Penny Stocks Bucking the Broader Markets
It’s tough to tout three winning penny stocks for 2016 when mid- and large-cap stocks have struggled in 2015. In 2016, nervous investors may want to consider penny stocks that have been quietly gaining steam over the last year or two. Three great penny stocks that could turn that lump of coal in your stocking into a diamond include: Zix Corporation (NASDAQ:ZIXI), UrtheCast Corp. (TSX:UR), and GlobalSCAPE, Inc. (NYSE:GSB).
Dividends aside, for most investors, 2015 was the year that didn’t happen. After a roller coaster year, the S&P 500 is essentially back to where it started on January 2. The Dow Jones Total Market Index is pretty much in the same spot, too. This year, 2015, could go down as the year the stock market forgot.
Unfortunately, many investors will be doing whatever they can to make up lost ground in 2016. That can make penny stocks an attractive bet as we head into the New Year. Keep in mind, however, that most penny stocks are garbage.
By that, I mean they have no proven track record, little or no assets, and products that may or may not exist. Throw in a low stock price that can be easily manipulated and you’ve got a recipe for failure—or eating macaroni and cheese all year long.
Case in point, go to Google and type in “penny stock fraud” and you’ll see what I mean. The Securities and Exchange Commission (SEC) announced fraud against a Florida-based penny stock company touting itself as “the largest publicly traded diversified portfolio of professional sports teams in the world.” It wasn’t. (Source: “Regulator charges soccer penny stock company with alleged $6.5M fraud,” South Florida Business Journal web site, December 17, 2015.)
In another recent case, a 21-year-old was sentenced to four years in prison for running a penny stock pump-and-dump scheme. (Source: “4 years for former Vancouver man for running stock fraud scheme,” The Columbian web site, December 18, 2015.)
The horror stories go on and on, but that shouldn’t dissuade investors from hunting down excellent penny stocks. After all, it’s not just penny stocks that can lose some or all of their value.
The fact of the matter is that penny stocks can be tremendously profitable. You just need to know what to look for and have a firm grasp on your risk tolerance level. Your commission-hungry broker might tell you to avoid penny stocks, but if you do your proper due diligence, there’s no reason to skip penny stocks entirely.
Below are three penny stocks that you might want to consider researching a little more.
Zix Corporation (NASDAQ:ZIXI) is a penny stock I first wrote about in mid-2014. The company looked promising then; it still does. Unlike the broader market, Zix Corporation has had a great year. Trading near $5.15 per share, ZIXI stock is up approximately 45%.
Zix Corporation is a leader in a growing niche market. The company provides industry-leading e-mail encryption, data loss prevention, and transmission services. Its technology enables users to send encrypted e-mails and documents to any address in the world.
With more than 49 million users, the Zix community grows by 110,000 every week. One in four U.S. banks and one in five U.S. hospitals use “Zix Email Encryption.” It’s funny, the SEC might warn you to avoid investing in penny stocks but the SEC, along with all U.S. federal financial regulators, use Zix’s e-mail security services. (Source: “Zix Corp,” Zix Corporation web site, last accessed December 21, 2015.)
UrtheCast Corp. (TSX:UR) is another penny stock I’ve profiled in the past. It went into the year with excellent momentum, and then faded fast in the second half of the year. Still, I like the company’s innovation, product, and expansion efforts.
UrtheCast (pronounced Earth Cast) is a technology company that has developed a high-definition video feed of Earth from outside the Russian module of the International Space Station (ISS). (Source: “Corporate Profile,” UrtheCast Corp. web site, last accessed December 21, 2015.)
This past summer, UrtheCast teamed up with NASA (the National Aeronautics and Space Administration) to stream real-time Earth video data aboard the ISS. (Source: “UrtheCast Teams With NASA To Stream Live High-Definition Earth Video,” UrtheCast Corp. web site, April 23, 2015.)
In September, UrtheCast was awarded the Euroconsult prize for “Strategic Transaction of the Year” for the July acquisition of the Deimos Imaging satellites and operations. This year, the company also announced plans to develop the world’s first commercial optical+SAR EO constellation, to be deployed in 2019 and 2020. (Source: “UrtheCast Awarded Prize for ‘Strategic Transaction of the Year’ by Euroconsult,” UrtheCast Corp. blog, September 18, 2015.)
All of the above should help UrtheCast’s stock move higher in 2016.
GlobalSCAPE, Inc. (NYSE:GSB) is a leading provider of secure information exchange solutions. It provides managed file transfer software for businesses and individuals. It also offers software used to collaborate, share, and back up data in real time across multiple sites. It primarily serves the finance, health care, energy, retail, manufacturing, and engineering markets.
Trading near $3.85 per share, GlobalSCAPE’s stock is up 75% year-to-date. The company’s share price popped in early February, after it announced that fourth-quarter and full-year revenues were the highest in the company’s history. It also announced a quarterly dividend program. (Source: “Quarter and Annual Revenue the Highest in Company History; Quarterly Dividend Program Announced,” GlobalSCAPE, Inc. web site, February 5, 2015.)
In late October, the company announced that third-quarter revenues were up 18% at $7.6 million. Third-quarter net income increased 53% to $1.2 million, while earnings per share were $0.06 compared with $0.04 in the third quarter of 2014. (Source: “GlobalSCAPE, Inc. Announces Financial Results for the Third Quarter 2015,” GlobalSCAPE, Inc. web site, October 29, 2015.)