While penny stocks are often criticized by experts as highly speculative, all the risk associated with penny shares does not come without potential for massive rewards. Some penny stocks may never take off and others may suffer from the “pump and dump” syndrome, but others hit it big and became billion dollar companies.
Contrary to popular belief, Apple and Microsoft were never penny stocks. Microsoft went public back in 1986 for $21 per share. If you look at their long-term share price, it seems as if they started as a penny stock because their historical value has been adjusted to include stock splits. For example, a 5-for-1 split would make a $50 stock appear on a long-term chart, that it started trading at $10 per share.
Below are 10 well-known companies that all traded under $2 at one point in time, only to see their stock prices soar in value, making savvy investors a boatload of cash. Included in this list, you will find small companies that transformed into industry leaders and successful businesses that collapsed or reignited into corporate powerhouses once again.
Monster Beverage (MNST:NASDAQ)
Everyone has heard of Monster Energy drinks, and today, Monster Beverage is a popular momentum stock on Wall Street. However, the company that formerly went by Hansen Natural was originally founded in 1935, evolving its business significantly over the course of 80 years. Today, Monster Beverage produces a variety of energy drinks, fruit drinks, and natural soft drinks, but its most popular products are Hansen’s Natural Soda and Monster Energy energy drink.
At the moment, shares of Monster Beverage trade around $60, and the company has achieved a market cap of $31.4 billion. Unbelievably, however, it wasn’t long ago that the company traded under $1. In fact, shares of Monster Beverage, which was still known as Hansen Natural at the time, closed at 69 cents on December 29, 1995. Thanks to the energy drink explosion in the last decade, Monster Beverage has gone from a lowly penny stock to a top Wall Street performer.
True Religion Apparel (NASDAQ:TRLG)
True Religion is the only ever penny stock pump that actually turned into a real company as their designer jeans became very popular with young people. On the 30th of July 2004, True Religion shares traded at $0.67 and were eventually bought out for $32 per share by a private equity firm, TowerBrook.
The suckers who bought the True Religion during the promotion were heavily rewarded as it rose an astonishing 4,676% from its low. TowerBrook’s acquisition turned out into a nightmare as they filed for bankruptcy in July 2017. The rise of online e-commerce sites such as Amazon and their failure to adapt to new fashion trends were the main reasons for their collapse.
Pier 1 Imports (PIR:NYSE)
The financial crisis drove this once-successful company to the absolute brink of destruction. Pier 1 is a home décor company that sell a wide range of home accessories, housewares and seasonal products throughout its stores. Although Pier 1’s stock suffered from volatility during the late 1990s, the company proved to be a success as shares eclipsed $25 at the end of 2003.
In the years following, Pier 1 Imports stockholders saw their share prices fall sharply as the company experienced fiscal difficulties. However, the real peak of despair occurred during the housing market implosion and the ensuing financial crisis. Since Pier 1 is a seller of furniture and household items, its business was completely devastated almost beyond repair by the mortgage meltdown.
Pier 1 hit an all-time low of 11 cents on March 13, 2009. In a feat of financial magic, the company was able to avoid bankruptcy, and an improving economy and soaring stock market popped the stock back up to $20. Unfortunately, the companies share price has been on a gradual decline since 2013 and currently trades at $0.28.
BJ’s Restaurants (NASDAQ:BJRI)
Most investors may look for technological or medical breakthroughs when searching for investment opportunities, but BJ’s Restaurants was able to create a market cap of over $1 billion through sound management, perseverance and time. In total, there are 117 restaurants operating under the BJ’s Grill, BJ’s Restaurant & Brewery, BJ’s Pizza & Grill, and BJ’s Restaurant & Brewhouse brand names.
The company has witnessed consistent growth over the years as the stock price has steadily climbed higher and higher. However, in 1997, BJ’s Restaurant stock garnered little attention and traded under $2. Today, BJ’s Restaurant is trading around $17, making investors who bought the stock at its lowest point an astronomical return of 750%.
Medifast is another shining example of a penny stock that eventually became a thriving company over time, succeeding in a highly competitive industry where countless others have failed. Medifast develops disease and weight management products. Its shares have been volatile over the years, but they have experienced a long-term upward trend.
The weight loss supplement industry has not always had the best reputation, which caused many investors to remain skeptical about Medifast in the early 2000s. In fact, Medifast was only trading at 14 cents at the end of 2000. Fast forward nearly 17 years later and Medifast are a widely known company with a market cap of $813 million and a stock price around $69. Forbes magazine even ranked Medifast as the leading small business in America in 2010, which is an impressive feat for a former penny stock.
Sirona Dental Systems (NASDAQ:SIRO)
This dental equipment manufacturer has seen consistent growth over the last decade and currently enjoys a $6 billion market cap. The company’s stock is sitting around its all-time high of $110 and has produced amazing returns for investors. Since 2003, Sirona Dental Systems stock has risen by a staggering 1480%.
If the returns were to be calculated from a few years earlier when it was still a penny stock, they would be even more impressive. At the end of 2000, the company’s stock closed at a meagre 27 cents, making Sirona a shining example of the profit potential that can come with long term small cap investing.
Quality Systems (QSII)
Quality Systems was a healthcare software provider based out of California. Quality Systems was 20 years ahead of its time when they IPO’d in 1982, back then hospitals didn’t store records digitally. The company stayed under $3 for nearly two decades before exploding in 2002. Quality Systems peaked at $48 in 2013 and since declined to $10.53. On 7th September 2018, they rebranded to Nextgen Healthcare.
Pharmacyclics, Inc. (NASDAQ:PCYC)
Pharmacyclics is a biotech company that creates therapies to treat cancer and immune-mediated diseases. Pharmacyclics was under $5 from 2006 to 2009, it skyrocketed to $250 in 2015 and was acquired by AbbVie for $21 billion.
Mylan is a pharmaceutical company that IPO’d in 1973 and reached a low of $0.75. Initially, they traded over the counter but upgraded to the Nasdaq. Mylan are now the second largest generic drug supplier in the world, Mylan was under $5 for 5 years and now trades at $15.76 with a market cap of $8.4 billion.
Ford Motor Company (NYSE:F)
Ford Motor Company is a surprising inclusion in the list, but it did plummet to a low of $1.43 during the last financial crisis, things got so bad that even General Motors had to file for bankruptcy. The iconic car manufacturer rebounded strongly until it was hit by the recent coronavirus pandemic, currently trades at under $5 per share. Those brave investors who bought during the crash and sold at the end of 2009 would still have made a whopping 240% return.