching these penny stocks and growth stocks with powerful a resource like Tim Sykes’s Real-Time Penny Stock Alerts.

Try putting a few dollars towards a penny stock to get a feel for it. Just remember not to hold it too long or become too emotionally invested if the stock has a significant amount of volatility and you can tolerate the risk.

About the Author

Riley Adams is the Founder and CEO of WealthUp (previously Young and the Invested). He is a licensed CPA who worked at Google as a Senior Financial Analyst overseeing advertising incentive programs for the company’s largest advertising partners and agencies. Previously, he worked as a utility regulatory strategy analyst at Entergy Corporation for six years in New Orleans.

His work has appeared in major publications like Kiplinger, MarketWatch, MSN, TurboTax, Nasdaq, Yahoo! Finance, The Globe and Mail, and CNBC’s Acorns. Riley currently holds areas of expertise in investing, taxes, real estate, cryptocurrencies and personal finance where he has been cited as an authoritative source in outlets like CNBC, Time, NBC News, APM’s Marketplace, HuffPost, Business Insider, Slate, NerdWallet, Investopedia, The Balance and Fast Company.

Riley holds a Masters of Science in Applied Economics and Demography from Pennsylvania State University and a Bachelor of Arts in Economics and Bachelor of Science in Business Administration and Finance from Centenary College of Louisiana.