Top Five Penny Stocks to Watch in May 2015

penny stocks to watchBelow is my list of the top five penny stocks to watch in May 2015. The theme for this group of top penny stocks is U.S. consumer-oriented companies that earn a majority of their incomes domestically.

Best Penny Stocks to Watch This Month

With a strong dollar having a negative effect on businesses that earn income abroad, domestically focused names should fare better. To identify the top penny stocks for May 2015, it’s best to look for stocks with the following three criteria:

1) Consumer-driven businesses

2) A majority of their earnings come from within the U.S.

3) Trading under $10.00 and worth less than $2.0 billion by market cap

Top Penny Stock #1: Angie’s List, Inc. (NYSE/ANGI)

Angie’s List is a consumer review web site with a total of 3.1 million paying members. While the company has reported losses since 2009, the first quarterly report of 2015 surprised investors.

In its report, the company noted first-quarter revenues of $84.0 million, up 15% from the prior-year period. Angie’s List also managed to decrease its marketing expenditures by 31%, which added to the $4.4 million of net income. (Source: Angies List, Inc. web site, April 22, 2015.) This year is shaping up to be the company’s first profitable year ever.

Angie’s List could benefit from an improving U.S. economy and a stronger consumer, as more households turn to this anonymous business review provider for advice. Moreover, small businesses are likely to advertise more on Angie’s List as the many regional markets improve nationwide.

Top Penny Stock #2: Hersha Hospitality Trust (NYSE/HT)

Hersha Hospitality is a real estate investment trust (REIT) that operates 51 hotels, totaling 8,300 rooms, located in major East Coast hubs like New York, Philadelphia, Miami, and a few Hyatt and Marriot hotels on the West Coast.

Hersha Hospitality has been profitable since 2012 and earned a total of $67.0 million on $417 million of revenues in 2014. Analysts expect earnings per share to come in at US$0.14 per share in 2015, 10 cents lower than the previous year. But Hersha’s stock price has already taken into account the lower expectations, declining 13% from its highs and offering a potential opportunity. (Source: Wall Street Journal, last accessed April 23, 2015.)

Top Penny Stock #3: JAKKS Pacific, Inc. (NASDAQ/JAKK)

Founded in 1995, JAKKS Pacific manufactures and sells all types of children’s and pet’s toys. The company posted a profit in 2014, earning $22.0 million of net income on $810 million in revenues. JAKKS is likely to build on the strong results, as analysts expect the toy maker to grow earnings by six percent in 2015, and add another 11% in the following year. (Source: Yahoo! Finance web site, last accessed April 23, 2015.)

JAKKS has a market cap of only $156 million, but the company claims to be one of the top five U.S. toy companies. Consumers who find more cash in their pockets due to lower gas prices and subdued overall inflation may elect to spend more on discretionary items, especially on children’s toys – a boon for JAKKS’ shareholders.

Top Penny Stock #4: EVINE Live Inc. (NASDAQ/EVLV)

EVINE Live Inc. sells home, beauty, fashion, and consumer electronics via TV, online, and mobile devices. According to the company, EVINE Live, the company’s TV channel, broadcasts to more than 88 million households nationwide.

During 2014, EVINE reported $675 million in revenue and a net loss of $1.0 million. In fact, over the last 10 years the company has only reported a profit in 2008, when it had a net income of $22.0 million. However, EVINE is turning things around and is expected to deliver $730 million in revenue during 2015, which is eight percent higher than the year past. (Source: Yahoo! Finance web site, last accessed April 23, 2015.)

In 2014, the companywide average price of merchandise sold totaled $67.00, down from $81.00 in 2013. However, EVINE was able to combat price declines by increasing the volume of goods sold. In fact, the volume of shipped goods grew 26% in 2014, adding to the 27% growth in 2013. (Source: EVINE Live Inc. web site, March 18, 2015.)

EVINE is sure to benefit from U.S. consumers with more cash on hand, likely making 2015 the first potentially profitable year since 2008. Moreover, in the near-term, EVINE is likely to outperform retailers that derive a large portion of their sales from abroad, which are hurt by a strong U.S. dollar.

Top Penny Stock #5: Glu Mobile Inc. (NASDAQ/GLUU)

Headquartered in San Francisco, Glu Mobile Inc. is responsible for developing more than 58 unique mobile games. Titles range from “Kim Kardashian: Hollywood” to “RoboCop” and “Deer Hunter 2014,” all aimed at mobile and tablet devices.

According to Glu Mobile, 39% and 67% of the time spent on smartphones and tablets, respectively, is used to play games. Moreover, Glu Mobile has developed several top-grossing games, such as “Kim Kardashian: Hollywood,” which spent seven months on the list of the top games in the U.S. app store. (Source: Glu Mobile Inc. web site, March 10, 2015.)

Popular games allowed Glu Mobile to more than double revenues in 2014. This year, profits are set to increase further, as earnings are expected to come in at US$0.26 a share, up 225% from 2015. Meanwhile, shares priced at $5.40, are trading at 70% of their highs, reached in November 2014. Glu Mobile shareholders are sure to benefit from increased consumer discretionary spending on entertainment, such as mobile games.

Warning on Risks of Penny Stocks

All investors looking to find the best penny stocks should always do their own research. Moreover, the price of all stocks, especially penny stocks, can move quickly and opposite to the expected direction. Risk-averse investors and those without an opportunity to perform detailed research should stay away.