"Small companies offer individual investors... many advantages. Most institutional investors, who have billions of dollars to allocate, must avoid small caps, at least until they grow larger. That makes them under followed and increases the chances that they're misvalued." –The Motley Fool
At the end of 2009, I discovered an intriguing technology stock called Waytronx (WYNX). The company had surging revenues and solid gross profits. A double-play combination that’s hard-to-find in the massive penny stock universe.
So I dug a little deeper.
What I found was simply amazing.
The company’s ground-breaking technology – “Waycool” - has the potential to revolutionize the semiconductor, solar, and electronic packaging industries. Waycool provides cooling solutions for microprocessors and other digital electronics well beyond the temperature requirements of today’s computer applications.
As a result, the company’s financial numbers were improving rapidly.
Revenues were soaring better than 30% quarter by quarter. And gross profit margins were better than 35%. I knew it wouldn’t be long before the company started showing positive earnings.
Now, a short ten months later, the stock’s showing eye-popping gains of 371%!
What did I know that other investors missed?
It’s pretty simple really. I know that at any given time, a certain number of penny stocks are undervalued relative to either their fundamentals or their potential.
In Waytronx’s case, it was both.
While still a tiny company, Waytronx was seeing explosive growth in revenue and gross profit. At some point, that combination begins catching the eye of investors and Wall Street.
So, I concluded that the stock price of this company was bound to rise. And rise it did.
You see, the consistent way to make money in penny stocks is to have a number of stocks like Waytronx in your portfolio. Keep in mind that not all of them will take off. But the few that skyrocket can make investing in penny stocks a very profitable enterprise.
We’ve seen penny stocks increase hundreds and even thousands of percent. But we’ve also seen many fall to zero. The key is to diversify into a number of high-quality positions that have the potential to make a lot of money very quickly.
And that generally means you need real companies with real products and prospects. After doing a bit of research, I found 3 companies that fit that description very well. In our opinion, these 3 stocks have the potential to generate tremendous returns with less risk than your average penny stock.
Let’s get started…
Unknown Stock #1: A Penny Biotech With Cutting Edge Technology
In the penny stock universe, one area stands out for generating not just home runs… but also the much sought after GRAND SLAMS! Home runs are the doubles, triples, and quadruples most common to penny stocks.
But grand slams are a whole different breed.
These are the monster profits of 10, 20, or 30 times your money. The kind of penny stock winners that can change your life overnight!
I’m talking about penny biotechs of course.
These amazing companies combine the enormous profit potential of biotechs with the explosive price appreciation potential of penny stocks. Having a few choice penny biotechs in your portfolio is a must if you want to strike it big.
That’s why my first pick is a quality, penny biotech.
Introducing… Neostem (NBS).
Neostem is a cutting-edge biotech developing stem cell therapies in the U.S. and China. They’re also a leading provider of adult stem collection, processing, and storage services.
Stem cells are primitive and undifferentiated cells with the unique ability to transform into many different kinds of cells. For example, they can become white blood cells, nerve cells, and even heart muscle cells to name a few.
Neostem works only with adult stem cells. They don’t work with controversial embryonic stem cells at all.
Adult stem cells are found in bone marrow, in peripheral blood, and in umbilical cord blood. For over 40 years, physicians have been using adult stem cells to treat various blood cancers. Only recently has the promise of using adult stem cells to treat a myriad of other diseases begun to be realized.
Neostem is developing stem cell therapies for various diseases at its labs in the U.S. and China.
In the U.S., they’re focusing on developing stem cell therapies based on very small embryonic-like stem cells. They call this process VSEL technology.
Research shows bone marrow contains a population of stem cells with properties similar to those of embryonic stem cells. These very small embryonic-like stem cells could provide the positive benefits of embryonic stem cells without the ethical or moral dilemmas.
In fact, recent studies by Neostem researchers are providing exciting results.
They indicate very small embryonic-like stem cells may have potential to repair degenerated, damaged, or diseased cardiac tissue. And they might even help identify those at risk for cardiovascular disease.
In China, Neostem is advancing their Regenexx process to treat a variety of musculoskeletal diseases. This innovative process uses the patient’s own adult stem cells to treat osteoarthritis, meniscus tears of the knee, avascular necrosis, and bulging lumbar discs.
Neostem plans on establishing a network of hospitals throughout China to offer their cutting-edge orthopedic treatment.
I’m sure your thinking, this sounds absolutely amazing, but isn’t it expensive to develop these stem cell therapies?
It certainly is.
But Neostem has an ingenious business model designed specifically to further their stem cell research and help pay for it.
First off, they operate adult stem cell collection, processing, and storage services. Healthy individuals donate and store their stem cells in order to have a secure supply if ever needed for future medical treatment.
Neostem is a leading provider of these services in the U.S. with nine collection centers.
This business generates revenue from a combination of fees paid up-front and over time. The fees are paid by both the collection centers and the individual clients.
Revenues are set to explode as Neostem expands the number of collection centers and more people learn about the miracles of stem cell medicine.
Second, Neostem operates a pharmaceutical business in China. The company offers a broad portfolio of anti-infective drugs. In 2008, seven of the top 20 antibiotics used in Chinese hospitals were made by Neostem. And last year, this business generated over $11 million in revenue.
The company’s pharmaceutical business has huge growth potential.
China’s antibiotics market was $8.8 billion in 2007 and is growing 24% a year. Plus, the country’s overall pharmaceutical market is expected to triple in size by 2013.
Neostem is poised for huge growth going forward.
Revenues are expanding sharply. Net losses are shrinking rapidly. And the company sports a solid balance sheet.
The stem cell collection and pharmaceuticals business will help grow the company now and in the future. But the real potential money-maker is the stem cell therapy business. Any positive advances in this area have potential to turn Neostem into the next penny biotech grand slam!
Unknown Stock #2: This Company’s Calorie Burning Beverage Could Be The Next “Monster”
One of the all time great penny stock stories is the tale of Hansen Natural (HANS). The company went from bankruptcy to multi-billion dollar beverage titan. Spurred by their wildly popular “Monster” energy drink, Hansen stock soared from around $1 a share in the mid-1990s to a peak price of $68.40 in October 2007.
In just ten years' time, you could have made a whopping 6,740% return on your money!
If you missed the Hansen bonanza… don’t fret. I’ve found the next penny-sized beverage company poised for Hansen-like growth. Say hello to Celsius Holdings (CELH).
Celsius has developed the next-generation of functional beverage products… the calorie burning energy drink!
These amazing fitness/energy drinks combine nutritional science with mainstream beverages. Not only do they provide a great taste, they’re scientifically proven to burn calories.
According to multiple clinical studies, a single serving (12 ounce can) of Celsius burns up to 100 calories.
Celsius is made with the company’s proprietary thermogenic MetaPlus formulation. It’s scientifically proven to increase a consumer’s metabolism an average of 12% for up to three hours.
The drink also packs a strong energy punch. Each 12 ounce can contains 200 milligrams of caffeine… that’s comparable to about two cups of coffee.
The market opportunity for Celsius is phenomenal to say the least…
The company’s target market is a niche within the functional beverage market. Ideal customers are men and women aged 25 to 54 who are looking for a way to burn calories and boost energy.
According to Datamonitor, the functional beverage market was about $9.7 billion in 2009. And it’s growing very fast. This market is expected to hit $19.7 billion by 2013.
That’s a compound annual growth rate of 15.2%!
And here’s the best part…
The two biggest segments of the functional beverage market are energy drinks (62%) and sports drinks (26%). But not for long. Celsius has created a new segment… calorie-burning drinks… and it should grab a big chunk of market share from the leading categories.
You see, a new trend is taking hold of the functional beverage industry, and it benefits Celsius.
While more and more consumers are buying functional beverages, they’re now looking for the healthiest drinks. Many leading functional beverage products contain high doses of sugar or high fructose corn syrup, sodium, artificial flavors, and preservatives.
Celsius, on the other hand, is as natural as possible.
The drink has no chemical preservatives, aspartame, or high fructose corn syrup, and it’s very low in sodium. It uses good-for-you ingredients like green tea, ginger, calcium, chromium, B vitamins, and Vitamin C. And it’s sweetened with sucralose, a low-calorie, sugar-derived sweetener found in Splenda.
Right now you can still get in on the ground floor of this amazing opportunity.
Celsius is still relatively unknown. But that won’t last much longer. The company’s marketing blitz across TV, radio, newsprint, magazines, and social networking sites is rapidly building brand awareness.
And it’s already translating into huge sales growth. It won’t be long before Celsius hits the radar screens of more individual and institutional investors. Grab your shares now before the herd rushes in!
Unknown Stock #3: An Obscure Company Poised To Make A Killing In Rare Earth Metals
This last penny stock pick is a play on the crisis evolving from the global shortage of rare earth metals. This tiny company is one of just seven publicly traded rare earth companies. And they stand to make a killing by supplying rare earth metals to U.S. industries.
Before I explain why, let me first tell you about rare earth metals…
Rare earth metals, or rare earths, are 17 chemically similar elements. They are critical components of hybrid cars, flat screen TVs, LED light bulbs, and wind turbines.
What’s more, these metals are vital to the aerospace and defense industry. They’re used extensively in aircraft parts, anti-missile defense systems, jet engines, and missile guidance systems.
Clearly, rare earths are key materials for a number of important industries.
The U.S. was a major global producer of rare earths until the mid-1980s, but now it no longer mines any of the materials. The world’s largest producer is China. They control a mind-boggling 97% of the global supply.
And that’s where the problem begins…
You see, China has slashed exports of rare earth metals. And this is causing a panic in Japan and the U.S. – two of the largest importers of rare earths. A shortage of rare earths could cause a major disruption for many industries and the U.S. military.
However, the shortage of rare earths could be a boon for one tiny company…
American Rare Earths & Materials (AREM) is positioning itself to become “America’s and North America’s best and most reliable source for rare earth metals.”
This amazing company has long-standing relationships with rare earth producers in Russia and Indonesia. And the company has proven scientific know-how to transform rare earth metals into commercially viable products.
Now they’re developing opportunities to distribute rare earths that will help key industries launch major industrial brands.
With demand for rare earths expected to keep rising and global supply tightening, AREM is on the cusp of a major growth cycle. Prices for rare earths are likely heading astronomically higher. And as one of the few suppliers of rare earths, AREM is sure to rake in huge profits.
Now’s the time to establish a position in AREM.
Most investors have yet to catch on to the astonishing growth potential of rare earth metals. And tiny AREM is hardly a blip on anyone’s radar screen. Grab your shares now before Wall Street wakes up and realizes the staggering profit potential this company offers.
How To Turn $300 Into $1.3 Million With Penny Stocks
Before concluding our report, we wanted to do the math on how it would be possible to turn $300 into $1.3 million. Now before we run the numbers, you need to know that getting a return this high would be difficult, but not impossible. Most investors would be happy to get just a fraction of these gains.
Start Amount Return Gain Ending Amount
Stock #1 $300 852% $2,556 $2,856
Stock #2 $2,856 3,428% $97,903 $100,759
Stock #3 $100,759 1,256% $1,265,541 $1,366,300
So there you have it. To turn $300 into $1.3 million, you’d need three consecutive returns of 852%, 3,428% and 1,256%. Difficult to do, yes. Impossible, no.
One thing is certain however. If you’re going to attempt gains like this, you’ll need to do it with penny stocks. It’s very difficult to register gains of 1,000% to 4,000% with blue-chip stocks like General Electric and Microsoft. You’ve got to find penny stocks that turn into the next General Electric and Microsoft.
And you do that by finding high-quality companies with real products and real potential. They’re out there- it’s just a matter of finding them!
