5 Reddit Penny Stocks That Turned Stimulus Checks Into Big Money - GameStop (NYSE:GME)

Penny Stocks That Turned Last Year’s Stimmy Into Big Money

Some may say that buying penny stocks with a government stimulus check is irresponsible. But I’m willing to bet that there are plenty of newly minted traders who would argue that point.

Thanks to the 2020 pandemic, markets were rocked to the core and gave up nearly years of gains in just a few weeks. Economies shut down as the virus swept the globe. Millions were left unemployed or furloughed with no immediate way to make money. In April of last year, the first round of stimulus money hit Americans’ accounts. The majority of these payments hit on what would have been tax day, April 15th.

You may assume that without income, those funds would go toward paying for things like groceries or bills. But an interesting phenomenon was seen as millions of those out of work flocked to the stock market for opportunities. In fact, if you look at some of the brokerage growth statistics in 2020, you’ll see that millions went on to download apps like Robinhood to gain immediate access to the stock market.

Will Traders Invest Their Stimmy In 2021?

Deutsche Bank did a little digging. A survey from the bank, 430 investors using the platform revealed a telling sign that the market may be set for another capital infusion. Of those polled, respondents between 25 and 34 said they plan on spending half of their stimulus on stocks. The 18-24-year-old cohort said 40% would go into the market. Meanwhile, the older 35-54 group earmarked 37% for stocks.

What was even more telling was that the bank said previous stimulus payouts were also reported to have been used for investing in stocks. "Behind the recent surge in retail investing is a younger, often new-to-investing, and aggressive cohort not afraid to employ leverage," Deutsche Bank strategists Jim Reid and research associate Raj Bhattacharyya said in a report.

While this data is suggestive of a stimulus-fueled move in the market, other market analysts are flat-out pushing for younger traders to use the stimulus to invest in the market. Not only that but going as far as to suggest investing in speculative vehicles. Mad Money host Jim Cramer recently implored, “The younger you are, the more I'm begging you to take an aggressive stance on something speculative.”

Are penny stocks worth it in this case? Well, with the first round of stimulus last year, anyone looking at any of these stocks may argue in favor of buying penny stocks. I’ll show you why and Reddit has helped play a bigger role.

Reddit Penny Stocks Turned Stimulus Checks Into Big Money

Few may take up the stressful model of investing in penny stocks. But, over the last year, these 5 Reddit penny stocks have shown exactly why traders still look for cheap stocks to buy. For these examples, I will use April 16th as the start date – 1 day after the first round of stimulus checks was supposed to hit.

Travel Penny Stocks Take Flight: Trivago Soars

The travel and leisure industry was hit hard by the pandemic. With flights grounded, cruise liners docked, and restrictions placed on travel, everything from airline stocks to hotel stocks fell swiftly. Trivago TRVG isn’t exactly a hotel operator. However, the company is famously known for its hotel deal platform, Trivago.com.

On April 16, 2020, shares of TRVG stock opened at $1.80 or around 665 shares at the time, with a $1,200 position. It would have a volatile next few months climbing to a high of $2.89 then falling as low as $1.25 last November. However, as vaccine distribution plans began rolling out, the travel and leisure sector began bouncing. What also helped Trivago stock was the Reddit-fueled breakout that saw shares rally to highs of $5.88. As of this week, TRVG stock is trading above $5.20 per share. Those same 665 shares are worth more than $3,400 as of this article.

Retail Penny Stocks Bought Up By Traders: Bed, Bath & Beyond

Another one of the industries hit hard by the pandemic was retail. In particular, any company with a brick-and-mortar focus felt the brunt of the pandemic. This saw countless companies, including Bed, Bath, & Beyond BBBY, tumble in the market. It also forced many to either evolve or die. This evolutionary process ended up turning many brick-and-mortar businesses into either brick-and-click or fully digital retail.

On April 16th, BBBY stock opened at $5.26, just slightly above the $5 threshold of the penny stock definition. A $1,200 stimmy would’ve equated to roughly 228 shares. Unlike Trivago, Bed, Bath, & Beyond shares remained in a relatively consistent uptrend for the remainder of the year. With the Reddit-fueled jump in January, BBBY stock reached highs of $53.90. This week the retail penny stock is trading around $30. Those same 228 shares are now worth more than $6,800.

Electric Vehicle Penny Stocks Get Charged: Workhorse Group

Something that 2020 sparked (no pun intended) was immense interest in electric vehicles & green energy. The addition of Joe Biden as president further intensified the market’s pursuit of green energy profits. In light of this, we saw everything from golf cart companies to charging & green energy infrastructure companies benefiting. One of them was Workhorse Group WKHS.

Shares of the company had previously benefited in 2019 from a Trump tweet that put it in the cross-hairs of a potential contract with the U.S. postal service. This focus would remain in the background, and then, last summer, exposure was heightened. Ultimately, shares of WKHS stock would go on to make a move from $2.08 on April 16th to highs this year of nearly $43. Shares of WKHS stock have dropped aggressively recently due to losing a contract with the USPS. Even with that as the case, however, shares are still trading above $16 this week.

Back in April, a $1,200 stimmy would have gotten about 576 shares of WKHS stock. This week, those same shares are worth more than $9,000.

Short Squeeze Penny Stocks Participate In Reddit Rally: GameStop

Probably the most notable Reddit penny stock on this list is GameStop GME. Believe it or not, it wasn’t the biggest gainer of the bunch, though. On April 16th, GME stock opened for trading at $5.12. A $1,200 in stimulus equated to roughly 234 shares at the time. One of the biggest attractions of GME wasn’t just a position from Big Short investor Michael Burry; it was also growing interest from other firms and industry founders like Chewy’s Ryan Cohen, who emphasized GameStop’s potential in light of a digital pivot.

Regardless, Reddit traders also had another motive: beat Wall Street funds holding massive short positions in the stock. Ultimately, GameStop, which was trading well into penny stock territory since 2019, rallied to highs of $483 this year. As of this week, the former Reddit penny stock sits above $216 per share. Those same 234 shares from April are now worth more than $50,000. What’s even crazier is that at prices above $400, the original $1,200 position was worth nearly $100,000. How’s that for “stimulus”?

Consumer Electronics Turned Up The Volume On Reddit Penny Stocks: Koss Corp.

You may think the biggest gainer on this list of former penny stocks would’ve been GameStop for all of the attention it has received. But you’d be wrong. Koss Corp, KOSS a thinly traded consumer electronics company manufacturing headphones takes that crown. The interesting part is that until this year, it hadn’t really been something many looked at. There’ve been sessions where KOSS stock failed to trade more than 1,000 shares.

It was more akin to some of the “random” penny stocks we see break out for a day then disappear into the deep abyss of forgotten stocks. But 2021 was definitely memorable. That’s due to the fact that on April 16, 2020, KOSS opened at $1.20, which would be a position of 1,000 shares with $1,200.

It would remain relatively flat for most of the year. But then the Reddit rally happened in January, which saw shares reach highs of $127.45. Even after its massive pullback, shares of KOSS stock still trade over $27 this week. That same 1,000 share position is now worth over $27,000. At its $127.45 peak, a 1,000 share position would be north of $127,000.

Should You Invest In Penny Stocks With Stimulus Money?

These are obviously extreme cases where actually holding penny stocks for almost a year would see moves like this. Is this always the case? Of course not, and penny stocks are some of the most speculative, high-risk investments you can look at. However, if you know how to day trade stocks, for example, you may not need to way a whole year to see a windfall. But at the end of the day, what you do with your stimulus is up to you. Will this next round see the birth of a new group of stimmy stocks to write about a year from now?

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