With the financial markets quickly recovering after the pandemic, many investors seek quick ways of earning extra cash. The economic uncertainty and substantial market volatility led to numerous opportunities, even if you invest in value stocks or blue-chip companies. However, dollar stocks depict an entirely different story.
Investors use dollar stocks due to their high volatility to earn quick cash during the trading day. They might also be excellent long-term investment opportunities if you find one or more dollar stocks in which you strongly believe. Regardless of your investment strategy, you should check out these budget-friendly dollar stocks and learn how to capitalise on them.
Where Can I Trade Dollar Stocks?
Dollar stocks are rarely available on major stock exchanges as they are more commonly traded OTC. However, since our recommended dollar stocks to trade this year can be bought and sold via stockbrokers, we’ve also listed the top online brokers that offer access to them.
What Are Dollar Stocks?
Dollar stocks, also referred to as “penny stocks”, are defined as companies that trade for a maximum of $5 per share. Some trade on major stock exchanges, such as NASDAQ, but most of them are available only over-the-counter (OTC). Initially, dollar stocks traded for a maximum of $1, but the Securities and Exchange Commission (SEC) has recently changed this definition.
Dollar stocks are often associated with high risks as they are very volatile. At the same time, these cheap stocks are small companies that lack liquidity, so sellers may find it challenging to find buyers on the market. Many speculative traders use dollar stocks to gain returns. However, high price volatility, lack of liquidity, and the lack of potential buyers may lead you to lose some or all of your investment.
How to Trade and Invest in Dollar Stocks?
Open a Trading Account
Open a trading account with a broker that provides dollar stocks as part of their tradable instruments. Typically, online brokers require you to provide your private information, such as name and address, along with the necessary identification documents.
The next step is to choose the dollar stocks you want to invest in before placing your trade. You can choose some of our recommended companies or other cheap priced stocks provided by your chosen broker, but it is important to do your own analysis before allocating your capital, given the risks associated with cheap stocks.
Place Your Trade
Once you identify the stocks that you find suitable for your investment portfolio, you can place your trade. Be sure to deposit your capital before filling in the amount you want to spend on shares and add one or more dollar stocks to your new trading account.
Top 10 Dollar Stocks to Trade
We have selected the top ten dollar stocks to trade this year, as presented below. Additionally, check out the next sections to find out more about five of them and why you should consider adding them to your portfolio.
- MedMen Enterprises [MMEN]
- ToughBuilt Industries [TBLT]
- Inuvo [INUV]
- Gold Resource Corporations [GORO]
- Actinium Pharmaceuticals [ATNM]
- Arcadia Biosciences Inc [RKDA]
- Matinas Biopharma Holdings [MTNB]
- Drive Shack [DS]
- VOC Energy Trust [VOC]
- OrganiGram Holding Inc. [OGI]
1. MedMen Enterprises [MMEN]
MedMen Enterprises is a cannabis retailer with outlets in California, Florida, Nevada, and Illinois. With the recent reclassification of marijuana by the UN as a non-dangerous drug coupled with pro-marijuana democrats taking over in recent elections, this pot stock has a high probability of both short-term and long-term growth.
In early 2019, MedMen received a $280 million investment from Gotham Green Partners that helped to drastically reduce the debt, while the falling share price could be seen as a great opportunity to capitalise on a cannabis company whose revenues are expected to explode in the post-pandemic period.
2. ToughBuilt Industries [TBLT]
Trading in the building industry, ToughBuilt designs, manufactures, and sells innovative products for the DIY and professional home improvement markets. With a successful leadership team, the company’s revenues grew from $1 million in 2013 to more than $14 million in 2017. This income mainly came from three product categories, although the company constantly develops new goods for its target markets.
With high daily fluctuation, ToughBuilt Industries might be a great investment opportunity for seasoned traders thanks to numerous positive short-term signals.
3. Inuvo [INUV]
Inuvo is a data mining company specialising in market analysis services, such as the use of artificial intelligence to break down consumer behaviour for targeted advertising strategies. Its adoption of cloud technology results in 300 times faster market data processing capability compared to conventional means. This shows that it is continuously looking for reinvention to stay ahead of its niche's needs.
The company has a market cap of $170 million. Given the modern-day informed consumer, the future of marketing is in AI technology, where Inuvo already has a strategic positioning.
4. Gold Resource Corporation [GORO]
Gold Resource Corporation operates in the mining and exploration industry. In addition to gold, it sells zinc, silver, lead, copper, and gore-containing silver and gold. Investors’ continued confidence regarding commodities should result in an increased value of this stock.
Gold Resource Corporation pays regular dividends covered by the generous cash flow, which might make it suitable as a buy-and-hold asset.
5. Actinium Pharmaceuticals [ATNM]
Actinium specialises in developing antibody radiation conjugates (ARC). ARC technology combines the power of radiation with the targeting ability of antibodies to kill malignant cells. The company’s cancer drug based on radioimmunotherapy, Iomab-B. HC, is under development. As a result, Actinium’s potential success in developing cancer drugs that will get approved makes this stock worth monitoring.
At the end of 2020, the company was in six hedge funds’ portfolios. Many investors also consider that the company is presently undervalued.
Expert Tip on Investing in Dollar Stocks“ Some of these dollar stocks may be priced so low because of their weak chances of turning profitable. As a result, it’s important to opt for hedging strategies or invest in dollar stocks only for diversification purposes. You should not allocate funds that you need in the near future and invest up to 2% of your capital in these high-risk companies. ”- Alice Wanjiku
Why Invest in Dollar Stocks?
Many traders choose dollar stocks because they can capitalise on high daily volatility. Some of these companies may turn out great buy-and-hold investments, but you need to do your research and determine whether they have all it takes to be successful.
Frequently Asked Questions
The best dollar stock depends on your existing portfolio and trading strategy. Some dollar stocks may not turn out to be profitable, so it is important to make your decisions based on sound information.
Dollar stocks may be an excellent investment if you are an active trader or you want to diversify your portfolio. However, you should keep in mind that these companies carry high risk.
The strongest dollar stock company is OrganiGram, with an $870 million market value.
Anyone can invest in dollar stocks, but it is more suited for investors with a high tolerance for risk due to high volatility.
Beginners should avoid investing in dollar stocks unless they use mitigation strategies and hedging, or use only risk capital.
Dollar stocks are popular because you can capitalise on the price volatility. Many investors also opt for promising dollar stocks to diversify their portfolio.
Dollar stocks can be purchased during the regular trading hours depending on which exchange you choose. For instance, the London Stock Exchange is open from 8:00 A.M. to 4:30 P.M. (BST/GMT), from Monday to Friday.