In this article, we’re going to dive into a few things. First, what are penny stocks and why should you care? Next, what are epicenter stocks, and should they be something to watch in 2021? Finally, we’ll talk a bit about a few cheap stocks to watch in light of this interesting market trend.What Are Penny Stocks?
Penny stocks are shares of companies that can be bought for less than $5. This is according to the Securities & Exchange Commission’s definition of penny stocks. Some traders may focus on lower-priced stocks that fit their own definition. However, for the purposes of this article, we’ll be looking for stocks under $5. One of the big reasons that traders care about these types of companies is twofold, in my opinion.
First, the low prices lend themselves to large percentage moves, and, in turn, the potential for larger gains quickly. Second, when it comes to companies like these, they’re usually early-stage. This gives investors an opportunity to take a position in what could become the next market leader. Readers will understand this very well considering the countless penny stocks that hit it big in 2020 (See: 5 Top Penny Stock Picks In 2020 Traders Watched Explode To New Highs).What Are Epicenter Stocks?
The next thing I want to discuss is this idea of “epicenter stocks”. The term was initially coined by Tom Lee of Fundstrat. He’s explained that epicenter stocks are shares of companies that were among the hardest hit and/or ones that could benefit the most from an economic rebound. Anything from biotech and energy to technology and manufacturing can fall under this umbrella.
“Pent-up demand + massive relief and celebration of pandemic finale could lead to substantially stronger than expected GDP recovery,” Lee said in a note to clients last year. “This is what the resilience of equities in 2020 seem to suggest.”
Believe it or not, these are some of the hot penny stocks in the market right now. Economic recovery or “reopening stocks” are also terms used to describe these types of companies. Now, in consideration of the current economic climate, here’s a list of names to watch. It will be up to you to decide if analysts are right with their Buy ratings or if you should hold off.Epicenter Penny Stocks To Buy According To Analysts
- Yatra Online Inc. (NASDAQ: YTRA)
- Southwestern Energy Company (NYSE: SWN)
- UTStarcom Holdings Corp (NASDAQ: UTSI)
- Ambev S.A. (NYSE: ABEV)
One of the industries that caught the brunt of the pandemic’s negative impact was the travel industry. In fact, travel penny stocks were hit just as hard as many of the blue-chip stocks. Yatra Online is an Indian consumer travel platform. The company provides online travel agent services like air ticketing, hotels, and package deals. Some of its applications include Yatra Mini, Yatra Web Check-In, Yatra Corporate, and Travelguru HomeStay.
The company had a rough last quarter as many would’ve imagined. The travel company recorded massive declines across the board. These included year-over-year declines in revenue from air ticketing (-75.2%) and hotels & packages (-75.4%). Bookings were also down immensely in the quarter for the two categories, -91.8% and -94.4% respectively. However, the company made mention of its outlook.
“We expect to see gradual recovery here as well in the next quarter as people begin to undertake short-haul and driving holidays. The first impact of this we’ve seen post-quarter-end in the month of October, where there were 2 long weekends, and we’ve seen a healthy trend emerging of short-haul domestic holiday brakes…That said, we believe we are well positioned to leverage our scalable SaaS technology platform and continue to take market share.”
As far as analysts are concerned, Sidoti recently boosted its price target on YTRA. The firm increase the $2 target to $3. H.C. Wainwright analysts also have a $3 target along with a Buy rating on Yatra.Southwestern Energy Company
You can’t talk about “reopening stocks” without mentioning the energy sector. Many traders are looking at alternative energy ahead of a Biden presidency. However, the facts remain, the renewable/alternative energy infrastructure it’s there yet. It still needs to be built and scaled. Oil and gas will likely be the energy solution of choice to build this infrastructure. Furthermore, electric vehicles may be a hot topic right now. But planes and the majority of interstate commercial vehicles use some source of fossil-fuel. In light of this, I think oil and gas stocks are clearly something in the short-term to keep in mind.
One of the names we’ve discussed more frequently has been Southwestern Energy Company. Most of the fourth quarter of 2020 saw shares of SWN stock steadily climb. Now, in 2021, the energy penny stock has begun to come within striking distance of last year’s highs. With operations in Ohio, West Virginia, and Pennsylvania, the company is focused on some of the top oil-producing regions in the U.S.
Last quarter, the company further expanded its resource assets with the acquisition of Montage Resources. “This strategic transaction represents another deliberate step in our disciplined repositioning strategy. We strengthened our position as a premier producer in the Appalachia basin with an at-market, accretive acquisition that provides a step-change in free cash flow,” said CEO Bill Way.
Right now, analysts have begun upgraded some ratings. Tudor Pickering is the latest as they upped their “Hold” to a “buy this week. The firm also has a $5 target on SWN.UTStarcom Holdings Corp
You might remember UTStarcom from our article on 5G penny stocks to watch this week. Telecommunications and technology are two industries that are seeing a bit of resurgence in momentum this year. On Monday, the company announced the expansion of a cooperation with a mobile operator in Europe. UTStarcom will supply an advanced networking platform in support of the operator’s 5G deployment requirements.
The company also released a new metro access platform, NetRing® TN704E. This adds to the company’s SDN-enabled packet optical transport network product portfolio. This will be one of the key components of the mobile backhaul network expansion project with this mobile operator, in Europe. The news was one of the bigger catalysts in 2021 so far. It’s worth keeping in mind and follow progress on. Obviously, expanded 5G programs will be vital to the overall adoption of the technology itself.
Year-to-date, shares of UTSI have climbed as much as 33% so far. Though it is a commendable move, analysts at Northland Securities have higher hopes. That’s based on the firm’s $2.50 price target issued last year. Northland also has a “Buy” on the stock.Ambev S.A.
Another group of epicenter stocks to keep in mind are beverage companies. Specifically, I’m talking about alcoholic beverage names. One of the things many did during the pandemic besides stay inside was drink. As ABC News reported late last year, consumption was up based on results from a RAND study.
“The magnitude of these increases is striking,” Michael Pollard, lead author of the study and a sociologist at RAND, told ABC. “People’s depression increases, anxiety increases, [and] alcohol use is often a way to cope with these feelings. But depression and anxiety are also the outcome of drinking; it’s this feedback loop where it just exacerbates the problem that it’s trying to address.”
In light of this, it’s no wonder that we saw a rebound in several alcohol stocks. Ambev S.A. isn’t an outlier to this trend either. Since March of last year, the “Brazilian Budweiser” jumped from just $1.90 to recent highs of over $3. Ambev is the largest brewer in Latin America and the Brazilian arm of AB InBev (NYSE: BUD). Another high point for traders to notice is that this is one of the penny stocks paying a dividend. The most recent dividend paid was 7 cents per share or roughly 2.26% yield per year. The Ambev bylaws provide for a mandatory dividend of 40% of our adjusted annual net income.
Analysts have grown more bullish on ABEV as well. HSBC upgraded the alcohol company to a Buy from Hold last month. This came a few weeks after Citigroup did the same (Neutral to Buy).