Penny stocks are notoriously risky investments because they’re often speculative in nature. With that said, investors who are willing to take on a relatively high level of risk could find them to be a good way to play the current market uncertainty. With the novel coronavirus still looming and equity prices climbing ever higher, looking for penny stocks to buy could be a good way to find value.
Laura Gonzalez, Ph.D, an Associate Professor of Finance at California State University, Long Beach, said penny stocks deliver the most value when they’re more-or-less undiscovered. As trading volume increases, the wider market starts to pay attention.
Historical data shows that penny stocks receive less attention from investors, are oftentimes undervalued and underpriced, and therefore poised to deliver superior returns. When superior returns materialize, analysts and other investors notice them, but [the] attention is not sustained for a long time.
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