This article was last updated on July 6, 2022
Investing in the stock market comes with many advantages and benefits for those who do it. As such, it is no surprise that it has become so popular an investment choice among the wider public. Thanks to the wide access to the internet, buying and selling stocks is no longer limited to the rich and privileged. Today, anyone can go online and invest in stocks. However, for many, this can be a costly endeavor. That is why many retail investors will look for so-called “penny stocks,” which cost under $5. While more affordable, $5 per share can still be a tough pill to swallow. As a result, today, we are looking at stocks under 10 cents as a good option to start out with minimal risk.
Table of contents
- What Are Penny Stocks
- What Are Over-The-Counter (OTC) Stocks
- Over-The-Counter (OTC) Exchanges
- Appraising Stocks Under 10 Cents
- Stocks Under 10 Cents
- Where To Buy Stocks Under 10 Cents
- The Bottom Line On Stocks Under 10 Cents
What Are Penny Stocks
While the name penny stocks might lead you to believe that they cost pennies, that is not quite so. The term “penny stocks” encompasses all stocks that are valued at less than $5 per share. This can often lead to confusion among prospective investors who are not looking to spend too much on a single investment.
Penny stocks have numerous advantages and benefits. Since they are much more affordable, you can make smaller investments or make your large ones even more significant. Investing $500 into penny stocks that are under 10 cents can turn out to be a life-changing event if a company ends up taking off.
Meanwhile, penny stocks also allow you to diversify your portfolio much more freely. Investing in several high-value stocks is a feat not easily achievable for most. Investing in multiple penny stocks, on the other hand, is very easy and won’t put too big a hole in your wallet.
However, penny stocks do have several significant drawbacks. Most significant of these is their uncertainty. There is a reason for them to be so cheap. In most cases, they are start-ups or medical trials that promise to revolutionize a given industry or sector. However, many of them fail to deliver on their promises and end up going bust. As such, they can cost investors a lot of money, even if they are penny stocks.
Such cheap stocks are also rarely listed on the major stock exchanges. Since the NASDAQ, DOW, and NYSE all have a minimum value requirement, among many others, penny stocks are most often traded over-the-counter (OTC). This means that they are not available on many of the more popular online trading platforms.
What Are Over-The-Counter (OTC) Stocks
Over-the-counter (OTC) stocks are US stocks that are not listed on any major US stock exchange. This can either be a matter of choice or as a result of outside constraints. Because these stocks are not listed on any of the major stock exchanges, they trade on one of the three OTC exchanges. These include the OTCQX, the OTCQB, and the Pink Sheets.
All three of these exchanges have varying degrees of oversight and prestige. As such, trading on each one comes with different risks. However, just because a company is listed on an OTC exchange does not mean that it is inherently untrustworthy. Many companies are unable to trade on major exchanges due to federal regulations like the ones prohibiting cannabis companies from listings.
Meanwhile, exchange requirements for minimum value, number of shares outstanding, and more prevent smaller companies such as ones with stocks under 10 cents from being listed. Lastly, some simply choose not to seek listings on major exchanges. These can be OTC versions of foreign companies or shell companies.
Over-The-Counter (OTC) Exchanges
As we mentioned, each one of the three OTC exchanges offers a different level of oversight. The OTCQX is the most stringent of them. It requires companies to report their financials and register with the SEC. As such, companies listed on it are the most trustworthy and most often include OTC listings of foreign corporations or ones that plan to eventually get listed on a major exchange like the NASDAQ.
Second is the OTCQB which is often referred to as the venture exchange. This exchange is middling in terms of strictness. It still requires companies to submit to some level of oversight and also requires registration with the SEC. As such, the exchange is mostly populated by corporations that are still developing. Again, the goal for most of these is to move to a major stock exchange once they have reached a certain size.
Lastly, there are the Pink Sheets. This is the least regulated exchange out there, and as such, it carries the least level of trustworthiness. In fact, companies in the Pinks Sheets do not need to file any reports or register with the SEC. As such, companies in the Pink Sheets are not generally regarded as good or safe investments. While there are some legitimate organizations on this market, most of the ones present are shell corporations. As such, you should be very careful when navigating this market, and it might be better to avoid investing in it altogether.
Appraising Stocks Under 10 Cents
Just because penny stocks are on the cheap side, it does not mean that you should or can be reckless with your choices. Just like with any other investment in the stock market, thorough research and due diligence are critical in spotting and appraising promising penny stocks.
Here are some best practices and characteristics to keep in mind when looking at potential investments. These will help you to find and evaluate the right stocks when navigating the vast ocean of OTC markets.
Assets and Liabilities
When investing in a company, regardless of whether its stock costs 10 cents or 10 thousand dollars, one of the most important things to look at are its assets and liabilities. By looking at a company’s balance sheet, you can quickly and easily assess its current standing and determine if it has any promise for future growth.
A balance sheet is one of the most important tools when evaluating a company, and you should never overlook this staple document.
Liquidity is another fundamental indicator that you need to look at when investing in a company. This can be particularly important when dealing in penny stocks as liquidity in that market can be more limited. This can create difficulties when trying to quickly buy or sell assets.
Choosing a stock with high liquidity will give you greater flexibility and allow you to move your assets much more freely. Otherwise, you will be limited by the constraints of the market.
Since many companies with stocks under 10 cents are still in their development or early stages, it is incredibly important to analyze what they are promising. Such companies will usually be start-ups or medical trials and will have a product or service that they are pitching.
Before investing, you should closely examine what they are offering, how it stacks up against the current market, and whether it is commercially feasible. Additionally, it is also important to make sure that the promised product or service actually exists, as many scams can occur on OTC exchanges.
Future Growth Potential
Another very important factor is a company’s future growth potential. This determines how the organization will do in the long term and allows you to gauge if your investment will be worth it. By looking at future growth potential, you can predict what return on investment to expect and when you will see profits.
Future growth potential is particularly important with companies whose stocks trade for under 10 cents, as those uncertain investments. If you can see that a company has no room for growth from such an early stage, then it would probably be best to avoid putting money into it.
Stocks Under 10 Cents
The OTC marketplace is a vast expanse full of investment options. There are more than 12,000 securities currently listed on over-the-counter exchanges. While many of these are well above the 10 cents per share mark, many others are below it. This makes them an appealing opportunity for many investors.
However, one should always be cautious when dealing with OTC stocks. As a result, we have put together a list of some of the most promising stocks under 10 cents.
SunHydrogen is a renewable energy company working on a technology for the creation of clean and sustainable hydrogen. While hydrogen as a power source is not unique to this company and many others utilize it, it presents numerous challenges. Chief among these is the electricity needed to create and store the substance.
This is where SunHydrogen aims to improve on the process. By utilizing its patented technology, the company is able to create hydrogen through solar power. This greatly decreases electricity costs and makes for a much more eco-friendly process. Furthermore, because the technology only requires water and sunlight, it can be installed closer to the final destination, thus reducing transportation costs.
While still in the development stage, the company has a bright future and is currently scaling up its operation through new partnerships. The technology itself also has plenty of growth potential as more and more countries are setting hydrogen adoption goals. Meanwhile, companies like Shell and Amazon are investing heavily in the new power source.
SPYR Technologies Inc (SPYR)
SPYR is an internet of things (IoT) company that works closely with Apple in order to produce software and smart devices. It manufactures a range of products, including Carplay-compatible tablets, smart home devices, and smart security systems.
In 2020, SPYR acquired Applied Magix Inc. – another company focused on the development of Apple-compatible devices. This further expands SPYR’s presence in the Apple ecosystem, which boasts almost 2 billion active devices worldwide. This gives the company plenty of space for growth as IoT becomes more widely adopted among consumers. Meanwhile, the Apple association gives the company a strong base of potential users already in the ecosystem.
Flower One Holdings Inc (FLOOF)
Flower One is a leading cannabis producer and distributor in the United States. The company runs the largest operation in the state of Nevada, with two greenhouse facilities spanning a total of 480,000 square feet.
By combining both production and distribution, the company is well placed within the market to ensure its long-lasting success. Flower One takes a two-pronged approach to what it does with its product. First is the fulfillment service that the company offers to third-party sellers and brands. This is the B2B side of the business and gives the company a steady stream of income. Meanwhile, Flower One also runs its own brand of cannabis-related products that it offers to the wide public. This is the B2C part of the business.
The company recently secured a 10.1 million dollar financing and loan modification deal. This will be used to improve facilities and create better working conditions as the company returns to normal operations following the COVID-19 pandemic. The cannabis industry was particularly affected by the pandemic, with multiple dispensaries shutting their doors throughout the country. Now, as many states are lifting mandates, the industry is looking to make a recovery.
Kraig Biocraft Laboratories Inc. (KBLB)
Kraig Biocraft is a biotech company that mainly focuses on the development and production of genetically engineered fibers. The company’s flagship product is its “spider silk,” which is produced by genetically engineered silkworms spliced with genes from the golden orb spider.
This new material is very strong yet light and flexible. In fact, many claim that it is stronger than steel and could be used for a wide range of applications. The technology was created as a way to harvest spider silk which was previously difficult due to the animal’s active nature and difficult extraction process. Through the use of silkworms, Kraig Biocraft is able to harvest the silk without the need for any extra steps.
Kraig Biocraft is now expanding its operation with new facilities and improved production processes. Furthermore, the company has filed several new patents, which gives it a further advantage over competitors.
Vaycaychella Inc. (VAYK)
While Vaycaychella is now an investment company, it was not always so. Before it was a way for investors to network and connect with each other, Vaycaychella was a sports company named World Series Of Golf. However, the organization changed its name to better reflect its current operations.
Today, Vaycaychella acts as a platform for investors in the short-term vacation rental space to connect and network with each other. This was spurred on by the success that the two founders saw when they invested in a resort in Cuba.
Apart from providing a social platform, Vacaychella also acts as an investor in the same space that it operates in. The company has continued to expand its investments beyond the initial one that started the business and has brought on new people on the executive level. Vaycaychella has some great potential for growth as COVID-19 restrictions continue to lift and the travel industry resurges.
Where To Buy Stocks Under 10 Cents
Buying stocks under 10 cents might be easier said than done. While most of the popular and well-established online brokers offer access to over-the-counter markets, many of the newer online trading platforms do not. This can be problematic as most stocks under 10 cents are listed precisely on such OTC exchanges.
Here are some of the best places you buy, sell, and invest in stocks under 10 cents:
Interactive Brokers is one of the most well-established and highly regarded online brokerages currently on the market. A trailblazer in the sector, IB has many industry firsts under its belt and has set the standard for professional online trading platforms.
The service offers a wide variety of tools that give users information on both micro and macro levels of investing. Apart from major exchanges and various markets, IB also provides access to OTC trading which is great for those looking to invest in stocks under 10 cents.
However, this professional-centric approach does come at a premium price. Many of the tools on the platform require additional payments. Real-time market data, for example, requires paying a monthly subscription fee for each exchange individually.
TD Ameritrade is is another well-established online brokers, preferred by professionals and retail investors alike. This platform, however, is mostly limited to the US and a handful of other countries. As such, fewer users will be able to take advantage of its numerous features and advantages.
For those who can access the platform will be able to trade on major stock exchanges, the foreign exchange market, crypto markets, and more. The platform also offers access to the OTCBB which is great for those looking to invest in cannabis penny stocks, as most of these are listed on that market.
While TD Ameritrade’s platform is highly professional and rich in tools and features, it is not difficult to use. This is thanks to the company’s commitment to education and wide accessibility. By combining an extensive educational section with a simple design for various tools, TD Ameritrade has become the platform of choice for both seasoned and beginner investors.
The Bottom Line On Stocks Under 10 Cents
There you have it, some of the most promising stocks under 10 cents, currently on the market. All of these companies show great potential as they are either well positioned in their respective markets or they offer a unique product or service. As such, they have plenty of room for future growth and development.
However, as with most penny stocks, investing in these is a high-risk venture. This is especially the case here because these are extreme examples of penny stocks that trade at under 10 cents per share. Even though they might be cheap, they can end up costing you more than the highly-priced stocks found on major exchanges. Since the future of these companies is so uncertain and volatile, it is absolutely possible that you will never see any returns. As a result, we recommend that you not spend more money than you can spare and set reasonable expectations.