Penny stocks are often seen as highly risky investments. Many of these small, obscure companies operate on the edge of profitability and have limited financial reporting. However, for savvy investors willing to do their research, penny stocks can also offer huge upside potential. This article will explore 17 penny stocks across several key themes that show promise for strong long-term gains.
Table of Contents
- Energy and Commodities
- Deep Value
- Cannabis and Other Under-the-Radar Stocks
Penny stocks, defined as stocks trading under $5 per share, inhabit a world of their own on Wall Street. With little analyst coverage or institutional ownership, penny stocks often exhibit pricing inefficiencies that can be exploited by retail investors. While many penny stocks are speculative companies with a high chance of failure, hidden gems can be found amongst the rubble. With patience and diligence, sizable gains can be realized by investing in quality penny stocks that are undervalued and overlooked.
This article highlights 17 penny stocks across 4 key themes that show strong business fundamentals and growth prospects. While not without risks, these stocks have catalysts that could drive significant upside over the long run. Let’s dive in.
Biotech penny stocks can offer excellent risk-reward ratios. While drug development is inherently risky, successful biotechs can see exponential growth. Penny biotechs with promising pipelines deserve consideration.
Longeveron is developing cell-based therapies for aging-related diseases. Its lead product Lomecel-B shows promise for treating Alzheimer’s disease based on Phase 1 trial results. With a market cap under $200M, Longeveron trades at an attractive valuation given its fast-track status and orphan drug designation from the FDA.
Tracon Pharmaceuticals (TCON)
Tracon’s lead immunotherapy drug Envafolimab received approval in China in 2021 and is progressing through FDA trials for soft tissue sarcoma. Approval could send shares surging. Tracon’s $50M valuation leaves substantial upside.
Entera Bio (ENTX)
Entera’s oral osteoporosis drug EB613 was recently granted fast track status by the FDA, increasing its chances of approval. ENTX trades around $100M despite this catalyst, presenting a compelling risk/reward profile.
Cerus Corporation (CERS)
Cerus produces the INTERCEPT Blood System for blood transfusions. A recent CMS decision expanded reimbursement, providing a pathway to profitability. CERS has analysts’ average price target of $9, implying nearly 100% upside from today’s $4.50.
Harvard Bioscience (HBIO)
Harvard Bioscience sells specialized equipment to biotech and pharma labs. While past growth has been lackluster, new products or an acquisition could ignite renewed expansion. Upside potential remains high due to HBIO’s microcap valuation.
Energy and Commodities
Surging oil prices and a renewed focus on domestic energy production have created opportunities in beaten-down energy penny stocks. Commodities-linked stocks also deserve a look.
Martin Midstream Partners (MMLP)
MMLP operates oil storage, transportation, and processing assets. Growing oil production is driving higher utilization and cash flows. MMLP generates strong EBITDA and trades at a low 3x EV/EBITDA ratio, providing substantial upside as the macro environment improves.
Team, Inc. (TISI)
Team provides critical inspection services for pipelines and energy infrastructure. With domestic oil and gas ramping up and new pipeline safety regulations, demand for TISI’s services is surging. Its single-digit P/E presents an intriguing value play.
Arianne Phosphate (DRRSF)
This phosphate mining penny stock is levered to both the agriculture and electric vehicle booms. Fertilizer demand and lithium-iron phosphate battery adoption provide strong multi-year tailwinds. DRRSF has 10x potential if management executes.
Allegiant Gold (AUXXF)
Continued high inflation could drive gold higher, benefiting AUXXF. This Nevada gold explorer has seen significant insider buying recently, signaling management’s confidence in new discoveries at its projects. Speculative investors will like the high-leverage exploration upside.
Benson Hill (BHIL)
Benson Hill is an ag-tech company developing higher-protein soybean varieties. As fertilizer shortages drive more soybean acreage, BHIL is poised for rapid growth. The soy boom could make this moonshot stock multi-bag.
Penny stocks trading at deep discounts to peers or below liquidation value offer intriguing opportunities for value investors.
Party City (PRTY)
Party City has shown remarkable resilience coming out of the pandemic, achieving record gross margins. However, PRTY trades at just 4x P/E compared to specialty retail peers above 15x. Safe dividend yield of 6.6% provides income while awaiting multiple expansion.
Treecon Resources (TCOR)
This diversified land and resources company has seen double-digit revenue growth and trades well below 1x price/sales. While financials are unaudited, TCOR offers ultra-deep value exposure to timber, oil wells, and equipment leasing. Speculators will like the potential upside.
Cannabis and Other Under-the-Radar Stocks
Penny stocks in growing but restricted industries like cannabis offer big upside. International and over-the-counter stocks also provide opportunities away from Wall Street’s gaze.
POSaBIT Systems (POSAF)
POSAF helps cannabis retailers with point-of-sale payment solutions. With the legal cannabis market expanding quickly, POSAF enjoys a first-mover advantage in a sector with limited competition. This overlooked play has huge room to run.
Cryomass Technologies (CYM)
Cryomass helps cannabis companies maximize yields through its specialized freeze-drying technology. As demand for cannabis oils and concentrates grows, CYM enables producers to increase margins and quality. Long-term projections look bright.
Lark Distilling (LRK)
Australian whiskey maker Lark Distilling has invested heavily in production capacity and now has maturing inventory worth $110M+ AUD, providing a solid basis for rapid growth. Undervalued compared to bourbon peers at ~$180M AUD market cap.
Vestas Wind Systems (VWDRY)
With global energy security at the forefront,vestas wind turbines will see surging demand as Europe aims to dramatically accelerate renewable adoption. VWDRY’s cheap valuation around 10x earnings provides substantial upside.
ASE Technology (ASX)
Despite being the #1 OSAT semiconductor company globally, ASE trades under $8 due to its share count. With deep expertise in communications chips, ASE is a long-term winner as 5G networks rollout continues. Very undervalued relative to peers.
Penny stocks often get overlooked by Wall Street and thus can offer propitious risk/reward setups for enterprising retail investors. While conducting due diligence is critical, huge gains can be realized by investing in quality penny stocks with strong fundamentals and growth drivers.
The stocks highlighted in this article represent promising opportunities across sectors enjoying structural tailwinds. With smart position sizing and a long-term horizon, these penny stocks have the potential to deliver outsized returns and diversify an investment portfolio. As always, ensure you do your own thorough research before investing.