Eighty percent of the market's annual movement happens when earnings reports are released. And it's earnings season once again.
That means more than 400% gains for one of the best penny stocks to buy in August 2019.
Good penny stocks often benefit from high returns on low share prices. By the U.S. Securities and Exchange Commission's definition, a penny stock is anything that trades for $5 or less.
But before you jump into penny stock investing, it's helpful to understand the risks.
Today, we'll share with you a little about buying penny stocks safely. Then, we'll reveal our pick for the top penny stock to buy today.
Picking the Best Penny Stocks
Penny stocks can be profitable, but only if you pick the right ones.
The wrong penny stocks can lose as much as the best ones gain. So here's how you avoid that.
The first thing you should do is set a budget. Penny stocks are a volatile asset, so you should mind your risk tolerance and only put a minimal percentage of your budget toward them.
Also, limit your penny stock investments to only stocks that trade on major exchanges. The New York Stock Exchange (NYSE) and Nasdaq have much tighter restrictions and more oversight than the pink sheets or over-the-counter exchanges.
Finally, be suspicious of anyone trying to pressure you into investing in a particular stock. There are plenty of penny stock scams out there.
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Lastly, you should be prepared to do some research before buying penny stocks.
There are thousands from which to choose, so it takes some effort to uncover the ones with the most potential.
Our Money Morning Stock VQScore™ system was designed for just this purpose. This proprietary system reviews and ranks stocks that have significant breakout potential, and we can narrow these down to stocks that trade for less than $5 per share.
The top penny stock that we've identified for August has a perfect 4.75 VQScore, and it has the potential for over 400% gains.
This stock is involved in the energy exploration sector, which is booming…
One of the Best Penny Stocks to Buy in August 2019
This is a Calgary, Canada-based oil and gas company that, along with its subsidiaries, focuses on exploring, developing, producing, and selling oil, natural gas, and natural gas liquids.
The company was founded in 1971 and holds just under 4 million acres, with 1.9 million in the United States and 1.7 million in Canada.
Its interests are varied and include the Montney in northwest Alberta and northeast British Columbia and Duvernay in west-central Alberta. It also has upstream operations comprising Horn River in northeast British Columbia, Wheatland in southern Alberta, and Deep Panuke offshore of Nova Scotia.
The company also has interests in assets in the United States such as the Permian in west Texas and the Eagle Ford in south Texas.
It mostly markets its services to local distributing companies, refiners, electronic exchanges, and energy marketing companies.
At the end of 2018, Encana reported production of 89.9 thousand barrels daily of oil and 1.158 billion cubic feet of natural gas, which made it one of North America's largest producers.
The company's substantial holdings have allowed it to become a major supplier as the worldwide demand for natural gas increases.
Natural gas consumption increased by 4.8% last year, which was the most rapid growth in eight years. Additional growth of 7% is expected over the next several years, according to projections from the Energy Information Administration .
Its sales have jumped 73% over the past three years, and its profits increased by 29% in 2018.
The company just announced second-quarter earnings of $0.21 per share, which beat the Zacks consensus estimate of $0.17. Total revenue for Q2 came to $2.05 billion, which also beat estimates and more than doubled the $988 million revenue earned a year prior.
ECA is currently trading at $4.01 per share. The stock trades at just over six times earnings, and the industry average is 32.47 times earnings. This tells us that this is an incredibly undervalued stock.
It has a price target of $21 for the year, which would give today's investor a staggering upside of 423%.
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This article is supplied courtesy of Money Morning.