No matter how often someone tries to frame the subject, penny stocks are inherently risky. As the name suggests, these speculative investments are typically priced below a buck (although this isn’t a hard-and-fast rule). More importantly, they feature low volume and subterranean market capitalization due to their all-or-nothing nature.
With the broader markets still under pressure due to the novel coronavirus, you’d assume the case for penny stocks would have died down. And in many cases, that’s exactly what happened. As valuations for virtually every sector declined at the onset of the global crisis, many gamblers took their money and ran.
But as major U.S. indices have trekked their way northward following their March lows, penny stocks have also attracted attention. For one thing, the down and dirty side of this investing business may run on their own fundamentals. That could be advantageous in some respects, especially as rising coronavirus cases wreak havoc on blue-chip organizations.
Moreover, innovation never ceases. Right now, with both advancing technologies and their associated cost reductions, it has never been easier for startups to pioneer solutions. But to raise capital, they’ve got to go somewhere. Those organizations that may not attract the most attention often turn to over-the-counter markets to gain cash.
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Thus, we have the opportunity in penny stocks, but also the pitfalls. You could be sitting on the next Apple (NASDAQ:AAPL). Or you could lose your shirt like Luckin Coffee (OTCMKTS:LKNCY) speculators possibly did. If you’re willing to take such extreme binary bets, here are seven companies to consider:
Blink Charging (NASDAQ:BLNK)
Champignon Brands (OTCMKTS:SHRMF)
Revive Therapeutics (OTCMKTS:RVVTF)
American Lithium (OTCMKTS:LIACF)
Fosterville South Exploration (OTCMKTS:FSXLF)
United Microelectronics (NYSE:UMC)
BIGG Digital Assets (OTCMKTS:BBKCF)
As I mentioned up top, this is an extremely treacherous segment to navigate. Therefore, my recommendation is to treat this as a casino. Have fun with these seven penny stocks but do not go overboard.
Penny Stocks That Could Pay Off: Blink Charging (BLNK)
By pricing alone, Blink Charging wouldn’t typically qualify in a list of “pure” penny stocks. But given that the price is under $5 at the time of this writing, I’ll give Blink a pass. In addition, I want to lead with BLNK stock simply because it offers the most credible opportunity out of the speculative gambles here.
After all, you’ve heard of electric vehicle companies like Tesla (NASDAQ:TSLA) and more recently Nikola (NASDAQ:NKLA). Clearly, the EV market is gaining ground against the mainstream combustion-engine paradigm. But the big question is, who will “fuel” a potential surge of EVs on the road? Blink answers that question with its network of charging stations.
Sure, most EV owners will presumably charge their vehicles at home. However, not everyone in the U.S. has access to a garage or carport. Therefore, a fully fleshed out charging network would help EV makers expand its potential revenue pool. In turn, that should drive up BLNK stock.
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Plus, Blink is one of the most forward-thinking organizations. For instance, it recently announced its mobile charger platform for emergency use. This way, drivers can get that extra bit of juice to reach their homes or a nearby charging station. And that reduces anxiety for consumers who have never tried EVs, making BLNK a compelling idea.
Champignon Brands (SHRMF)
Over the years, we’ve seen a dramatic shift in how Americans view marijuana laws. According to the Pew Research Center, two-thirds of us support full legalization. Given this dramatic turnaround, it’s possible that penny stocks which are levered to alternative psychedelic medicines could rise higher in the future. One possible candidate is Champignon Brands.
And no, that wasn’t a typo — I did mean psychedelics, as in the kind that truly gets you high. Of course, as a controlled substance, governments everywhere would impose all kinds of strict restrictions. But the irony here is that restrictions are what would ultimately benefit SHRMF stock. As we know today, part of the collapse of the legal cannabis market was the influx of competition.
With psychedelics, you’ve got to have the proper license to engage this sector. Immediately, that puts up a high barrier of entry that should limit competition. Further, as more people receive education about the myriad positive benefits of psychedelic medicine, investors will gradually lift SHRMF stock.
Also, consider the present environment. Due to the social and financial stress of the coronavirus pandemic, mental health issues have accelerated. Psychedelics may offer an effective solution where other treatments have failed, thereby lifting the case for Champignon Brands.
Revive Therapeutics (RVVTF)
Earlier this year, Revive Therapeutics enjoyed an explosive catalyst thanks to the coronavirus. A life sciences company, Revive announced that it was exploring the drug Bucillamine as a potential treatment for Covid-19. The move to focus on a treatment as opposed to a vaccine likely contributed to the astounding momentum of RVVTF stock.
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For one thing, a vaccine won’t help those who already have Covid-19. More importantly, we just don’t know how long it will take for a vaccine to hit the market, let alone administer it to billions across the globe. Plus, many folks have apprehensions about taking a vaccine. And don’t get me started about the implications of the government forcing everyone to take it.
Thus, Revive’s proposal strikes a healthy balance. However, RVVTF stock is more than just a play on the coronavirus. In February of this year, Revive announced the acquisition of Psilocin Pharma, which specializes in psychedelic-based therapies. As I mentioned for Champignon, psychedelics are relevant for mental health issues that will last beyond this pandemic.
However, do note the risks associated with very cheap penny stocks. With RVVTF currently priced at 14 cents, you can expect a wild ride.
American Lithium (LIACF)
With the slow but steady transition toward EVs, investors should take a long look at penny stocks levered toward the lithium mining industry. Yes, mining companies are well known for their incredible volatility. Further, the lithium market hasn’t exactly been the bastion of stability. Nevertheless, if you’re willing to absorb some risk, you may want to check out American Lithium.
Focused on the production of the metal in Nevada, American Lithium offers insulation from geopolitical turbulence. Additionally, Nevada-based production may be far superior to lithium sourced in other regions, thereby bolstering the case for LIACF stock.
In an email sent to me by Andrew Bowering, founder and director of American Lithium, he stated, “The Nevada Department of Geology has made a bold prediction that Nevada will one day be producing 25% of the world’s lithium. It is very possible.” Additionally, Bowering noted:
“Chinese production challenges result from their brines being average grades of lithium but very high in Magnesium Sulfates. In addition, the production of lithium from brine requires the use of approximately 500,000 litres of water for every tonne of lithium carbonate in a typical evaporation pond operation. China has little known resources of hard rock pegmatites or claystones amenable to extraction at this time. Accordingly, they are required to seek lithium compounds and concentrates globally.”
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Of course, LIACT stock isn’t guaranteed to rise because of Nevada’s favorable platform. However, this combined with growing economic demand for lithium-based technologies makes American Lithium worth a shot, especially compared to some other penny stocks out there.
Fosterville South Exploration (FSXLF)
Due to mounting fears of economic calamity along with social unrest, it’s no surprise that gold-related penny stocks have shot up in demand. If you’re interested in this sector, you should go with the established names, such as Newmont (NYSE:NEM) or Wheaton Precious Metals (NYSE:WPM). This way, you can enjoy the rise in precious metals while mitigating some of the volatility.
However, if you’re adventurous and you understand the risks associated with penny stocks, you may want to check out Fosterville South Exploration. The company has three high-grade gold projects that are centered in the Fosterville area, located in southeastern Australia. As Kirkland Lake Gold (NYSE:KL) has proven, it’s a viable place to mine gold.
Further, Bryan Slusarchuk, CEO of Fosterville South, explained to me via email the fundamental catalyst for FSXLF stock:
“With the world having entered a phase of quantitative easing infinity, huge fiscal and monetary stimuli and low to negative interest rates, the conditions for the price of gold bullion itself are as good as I have ever seen them. Investors who have invested in the space before, know that in gold bull markets, gold equities outperform the price of the metal itself. Therefore, we are seeing a perfect storm for gold stocks.”
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I’m biased, but I couldn’t agree more. Still, like any speculative sector, I encourage due diligence before engaging. That said, the company’s link to the highest-grade, low-cost gold mine is a compelling argument for FSXLF stock.
United Microelectronics (UMC)
Although it’s tempting to just focus on the negative headlines and react accordingly, over the long run, this pandemic will be a chapter in our history books. Logically, this means that industries of technology and innovation will continue to press forward, pushing the envelope. If you have a longer-term window, then United Microelectronics may be the right speculative investment for you.
A semiconductor company specializing in integrated circuit wafers, United Microelectronics is essentially levered to a permanently strong revenue pool. That’s not to say that UMC stock is guaranteed upside — far from it. Rather, digitalization is only increasing across the globe. Therefore, United Microelectronics could be a discount at these coronavirus-impacted prices.
Also, what makes UMC stock particularly attractive is the competition. With the big dogs in the semiconductor space having jumped to ridiculous levels in recent years, United is a comparative bargain. Of course, you don’t want to jump recklessly into this boat. At the same time, if you’re tired of overvalued semiconductor stocks, UMC might fit the bill.
BIGG Digital Assets (BBKCF)
With BIGG Digital Assets, I’ve saved the most intense name in this list of penny stocks for last. By intense, I’m referring to the potential for incredible riches. For one thing, BBKCF stock is priced below a dime. So, just through the law of small numbers, you could make a killing.
However, do note that with penny stocks, you can also get killed. If you can’t afford to lose the money you put into BIGG, I have two words for you: stay away!
Yet if you’re willing to accept the risk, BBKCF stock is levered to a compelling business that will only grow in pertinence. A blockchain-based organization, BIGG Digital Assets owns and operates cryptocurrency-related companies that support a regulated and compliant ecosystem. In other words, BIGG is looking to mainstream blockchain-powered solutions and platforms.
In my opinion, I believe BIGG’s QLUE business offers the most potential. An acronym that stands for “Qualitative Law Enforcement Unified Edge,” QLUE assists law enforcement agencies in tracking down crypto-related crimes. While decentralization offers consumer-level benefits, it also opens the door to nefarious actors.
With QLUE, governments can potentially crack down on financial cybercrimes. As interest picks up in the crypto space, such enforcement measures will only increase in demand.
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A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he is long NKLA, SHRMF, and gold bullion.
With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
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