What are Penny Stocks?
ASX penny stocks are a crucial component of a diversified Australian investment portfolio, offering the potential for high returns if you manage the associated risks.
They are simply the smaller companies by market cap on the ASX. The most promising Small Caps that we recommend are solid companies operating with big ideas. It's because they are small and growing that there are increased returns.
What is the difference between Penny Stocks and Small Cap Stocks?
There are lots of ASX micro-cap or small cap stocks that are ‘penny stocks’ because they literally cost a few cents and are certainly well under $5 a share.
Penny stocks refer to the share price, not the company's overall value. Small cap stocks, on the other hand, are defined by their market capitalization, which is the total value of the company.
Small Caps or micro-cap stocks are defined by how much the whole company is worth or it's total market cap. The price of penny stocks doesn't tell you the market worth of the company you are investing in.
That is why classic penny stocks are generally considered highly speculative investments because it is simply the companies that trade with a very cheap share price and often high volatility.
Most investors are looking for stocks to buy that are smaller companies trading for less than $5 but that have a market cap over $50-$100 million for increased liquidity as under this valuation the stocks are often thinly traded and are higher risk.There are lots of ASX micro-cap or small cap stocks that are ‘penny stocks’ because they literally cost a few cents and are certainly well under $5 a share.
The definition of penny stocks is only referring to how much each share costs, but it does not consider the size or value of the entire company.
Small Caps or micro-cap stocks are defined by how much the whole company is worth or it's total market cap. The price of penny stocks doesn't tell you the market worth of the company you are investing in.
That is why classic penny stocks are generally considered highly speculative investments because it is simply the companies that trade with a very cheap share price and often high volatility.
Most investors are looking for stocks to buy that are smaller companies trading for less than $5 but that have a market cap over $50-$100 million for increased liquidity as under this valuation the stocks are often thinly traded and are higher risk.
Boost Your Returns with Penny Stocks
Penny stocks are prized for their rapid growth. With just a few well-chosen investments, you could double or triple your returns and significantly outperform the market.
You can buy small cap shares that are priced cheaply like penny stocks but are more promising companies with stronger prospects and a lower risk profile.
Best Penny Stocks of 2024
Look at this image and see the Penny stocks to buy that we have recommended in 2024. You can see that you can turn $1,000 into... with carefully selected Penny Stocks.
The financial rewards and outperformance are why Australian investors are active in this space despite the higher risk. We deliver up-to-date technical advice and research on these key under researched stocks. Our team have done the due diligence so you don't have to on a hand picked number of shares. Read on to find out the top 5 reasons you need to invest in penny stocks.
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Top 5 reasons why you should invest in ASX Penny Stocks
In developed economies, finding substantial growth can be challenging.
ASX penny stocks, however, can offer investors significant opportunities for share price appreciation.
1. Making money
Get capital growth and a strong financial return
When a company is small it is much easier for it to grow fast and to double, triple, quadruple or indeed become a 10 bagger because it is still small and starting from a low base.
This means that your investment can easily grow from small growth stocks, much more than from a blue chip stock.
2. Cheap
Lower prices and more affordable
An obvious benefit is that when a stock is cheap, you don’t have to put much money in. Or you can buy a significant holding at cheap prices, with much less capital required upfront. You are risking less and you don't need a lot of money to start trading in the share market.
3. DIVERSIFY
Achieve diversification
You can really diversify your portfolio across a number of different industries, or a cutting edge technology cheaply through penny stocks. They can also give you global exposure cheaply.
Our expert analyst team recommend that your ASX share portfolio should have a minimum of 7-15 small caps or penny stocks. When you subscribe to our services and stock report, we make it easy for you. You can follow our advice and our clear buy, sell and hold recommendations.
4. FAST GROWTH
Give your portfolio the boost it needs
If you park your money in the bank, or just invest in a blue chip company for their dividend yield your capital will remain stagnant and will not grow.
You need to consider investing a percentage of your active portfolio into a number of penny stocks so your portfolio has the opportunity to really grow. Find out our favourite top penny stocks with our best stocks to buy right now.
5. AHEAD OF THE CURVE
Invest in niche industries & surf a trend
Another great (and really interesting) thing that investing in penny stocks does, is that it allows investors to get to learn about and understand a small company. They often are in a niche industry that have cutting edge technology, or for example are a med-tech stock developing new and exciting drugs or lithium, which is where we have had great success.
Exposure to exciting new industries
Get bang for your buck: its more likely for a share to go from 5c to $1 than from $5 to $100.
Penny shares give you exposure to exciting new industries and can sometimes let you buy millions of shares at very low prices.
Penny Stocks are cheap!
ASX share investors are all after serious share price growth and a few small penny stocks that you buy cheaply can really transform the returns in your share portfolio by doubling, tripling and more.
With a small $2,000 investment you could buy 20,000 shares at 10c per share. Then if the stock price rises to 15c you make a quick $1,000. For the same investment you could buy 20 CBA shares.
But if your penny stock goes up to 50c per share you really have made a hot penny! turning $2,000 into $10,000. Now who doesn't want to do that. The trick is not to lose your original $2,000.
What are Penny Stocks called in Australia?
Americans use the term penny stock but in Australia we use small cap stocks or micro caps. They are simply a stock on the ASX that typically trades with a share price of a couple of cents to less than $5.
They are typically considered to be volatile with a buyers beware tag. But with quality independent research, there is serious money to be made no matter your risk profile.
Our Performance
We select companies in the right industries and delve deep into the financials, management and fundamentals before recommending the stock. Simply put, we do the hard work for you.
7/10 Stocks Outperform
Penny stocks we cover make our subscribers a strong profit.
Since 2011, 7 out of 10 stocks have made money for our members.
20% STOCKS TAKEN OVER
Big share price spike
Since 2011, 1 in 5 of our Small Cap stocks have been taken over delivering big returns.
Filter through over 2000 stocks
Get Strait to the Best Buys
Australian ASX investors love our small cap stocks. Our independent research de-risks your stock picking. We filter through over 2,000 stocks, pick the companies with a cheap share price that are positioned to expand and take market share.
We help you reduce your risk
Penny Stocks are renowned for their high risk profile. You often read about a penny stock that offers huge, unbelievable returns or at the other extreme that people crash out and lose their money. So is this true?
A good benchmark is to look at the value of the company as a whole. The bigger the market cap the bigger the company.
ASX share investors are all after serious share price growth and a few small penny stocks that you buy cheaply can really transform the returns in your share portfolio by doubling, tripling and more.
Don't buy a penny stock just because you are buying it for a penny. It's not a gamble you are making. You can remove risk through proper research.
Invest Successfully in Penny Stocks
Follow our stock advice now for free so you can invest successfully in ASX Penny Stocks.
Investors need quality Stock Research when investing in a Penny Stock
Before you invest in a penny stock simply because it doesn’t cost much, you really need to actually look at the company to see if it is profitable, or at least is on the path to being profitable.
It's very important to be careful and to invest wisely and to get quality stock research. This is particularly important in Penny Stocks and at the smaller end of the stock market.
The small companies can be high risk because these penny stocks are often unknown and normally always under researched. They don't have teams of analysts pouring over their financials like you do with the Big ASX Blue Chip stocks.
How to find 100 of the best Penny Stocks under $5 on the ASX stock market
All 100 of Under the Radar Report’s current recommendation of penny stocks were under $5 when we first recommended them. But they are not all penny stocks now! That is the point of penny stocks. They can provide some significant benefits. They offer real returns to really boost your portfolio's return.
It's easy to find 100 of the best Australian shares under $1 on the ASX, just subscribe to Under the Radar Report's services and advice. If you love finding value on the ASX then you will love Under the Radar Report.
Small Caps can't be forecast easily like Blue Chip stocks. This is because institutional investors have to keep away from Small Cap stock due to investment mandates and low liquidity.
Benefits and Strategies when Investing
Unlock True Potential
At Under the Radar Report, we specialize in identifying undervalued stocks with strong growth potential. Our independent analysts conduct thorough research to ensure our recommendations are both profitable and promising.
80% Returns on our ASX Penny Stocks
We are very proud of our strong ASX penny stock picking record, where we have delivered an average return of over 80% on our buy recommendations and share trading tips since 2021.
Diversification
We recommend that our ASX stock investors diversify their portfolio and invest over 7-10 ASX stocks which goes along with ‘don’t put all your eggs in one basket’. It’s common sense really but experts write pages and pages about it. Diversification is really important!
ASX Penny Stocks with a Market Cap of $50 million
At Under the Radar Report we focus on the ‘sweet spot’ of ASX stocks with a market cap from around $50 million to about $500 million. In this space there are still lots of ASX penny stocks with a stock price of well under $1 (over 50% of the ASX small cap stocks we recommend fall into this category) and the other 50% are under $5. Only occasionally do we recommend an ASX stock with a price tag of over $5 per share.
