Despite The Volatility, Penny Stocks Are A Good Bet
Investors tend to avoid penny stocks when theyre feeling fearful. Penny stocks are considered riskier investments, so theyre often the first to go during periods of high market volatility.
Of course, were coming off a week of extreme market volatility and significant selling of penny stocks.
But despite the elevated levels of volatility, this is an excellent time to find great penny stock bargains.
And Im not just talking about finding undervalued companies because of the recent overselling. You see, investors who are worried about negative macroeconomic conditions arent going to be concerned about finding good values.
Risk averse investors often live by the rising tide lifts all boats theory. Although in this case, it would be the opposite. (A receding tide sinks all boats? It just doesnt have the same ring to it.)
Basically, if investors believe the overall market is going to suffer in the weeks or months ahead, theyre more likely to stay away from riskier investments such as penny stocks.
Heres the thing
Macroeconomic conditions arent as bad as you think. In fact, theres some reason to believe all the double-dip recession talk is nothing more than an overreaction from the naysayers.
For one, corporate earnings are strong. In the second quarter, 68% of companies beat revenue expectations and 60% surpassed earnings expectations. Thats hardly catastrophic.
Moreover, the unemployment situation in the US is actually improving, albeit slowly. Initial jobless claims are slowly trending in the right direction. And overall job creation is starting to tick up.
Finally, retail sales are actually increasing. And its not just some one-off event. Of the thirteen components of the headline retail sales number, ten of them were positive in July. What recession?
Okay, so were not out of the woods yet. But I really dont see strong evidence of another recession on the horizon.
Thats not to say were going to be seeing any significant growth in the near future. But slow growth and negative growth are two very different things.
And Im sure most of us will take a slowly growing economy over a recession any day.
Heres the bottom line
Investors fled penny stocks in droves at the height of the market selloff in early August. But theres little evidence the economy is headed for another recession. And savvy stock buyers have an incredible opportunity to load up on great penny stock companies at dirt cheap prices. Dont miss out!
Yours in profit,
Gordon Lewis
Category: Investing in Penny Stocks
