One of the trends we’ve started seeing with penny stocks is the start of a “reopening trade.” Some will refer to these as epicenter stocks. It was an idea originally thought up by Fundstrat’s Tom Lee. He explained early last year in the thick of the pandemic that certain sectors have been overly sold down.
As a result, Lee explained, these companies were at the epicenter of the global economic downturn. He also pointed out that certain industries could experience some of the steepest turnarounds should pandemic conditions lessen.
Fast-forward a year, and we’ve begun seeing indications of this idea coming to fruition. Everything from travel stocks to leisure & hospitality have begun popping here and there. We aren’t talking about a full recovery. Compared to last year, however, many of these stocks are trading much higher.
Additionally, we’ve got vaccines now. This is something that seems so far away this time last year. The CDC has also come out with guidance showing those inoculated can also gather in small groups without masks.
“Households are fundamentally in a strong position, with elevated savings rates and a positive wealth effect from the move up in house and financial asset prices,” JPMorgan recently said. Citing improving labor markets and improving wages, the focus on a stronger economy suggests reopening stocks could be viable to watch right now.Time To Find Reopening Penny Stocks To Buy?
There are plenty of former epicenter penny stocks that no longer trade below $5. This, in itself, has suggested to many traders that there is still potential in some of the penny stocks in this grouping. The reason behind it is based on the fact that so many former “non-penny stocks” still trade below $5. Will the momentum in reopening stocks trigger a broader move in some of these cheaper names?
- Ashford Hospitality Trust (NYSE: AHT)
- Borr Drilling Limited (NYSE: BORR)
- Chico’s FAS Inc. (NYSE: CHS)
- Nordic American Tankers Ltd (NYSE: NAT)
- Genius Brands (NASDAQ: GNUS)
Assuming we see a broader economic reopening, travel, and leisure are likely to benefit. With over a year of not going outside their homes or hometowns, the majority of people could be frothing at the mouth to get back and travel.
Leisure travel has been said to be the first leg of the industry’s rebound. The future is up in the air right now as far as business travel goes. However, when you look at companies like Ashford Hospitality Trust, its properties could benefit whether it’s business or pleasure. The company invests in full-service, upscale, and upper-upscale hotel properties in the U.S. We’re talking about brands like the Marriott, Hilton, Hyatt, Crowne Plaza Sheraton flags.
Aside from the industry sentiment, Ashford has been fundamentally making strides in preparation for a hopefully bullish return to the market. This included exchanging some of its preferred shares for common stock. We’ve also seen analysts take a more bullish stance on AHT. Most recently, B. Riley adjusted its price target on the penny stock. In this case it bumped the previous $2.50 target to $3 and currently maintains a Neutral rating on the company.Energy Penny Stocks: Borr Drilling Limited
Something else to consider with this idea of the reopening trade is energy. While there’s been a clear push for things like green and renewable energy by the current administration, the most easily and readily accessible is still traditional oil and gas. Assuming there will be more travel and a restart in expanded manufacturing programs, energy sources will obviously be needed. So, everything from coal and nuclear power to oil & gas has come into focus in this light. In fact, oil has become one of the top-performing commodities in 2021 so far. Year-to-date, light sweet crude has climbed over 28%.
Based on this, it might make sense to have some oil and gas penny stocks on the radar. This week, one of the lower-priced names, Borr Drilling, has started to pick up steam. The course of the last 7 days has seen BORR stock jump as much as 24% and climb as high as $1.43.
The company recently released its Q4 results and provided a fleet status report. Borr generated just over $60 million in revenue and reported a net loss of just under $47 million or around $0.22 per share. The company also explained that “even though we received broad support for the liquidity improvement plan, concluded in January, we are convinced that some opportunities remain to further improve our capital structure and liquidity in 2021.”
While the majority of oil and gas stocks still have yet to reclaim their pre-pandemic levels, a stronger focus on them right now could be supporting reasons why stocks like BORR have continued rebounding.Retail Penny Stocks: Chico’s FAS Inc.
Earlier today, we discussed some of the hot penny stocks on Robinhood gaining interest from traders. Retailer Express was on this list. The company did report earnings. However, attention was already on the company (even before the Reddit squeeze) for its turnaround story. In-store sales suffered greatly last year. Obviously, thanks to the pandemic, the brick-and-mortar retailer saw much less foot traffic. However, it was able to refocus efforts on expanding its eCommerce offering. In this light, it has firmly established a brick-and-click approach to selling its products.
Chico’s FAS is another apparel retailer owning popular niche brands like Chico’s, White House Black Market, and Soma Intimates. It, too, has taken up a larger focus on digital sales. In its latest quarterly filing, Soma, for instance, saw its highest sales in the history of the brand. Comparable sales were also up over 15%, and it was driven by an uptick (over 68%) in digital sales. What’s more, total company Q4 and year-to-date digital sales increased almost 20%, according to Chico’s.
“We enter 2021 as a digital-first, customer-led company with the capabilities to support continued improvement, enhanced value creation, and a return to growth in the years ahead,” said Molly Langenstein, Chief Executive Officer and President, Chico’s FAS. With the reopening trade more likely akin to a hybrid of in-person and digital options, CHS stock could be one to watch.Shipping Penny Stocks: Nordic American Tankers Ltd
You can’t forget the logistics of all of this. International business is still a large part of growth for many of these companies. Everything from barrels of oil to containers full of fabric and other goods requires a “vehicle” to get finished and raw materials from the manufacturers to the end-user. Shipping stocks remain one of the more popular points of interest for the market.
Nordic American Tankers is on this list of shipping stocks to watch. In this case, however, the company focuses on things like petroleum shipping. There was reduced oil production last year, so obviously, NAT and other companies in this niche experienced negative sentiment in the market. However, Nordic could be preparing for a stronger year.
In its Q4 and full-year 2020 update, The company said that “We see strong oil demand, in particular from Asia for 2021…The lock-downs around the world has led to pent-up demand for many goods and services that will flourish once the vaccination program gains momentum this year…The demand will, unlike wars and financial crisis, be met by an unharmed physical and financial infrastructure that is ready to deliver on all cylinders.”Entertainment Penny Stocks: Genius Brands
Then we’ve got entertainment, which hasn’t seemed to skip a beat during the pandemic. That is unless the entertainment was in-person. Needless to say, digital entertainment has continued to flourish. This is where we saw massive growth in user bases on Netflix and Disney+, for instance. One of the penny stocks continuing to grab attention from the market has been Genius Brands.
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It had an epic rise and fall last year. But compared to where it began in 2020 and where it is now, GNUS stock has risen significantly. Roughly 52 weeks ago, the penny stock was trading at $0.27. This week it has reached highs of $2.27 so far. One of the highlights in the stock market as a whole has been on a much-anticipated IPO of a famous children’s game company, Roblox (NYSE: RBLX). How does this involve Genius Brands?
The company is launching its “Big B Stats ROBLOX Challenges” show on its Kartoon Channel! Added attention to this, RBLX IPO seems to have created some sympathy sentiment in the market. Aside from this, GNUS stock was already trading higher as momentum continued from last week’s CEO newsletter, highlighting several key initiatives and milestones from the company.