Whether you’re new to trading or you’re looking for a new challenge, penny stocks can be worthwhile investment opportunities. Oil penny stocks can give you high returns, but they come with their share of challenges. Before getting started trading oil penny stocks, read up on what they are, the returns they provide, and some of the stocks to watch.
What Are Oil Penny Stocks?
Image via Flickr by joncutrer
As you might suspect, oil penny stocks are the stocks of small gas and oil industry companies. Though their name implies differently, penny stocks don’t have to cost an actual penny. Instead, they are stocks that trade at $5 or lower per share.
Do Oil Penny Stocks Provide a Good Return on Investment?
Generally speaking, penny stocks can yield high profits, but oil penny stocks can be particularly fruitful. The advantages of oil penny stocks for your pocket and portfolio include:
- They require a low capital investment, meaning you don’t have to be wealthy to get started.
- You can diversify your portfolio and protect your net worth.
- There are rapid fluctuations, allowing you to make a profit very quickly.
- Micro-capitalization stocks sometimes rapidly ascent to a mid-cap level, giving you large returns on your original investment.
These potentially high-reward stocks do come with a high risk though. When trading oil penny stocks, you face challenges because:
- Oil penny stocks lack liquidity, meaning they’re easy to buy but can be difficult to sell.
- Some of the companies lack a trading history, either because they’re on the verge of bankruptcy or because they are a new company.
- OTC oil penny stocks have no minimum standard requirements, meaning you can’t rely on balance sheets or P&L reports.
- Micro-cap stocks aren’t regulated by the Securities and Exchange Commission, resulting in investors having to do their own research.
What Are Some of the Best Oil Penny Stocks to Invest In?
Some of the oil penny stocks to watch include:
Unit Corporation (UNT)
This publicly held energy company and its subsidiaries specialize in natural gas, oil, midstream, and contract drilling. The company filed for bankruptcy in May 2020, but daily operations should be uninterrupted as the company cuts down its debt. With a current share price of $0.24 and an earnings growth rate of 2,417.23%, UNT is a stock to watch.
Nordic American Tanker, Ltd. (NAT)
Nordic American Tanker, Ltd. is a company that specializes in transporting crude oil. Despite the oil market crisis, the company has been recording high trading shares. The demand for oil is expected to shoot back up as countries reopen their economies.
Oasis Petroleum Inc. (OAS)
As a company that explores and produces petroleum products, Oasis Petroleum focuses on collecting and developing crude oil and natural gas resources. It then sells the crude oil produced to companies, refineries, and markets that have access to pipeline and rail facilities. OAS has a share price of $0.80 and ranks in the 6th percentile for potential gains.
As with any investment, there’s always a risk involved, but oil penny stocks can be particularly speculative. That’s why it’s important to educate yourself on the markets and companies before you try your hand at trading oil penny stocks.