Are Penny Stocks Worth It?

Learn everything you need to know in 'Canada's Penny Stock Guide' for FREE from The Successful Investor.

Canadian Penny Stock Guide: Find where to find Penny Stocks that pay well.

Topic: Penny Stocks

Here’s what to watch out for if you hope to successfully invest in medica-device penny stocks

buying penny stocks

Interested in medical-device penny stocks? It’s a very risky area, but there are ways you can cut that risk.

Demand for innovative medical devices and equipment tends to grow, or at least hold steady, regardless of swings in the overall economy. Many of these firms also get recurring revenue, mainly from long-time customers. They also face little competition from generic products, and stand to gain from the continued aging of baby boomers.

Apart from medical devices, other fields of medicine and health care can offer a number of stocks we recommend that meet our Successful Investor criteria. For example, we like other health care stocks with recurring revenue, which can come from the sale of lab supplies, maintenance on equipment or other such sources.

Some investors also consider medical device penny stocks for growth opportunities. We’ll talk about that more below, but first, here’s a look at a stock that’s well beyond the penny-stock stage:

Are Penny Stocks Worth It?

Learn everything you need to know in 'Canada's Penny Stock Guide' for FREE from The Successful Investor.

Canadian Penny Stock Guide: Find where to find Penny Stocks that pay well.

ResMed Inc., symbol RMD on New York, is a buy although it is not a medical-device penny stock

Sleep apnea gets far less media attention than other health issues such as high blood pressure, obesity, diabetes, depression, stroke and heart problems. But now, more and more public and private health insurers have begun to recognize, publicize and pay for sleep apnea treatment. That’s because untreated sleep apnea can expand a patient’s risk for several conditions that can lead to complications requiring much more costly treatment.

People who are only vaguely familiar with sleep apnea may think of it as a disease of the elderly. But it can strike anyone, children included. Some people in their 30s have sleep apnea or have friends who suffer from it. They describe the improvement that comes from treatment as “life-changing.” This may reflect the greater improvement that is possible when a sufferer begins treatment at an earlier age. It may also reflect the fact that people in their 30s are more comfortable with technology, having grown up with cellphones and computers. For people of all ages, however, it may simply reflect the positive impact on health and wellness of shifting from intermittent sleep deprivation to routinely enjoying a good night’s sleep.

In any event, we think this discrepancy in awareness creates a great long-term opportunity for ResMed. The stock has been a top performer for some time, but the company and its industry have a lot of potential that is not widely recognized. ResMed is up more than 110% since we added it to our Power Growth Investor newsletter in July 2019—it has room to move a lot higher.

Invest in a medical devices ETF that goes beyond drug company stocks for more secure profits in your portfolio

All in all, there’s little doubt that the developing world’s aging population will continue to spend more on medical services for years to come. Medical device makers are well positioned to capture a share of that increased spending. Technological changes that continually spur new product development will also pay off. In turn, investors in the industry’s leading companies stand to benefit from growing demand.

We still feel that investors will profit the most with a well-balanced portfolio of high-quality individual stocks, but ETFs can also play a role in a portfolio. And the best of those will offer a diversified and low-fee way for investors to participate in this expanding industry.

Meanwhile, if you do want to invest in medical device penny stocks, then here’s what to look for to boost your chances of success in this risky area:

Here are key traits of the best penny stocks—including medical-device penny stocks—to invest in for success

  • Look for a solid balance sheet when investing in penny stocks. High-quality penny stocks should have reasonably sound balance sheets with moderate debt. It’s even better if they have a major partner who can provide the financing needed to bring the penny stock’s product to market or its mine into production.
  • Focus on up-and-coming technologies. To do this, you need to know how technology is changing. For instance, the immense popularity of wireless devices, such as the iPhone and tablet computers, has stepped up demand for faster, more reliable wireless networks as well as related computer chips. At the same time, the pandemic has led to a shortage.
  • Buy multi-product tech penny stock companies. Technological advances come in spurts, and they leapfrog each other. Focus on investing in tech penny stocks that have some existing or soon-to-be-released products, and avoid one-hit wonders.
  • Look for earnings or cash flow. A perpetual money loser will eventually go broke, no matter how impressive its technology. But if it makes even a little money, it can stay in business and perhaps reap the bonanza of a new product.

Use our three-part Successful Investor approach for all investments, including those in medical device penny stocks

  1. Invest mainly in well-established, dividend-paying companies;
  2. Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; the Consumer sector; Finance; Utilities);
  3. Downplay or avoid stocks in the broker/media limelight.

Do you target medical-device penny stocks for investment, or do you prefer to invest in pharmaceutical stocks for healthcare investing?


Tell Us What YOU Think

You must be logged in to post a comment.

Please be respectful with your comments and help us keep this an area that everyone can enjoy. If you believe a comment is abusive or otherwise violates our Terms of Use, please click here to report it to the administrator.