Top 10 Penny Stocks To Buy in 2017

What are the top 10 penny stocks to buy in 2017? Out of thousands of stocks that are trading at price levels below $1.00, it can be hard to identify winning picks, especially since it’s no secret that the companies behind penny stocks may be involved in scams or other shady endeavors that will cause investors to lose money. However, one easy way to identify penny stocks that have the potential to bring in high returns is to follow smart money investors.

That’s what we do at Insider Monkey. We follow around 700 hedge funds and other large institutional investors and analyze their quarterly 13F filings to identify their collective sentiment towards thousands of stocks. We use the data mainly as part of our investment strategy that has returned over 45% since February 2016, including beating the market by five percentage points between mid-February and mid-May of this year. We share our stock picks with our premium subscribers quarterly; don’t miss your chance to subscribe before our next batch of picks are released.

Aside from picking stocks as part of our strategy, we can also see the number of investors that are bullish on individual stocks, and by comparing this data on a quarter-by-quarter basis, we can identify trends and see how these funds’ perception towards different companies changes.

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When it comes to penny stocks, they are included in the top-right quadrant in the risk-reward coordinate system, which means that they are highly risky, but can also generate substantial returns given the right circumstances. Therefore, it can be worth it to invest in penny stocks and there are examples of people who have made fortunes this way. For example, Timothy Sykes managed to earn over $1.6 million by the age of 21 by day trading penny stocks. However, for every few investors that scored big, there are hundreds if not thousands of those that lost a lot of money by trying to venture into the penny stocks area of the market (think of it as the seedy underbelly of a thriving town).

So, the key when it comes to trading penny stocks is to do your homework and carefully research each potential investment. For large companies, research is easy due to the availability of information, while for tiny companies, whose shares trade at very low prices, they are often surrounded by a bit of mystery. That’s especially true for stocks that are trading over-the-counter, because, by law, they are allowed to disclose less information to the public. In addition, such companies can be artificially promoted by scammers looking to boost their price so they can then dump the stock for huge returns. Since investing is a “zero-sum” game (i.e. for every winner there is a loser), it’s very easy to lose your head and fall for one of these schemes.

So, the rule is generally to stick to penny stocks that are traded on major exchanges. Penny stocks that are trading on the NYSE and Nasdaq are usually stocks of companies that went through troubled times which led to their decline. Subsequently, sometimes the market overreacts and/or doesn’t see the potential in these companies. However, through detailed research and careful analysis, big investors are able to identify catalysts that could send these stocks higher, which is why it is a good idea to follow them.

With this in mind, let’s take a look at the top 10 penny stocks to buy in 2017. The stocks that were selected registered an increase in the number of bullish investors during the first quarter. Earlier this year we wrote a similar list of 5 Penny Stocks to Buy Now, stocks which were the most popular among the funds in our database at the end of 2016, but companies from that list were not included in this one, as one of them was acquired and the others have conducted reverse stock splits in order to avoid being de-listed. Check out the list starting on the next page and good luck with your penny stock investing.

10. Intermolecular Inc (NASDAQ:IMI)

First up is Intermolecular Inc (NASDAQ:IMI), in which six funds tracked by us reported having long positions in as of the end of March, up by two over the quarter. These funds amassed $15.76 million worth of shares, which represented 34% of the stock’s float. Among those funds was William C. Martin’s Raging Capital Management, which held 14.73 million shares, while Frank Slattery’s Symmetry Peak Management owned 1.02 million shares.

Intermolecular Inc (NASDAQ:IMI) is a provider of advanced materials solutions that are used for research & development in the semiconductor, consumer electronics, and automotive industries. It owns a large portfolio of patents and has a proprietary platform that allows companies to speed up their research and development. Earlier this year, Intermolecular Inc (NASDAQ:IMI) announced restructuring plans that involve focusing on catering for the semiconductor industry, among others. The move is expected to lower the company’s costs by around $4 million this year.

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9. Trilogy Metals Inc (NYSEMKT:TMQ)

Trilogy Metals Inc (NYSEMKT:TMQ), a Canada-based metals exploration company, was owned by eight funds from our database at the end of March, compared to six funds a quarter earlier. Earlier this month, Trilogy Metals Inc (NYSEMKT:TMQ) announced that it has engaged an engineering company to prepare a pre-feasibility study technical report of its Arctic project, which involves exploration of a high-grade copper-zinc-lead volcanogenic massive sulfide deposit that also contains precious metals. Among the largest shareholders of Trilogy Metals Inc (NYSEMKT:TMQ) is John Paulson’s Pauslon & Co., and Seth Klarman’s Baupost Group, which owned 11.58 million shares and 10.60 million shares respectively at the end of March.

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8. Streamline Health Solutions Inc. (NASDAQ:STRM)

Even though the number of funds long Streamline Health Solutions Inc. (NASDAQ:STRM) increased by two to eight during the first quarter, the total value of their positions declined to $4.33 million from $5.18 million. Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management owned 1.48 million shares of the company, while Justin John Ferayorni‘s Tamarack Capital Management disclosed holding 1.14 million shares in its most recent 13F filing.

Streamline Health Solutions Inc. (NASDAQ:STRM) provides healthcare IT services, primarily through licensing its Electronic Health Information Management, Patient Financial, and Coding and Clinical Documentation Improvement software. Earlier this month, Streamline Health Solutions Inc. (NASDAQ:STRM) posted its first-quarter results, with its net loss of $0.10 per share beating the consensus estimate by $0.01, while revenue of $5.93 million was $730,000 lower than expectations.

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7. Peregrine Pharmaceuticals (NASDAQ:PPHM)

Peregrine Pharmaceuticals (NASDAQ:PPHM) is a $164 million biopharmaceutical company, in which eight funds tracked by us held shares at the end of March, compared to six funds at the end of December. Among the investors bullish on the stock are Renaissance Technologies, which increased its stake by 25% to 3.08 million shares during the first quarter, and Ken Griffin’s Citadel Investment Group, which initiated a stake containing 205,651 shares.

In March, Peregrine Pharmaceuticals (NASDAQ:PPHM) posted its results for the third-quarter of its fiscal year 2017 (ended January 31), which included a net loss of $0.04 per share, worse than the expected loss of $0.03. Even though its revenue of $10.75 million was $3.25 million below expectations, it did jump by 60% over the year. Peregrine Pharmaceuticals (NASDAQ:PPHM) also raised its full-year manufacturing revenue guidance to $60-$65 million from the previous range of $50-$55 million.

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6. Galena Biopharma Inc (NASDAQ:GALE)

The number of investors from our database long Galena Biopharma Inc (NASDAQ:GALE) increased by three to eight during the first quarter, while the aggregate value of their holdings appreciated to $3.23 million from $1.28 million and represented nearly 15% of the company’s outstanding stock.

Galena Biopharma Inc (NASDAQ:GALE) is focused on developing oncology therapeutics that address unmet medical needs. Its stock has lost 70% since the beginning of the year, and was trading at around $7 per share at the beginning of 2014, although it was reportedly due to the company paying for promotional articles to boost its price. Earlier this year, the company announced that it will continue two mid-stage phase 2 studies of its breast cancer vaccine and it also has a number of other ongoing and planned studies. However, as its market value plunges and the company is burning cash at a very high rate, a lot of effort will be required for Galena Biopharma Inc (NASDAQ:GALE) to survive. Nevertheless, Jim Simons’ Renaissance Technologies initiated a stake in Galena during the first quarter that amassed 1.60 million shares at the end of March.

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5. Bioline RX Ltd (NASDAQ:BLRX)

The number of investors long Bioline RX Ltd (NASDAQ:BLRX) jumped by five to nine between January and March. In addition, the total value of these funds’ holdings surged to $31.89 million from $5.95 million. Among them, Mark Lampert’s Biotechnology Value Fund and Hal Mintz’s Sabby Capital initiated stakes containing 17.50 million shares and 3.14 million shares, respectively.

Bioline, an Israel-based biotech company, has a number of products under development and last month announced filing regulatory applications to start a Phase 1b clinical trial of its BL-8040 in combination with Roche’s Tecentriq (atezolizumab) in patients with acute myeloid leukemia.

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4. Pengrowth Energy Corp (USA) (NYSE:PGH)

In Pengrowth Energy Corp (USA) (NYSE:PGH), there were 10 funds in our database holding shares heading into the second quarter, compared to eight funds a quarter earlier. Pengrowth is a Canada-based oil and natural gas exploration and production company, whose shares have tanked by 55% over the last 12 months. In May, it reported better-than-expected EPS and revenue and showed some significant debt reduction through asset sales. As Pengrowth Energy Corp (USA) (NYSE:PGH) improves its balance sheet, investors expect the company to deliver on its 2017 guidance and further focus on the development of some of its more profitable projects like Lindbergh and Montney. Chuck Royce’s Royce & Associates reported holding 4.53 million shares of Pengrowth Energy Corp (USA) (NYSE:PGH) in its latest 13F filing.

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3. Walter Investment Management Corp (NYSE:WAC)

Next up on our list of 10 penny stocks to buy in 2017 is Walter Investment Management Corp (NYSE:WAC), in which 12 funds held stakes at the end of March, up by two over the quarter. However, the aggregate value of their holdings slid to $15.71 million from $56.30 million during the first three months of 2017, as the stock fell by 77%.

Walter Investment Management is a diversified mortgage banking company that is engaged in the servicing and origination of residential loans. The company’s stock tanked due to Walter Investment Management Corp (NYSE:WAC) facing liquidity issues, which has some investors fearing a possible bankruptcy. Nevertheless, a number of funds, including billionaire Israel Englander’s Millennium Management, and Robert Rodriguez and Steven Romick’s First Pacific Advisors, initiated stakes in the company during the first quarter. At the end of March, Millennium Management held 299,000 shares, while First Pacific owned 279,750 shares.

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2. Enphase Energy Inc (NASDAQ:ENPH)

Enphase Energy Inc (NASDAQ:ENPH) was snapped up by several bullish investors in the first quarter, as the number of them owning the stock jumped to 12 from seven during the first three months of 2017, while the total value of their holdings advanced to $15.68 million from $7.25 million. Billionaires Dan Loeb of Third Point and Jim Simons of Renaissance Technologies held 6.25 million shares and 523,033 shares of Enphase Energy, respectively, at the end of March.

Shares of Enphase drifted into penny stock territory only a couple of months ago, as they had been steadily holding above $1.00 for the previous 12 months. The stock was trading well over $10.00 per share in 2014/2015, but started to struggle as the demand for residential solar installations cooled down and the company started posting worse-than-expected financial results. Its most recent quarterly report in May was no exception, as Enphase Energy Inc (NASDAQ:ENPH)’s net loss and revenue were below analysts’ estimates and the company is having trouble with liquidity. However, Enphase Energy Inc (NASDAQ:ENPH) is also trying to cut costs, having set a target of 50% cost reduction for its products, and is on track to introduce some new products in the next year.

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1. Gastar Exploration Inc (NYSEMKT:GST)

Gastar Exploration Inc (NYSEMKT:GST) tops the list of the top 10 penny stocks to buy in 2017, as the number of funds in our database with long positions in the company advanced by three to 17 during the first quarter. Subsequently, the total value of their holdings advanced to $40.90 million from $30.87 million and represented over 14% of the company’s outstanding stock at the end of March. Among the funds in our database, the largest shareholder of Gastar Exploration Inc (NYSEMKT:GST) is James Dinan‘s York Capital Management, which increased its stake by 52% to 5.45 million shares during the first quarter.

Gastar Exploration Inc (NYSEMKT:GST)’s stock has declined by 41% since the beginning of the year and over the last 52 weeks it has fluctuated between $0.80 and $2.19 per share. As with all oil companies, Gastar has seen its stock decline mainly on the back of the drop in oil prices. In addition, focusing on shale production means that Gastar incurs higher production costs than other E&P companies. However, if oil prices rebound and the Fed maintains its slow approach to raising interest rates, Gastar has the potential to recover, which is why large investors keep betting on it.

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Disclosure: None