Cannabis stocks have been in a freefall over the last two years. The COVID-19 pandemic has only amplified the sell-off in cannabis stocks. After the sell-off, many cannabis stocks got reduced to penny stocks. In the past, some of the companies had a market capitalization that exceeded $1 billion. So, what are the top cannabis penny stocks in 2020?
What are cannabis penny stocks?
First, we'll discuss how the SEC defines penny stocks. According to the SEC, “The term 'penny stock' generally refers to a security issued by a very small company that trades at less than $5 per share.” Usually, these stocks trade in OTC markets although some continue to trade on the stock exchange. Many times, stocks do a reverse stock split if their stock price falls too low to escape a delisting.
Why are cannabis penny stocks popular in 2020?
Cannabis stocks had a tough time over the last two years. Now, most of the high-flying cannabis stocks are classified as penny stocks. Many investors flock to penny stocks and expect stellar returns. For cannabis penny stocks, some investors seem to think that they might reach their all-time highs again.
What are the top cannabis penny stocks?
Aphria is a cannabis penny stock. However, Aphria's market capitalization is still above $1 billion. The stock has bounced back sharply from its March lows. Aphria has a strong balance sheet and is positive on the EBITDA level unlike some of its peers.
Aurora Cannabis is among the top cannabis penny stocks to watch. The stock has been moving in and out of the penny stock category. Aurora Cannabis did a reverse stock split in May, which helped it shed the penny stock tag. The stock has fallen below $5 again, which makes it a penny stock. However, Aurora Cannabis is still among the biggest cannabis stocks with a market capitalization of around $540 million.
Hexo is another cannabis penny stock to follow in 2020. The stock trades at less than 10 percent of its 2019 highs and has a market capitalization of a little above $310 million. Hexo has been in the penny stock category for the last year and its 52-week high of $4.23 is also below $5.
Charlotte’s Web Holdings is another top cannabis penny stock. The stock trades on the OTC markets and the Toronto Stock Exchange. The stock made a 52-week high of $14.7 and a 52-week low of $2.28. Currently, Charlotte's Web Holdings trades near its 52-week lows and has a market capitalization of $339 million.
Investing in penny stocks is riskier compared to investing in blue-chip stocks. While some of the penny stocks can give astonishing returns, many investors lose capital by investing in penny stocks. Some of the penny stocks fall to almost zero. You need to do extra analysis if you want to invest in cannabis penny stocks. Along with company-specific factors, the news flow about cannabis legalization drives cannabis stocks. If you decide to invest in cannabis penny stocks, you can invest through a broker like Robinhood.