Penny stocks are named as such due to their cheap price. Because of this, they tend to offer a high-risk, high-reward scenario for investors. Chesapeake Energy Corp (NYSE:CHK) shares are one of a number of stocks selling for under $5. Shares priced this low may become the next big name so, with that in mind, it’s all about finding the right one.
Penny Stocks to Watch
Headquartered in Oklahoma City, Chesapeake Energy Corp is engaged in hydrocarbon exploration. In layman’s terms, it supplies petroleum and natural gas.
Starting with the negative, operating in the energy sector comes with a big downfall and one that Chesapeake Energy experienced in 2018. This downfall? Reliance on the oil sector.
If oil prices fall—as they did dramatically last year—affiliated companies tend to fall with them. And in 2018 the energy sector was hit particularly hard as the price of oil plummeted due to over-production concerns.
With supply outpacing demand, oil price fell to as low as $42 USD per barrel. At the same time, CHK stock moved in tandem. By December, this penny stock hit a 52-week low of $1.73.
It was not a good year for Chesapeake Energy. All-in-all, shares dipped a whopping 33%. Herein is one potential red-flag for any energy sector company (unless you are in the sustainable energy field) and something investors should always be aware of.
What Goes Down…
The thing is, if you want to go on a rollercoaster ride with a penny stocks company, then you might as well do it with one that will hold its value—even if it means holding your shares for years. Because oil and natural gases remain a necessity in our world, so it’s inevitable that shares in this sector will climb again.
And such is the case here. Three months into 2019 and CHK has already climbed back to the $3.20 USD mark. It has further to go, but improvement is happening. The company has sold off nonessential assets, paid down debt, and shifted focus to its most profitable businesses.
Navigating its way through the tough times is another sign of a potential winning play. Investors want to know that a company can pick itself back up when the climate it operates in offers it a bad hand. The Chesapeake Energy penny stock has shown resilience in recent months and looks to be on an upward swing once again.
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