Penny Stocks Through a 2019 Lens: Four Undervalued Players Worth Considering

When investors think of penny stocks—equities trading below $5 per share—many dismiss them as speculative plays suited only for inexperienced traders chasing easy gains. Yet this sweeping generalization overlooks a critical reality: not all low-priced securities deserve such dismissal. Market cycles, structural industry shifts, and strategic corporate decisions can temporarily depress genuinely valuable companies into penny stock territory. The question worth asking isn’t whether penny stocks should be avoided entirely, but rather which ones present genuine opportunity despite their beaten-down prices.

By 2019, a selective group of penny stocks had begun to show renewed promise. These weren’t distressed companies clinging to survival, but rather established businesses facing temporary headwinds that appeared poised for reversal. Commodity market weakness, dividend pressures, and competitive disruption had all played roles in suppressing valuations, yet underlying catalysts suggested potential recovery. Here’s an examination of four such candidates that merited scrutiny during that period.

The Steel Sector Case: AK Steel Holding Corporation

The steel industry might seem straightforward—a cyclical business ebbing and flowing with global economic conditions. That assumption would be incorrect. Reality proved far more chaotic, with volatile swings in supply and demand making it nearly impossible for established players like AK Steel Holding Corporation (NYSE: AKS) to execute coherent long-term strategies.

For roughly 15 years leading into 2019, AKS stock languished in neutral territory. Adverse events clustered at precisely the wrong moments, compounding difficulties. Yet this narrative appeared positioned for change. With policy discussions shifting toward leveling competitive dynamics between domestic and international steelmakers, and broader economic indicators suggesting renewed expansion, the industry’s outlook brightened considerably. AK Steel found itself occupying what many analysts termed a propitious moment—one where structural support from trade policy aligned with cyclical strength from improving demand.

The Biotech Model Under Pressure: PDL BioPharma Inc

PDL BioPharma (NASDAQ: PDLI) represents an intriguing corporate archetype. The company’s original thesis involved acquiring rights to and patents on commercially successful pharmaceuticals, channeling ongoing royalty income to shareholders. This model functioned admirably for a period.

The pharmaceutical landscape shifted, however. Major drug developers internalized the functions that PDL previously provided, rendering the company’s core services increasingly redundant. PDLI found itself unable to acquire attractive intellectual property at valuations permitting sustainable dividend distributions. The consequence proved predictable: from over $30 per share in 2006, the stock had deteriorated to merely $3.77 by 2019. Recovery would require either restructuring the investment thesis entirely or identifying undervalued acquisition targets that could restore margin expansion and cash flow generation.

From Darling to Penny Stock: Groupon’s Transformation

Groupon (NASDAQ: GRPN) exemplified the classic tech bubble narrative. The company commanded market enthusiasm upon its 2011 public debut at $28 per share. That honeymoon proved ephemeral. Within months, shares plummeted into penny stock range, where they remained locked for years.

The decline reflected genuine business challenges rather than mere sentiment. The IPO-era growth trajectory proved unsustainable against mounting competitive pressure. Revenue peaked in 2015, while net profitability had already crested in 2012. Yet by 2019, management had begun articulating credible operational improvements. Analyst consensus anticipated that while top-line growth might decelerate temporarily, earnings per share should advance—potentially the catalyst needed to reignite investor interest and commence a sustained recovery trajectory.

Gaming’s Restructuring Play: Zynga Inc

Zynga (NASDAQ: ZNGA) developed the wildly popular online titles including Words With Friends and FarmVille—games many users enjoyed without necessarily recognizing the Zynga pedigree. Yet Zynga’s trajectory disappointed relative to expectations formed during its 2011 IPO launch.

A pivotal moment arrived in 2017 when founder and CEO Mark Pincus surrendered operational control by eliminating dual-class share structures that had previously granted him supermajority voting power. While Pincus alone wasn’t responsible for the company’s inability to generate compelling growth, the concentration of power certainly hadn’t facilitated strategic flexibility or accountability. Simultaneously, financial projections suggested revenue and income expansion on the horizon, signaling potential inflection points in the company’s operational performance.

The Broader Context

These four penny stock situations—AK Steel, PDL BioPharma, Groupon, and Zynga—shared common threads. Each represented an established business with recognizable market presence that had encountered specific headwinds: regulatory and competitive pressures for steel, industry disruption for biotech licensing, competitive saturation for daily deals, and governance constraints for mobile gaming. Yet each also exhibited identifiable catalysts suggesting potential mean reversion.

Investing in penny stocks carries legitimate risks, particularly when fundamentals remain deteriorated. However, dismissing all sub-$5 equities as inherently speculative overlooks situations where temporary depressed valuations mask genuine recovery optionality. The 2019 analysis of these four companies reflected precisely that calculus—acknowledging risks while identifying specific reasons why valuations had likely overshot fundamental downside scenarios.

Disclosure: This analysis reflects investment perspectives from 2019 and the original reporting period. Past performance and historical investment theses do not guarantee future results. Investors should conduct independent research and consult professional advisors.