Penny stocks are generally defined as securities that trade for less than $5 a share. These stocks can be volatile and unpredictable, leading many investors to avoid them. However, some investors with a high tolerance for risk specialize in trading penny stocks. Some have made a fortune doing so. Other investors take long-term positions in beaten-down penny stocks, buying shares on the cheap and riding them to big profits over extended periods of time. Many legendary companies have been penny stocks at some point in their existence, including Apple (NASDAQ:AAPL), Advanced Micro Devices (NASDAQ:AMD) and Ford Motor Co. (NYSE:F). Some of the most famous investors in the world will bet on key penny stock investments from time to time. While they’re not without risk, the rewards offered by penny stocks can be enormous. If you can only buy one penny stock, it better be one of these three names.
Tilray Brands (TLRY)
Canadian cannabis producer Tilray Brands’ (NASDAQ:TLRY) stock just jumped 15% in a single trading session after the company reported better-than-expected earnings. The share price is now just under $2 and has bounced off its 52-week low of $1.50. The surge comes after Tilray reported a net loss for the three months ended May 31 of $119.8 million, or 15 cents a share, which was much better than the $457.8 million, or 99 cents a share, the company lost a year earlier.
At the same time, Tilray said its revenue increased 20% to $184.2 million, up from $153.3 million a year earlier. The earnings per share (EPS) missed analysts’ forecasts for a loss of five cents a share, although the revenues were well above analysts’ expectations of $154 million. A note of caution: Tilray Brands has been treated as a meme stock in the past, and its shares have been squeezed multiple times. TLRY stock has been a house of pain long-term, with its share price having fallen 99% since just after its market debut in 2018. Proceed carefully.
IMAC Holdings (BACK)
Anytime a legendary investor takes an interest in a penny stock, it generates buzz. Such was the case a year ago when sources revealed that Wall Street wunderkind Peter Lynch had, at age 78, invested $1.2 million in IMAC Holdings (NASDAQ:BACK), a tiny company providing alternative medical treatments — notably sports injuries. Given that IMAC’s market capitalization is less than $4 million, Lynch’s position was significant and generated media headlines around the world.
While Lynch confirmed the investment in BACK stock, he didn’t say why he took the position, though he has said that he likes small-cap stocks because they are “less well followed” by investors. Famous for running Fidelity’s Magellan Fund in the late 1970s into the 1990s, Lynch posted annualized returns averaging 29% over a 13-year period. As might be expected, BACK stock got a nice boost from news of Lynch’s position, rising as high as $1.16 a share. The stock has since fallen back to just 11 cents. It’s not clear if Lynch remains a stockholder.
Eastman Kodak (KODK)
Eastman Kodak (NYSE:KODK) is still a penny stock, but just barely. The legendary photography company based in Rochester, New York, has a share price currently hovering right around $5, though it was as low as $3 in May of this year. KODK stock has been staging a rebound, having risen 80% so far in 2023. The recovery is welcome news for Kodak, whose business fell on hard times as smartphones became equipped with digital cameras, eliminating the need for standalone cameras and photographic film the company produced.
Kodak actually filed for Chapter 11 bankruptcy in 2012. KODK stock was trading near $40 a share in 2014 after the company emerged from bankruptcy. The share price has been in steady decline since, as several efforts to turn around the business failed. However, the stock has bounced higher over the last eight months. The resurgence appeared to be due to the company restructuring its finances and its new focus on developing pharmaceutical materials and licensing the Kodak brand to third parties.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
On the date of publication, Joel Baglole held a long position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.