If you’re new to the investing game, virtually every financial advisor will advise you to stick to proven names listed on the New York Stock Exchange or the Nasdaq. Primarily, these are the flagship exchanges and therefore, a vested interest exists in protecting their reputation. But stay in the game for more than an inning and you’ll eventually come across OTC stocks, or equity shares that trade in over-the-counter exchanges.
Now, I can bore you with the myriad details about why OTC stocks can be dangerous. But to spare us both some time, I highly recommend you watch the film, The Wolf of Wall Street. In one pivotal scene, the antihero of the movie, Jordan Belfort, walks into a strip mall company specializing in pink sheet securities, or companies that trade outside major exchanges.
Belfort is looking for a job. Instead, he gets a life-changing “education,” if you want to call it that. Due to their typically low share prices and highly speculative nature, it’s possible to make gobs of money. But the probability of doing so is minimal. Therefore, Belfort’s initial reaction is really the right one in most cases. “Ss-six cents a share? [Laughs] Come on…who buys this crap?”
The answer to the question is “mostly schmucks,” which is what you’d expect. However, having dumped on the OTC stocks, it’s fair to point out that not all names are completely crazy. Here, I love former InvestorPlace contributor Dan Burrows’ explanation, who wrote that pink sheets are like bad neighborhoods. Not all the residents are sketchy, but these places are where true criminals live, making you a target.
But as I’ll demonstrate, some companies don’t want to deal with the high cost of distributing shares in the NYSE or Nasdaq. Other firms have serious potential but are often overlooked by analysts and investors due to the reputation of pink sheets. So, if you’ve got an open mind, here are some OTC stocks you may want to consider.
- Nintendo (OTCMKTS:NTDOY)
- Panasonic (OTMCKTS:PCRFY)
- Tencent (OTCMKTS:TCEHY)
- Volkswagen (OTCMKTS:VWAGY)
- Ammo Inc (OTCMKTS:POWW)
- Champignon Brands (OTCMKTS:SHRMF)
- American Battery Metals (OTCMKTS:ABML)
- Revival Gold (OTCMKTS:RVLGF)
- New Pacific Metals (OTCMKTS:NUPMF)
For this list, I’ll start with the reputable companies first and work my way down to the crazy stuff. This way, you can appreciate the diversity of offerings among OTC stocks. Just be careful because these wolves can bite you.
With video game powerhouses Sony (NYSE:SNE) and Microsoft (NASDAQ:MSFT) introducing their latest generation consoles, you might be tempted to overlook Nintendo. Because the company specializes in family entertainment, NTDOY stock doesn’t have the favorable association to some the gritty gaming franchises available. Thus, on paper, Nintendo doesn’t make for a good candidate among OTC stocks.
However, I would say that this is myopic thinking. For one thing, older millennials are settling down and starting families. That right there is a big catalyst for NTDOY stock. While they may have enjoyed violent video games in their youth, when you became a parent, everything changes. Fortunately, Nintendo runs the gamut on fun for all age brackets, giving parents some peace of mind.
Additionally, NTDOY stock truly benefits from the nostalgia market. As you know, Nintendo mainstreamed the concept of home entertainment. With older millennials having fond memories of their youth, the company has made a small fortune on legacy products. Therefore, don’t ignore this video game icon for your portfolio of OTC stocks.
In the years before Apple (NASDAQ:AAPL) redefined the consumer electronics industry, Panasonic was a viable competitor to Sony. I guess you could have called PCRFY stock the poor man’s version of SNE. These days, with other rivals establishing dominance in the consumer tech market, Panasonic has shifted toward industrial and professional pursuits. And it’s this strategic realignment that makes this company one of the more intriguing OTC stocks to consider.
First, Panasonic has long partnered with Tesla (NASDAQ:TSLA) for electric vehicle batteries. With TSLA proving that EVs have a robust roadmap ahead, more established automakers will enter the space. That might put pressure on Tesla. However, it also potentially facilitates PCRFY stock with additional revenue channels. Further, the disruption to global automotive supply chains due to the novel coronavirus pandemic means that EVs have garnered substantial consumer interest.
Second, Panasonic is exposed to myriad relevant industries, such as data center solutions, solar energy, Internet of Things connectivity, security systems and smart mobility. While PCRFY might be in a bad neighborhood, this is one of the OTC stocks you’ll want for the long haul.
A massive technology conglomerate firm, Tencent has long represented one of the bright spots among notoriously shady OTC stocks. Levered to the burgeoning Chinese economy, the bullish thesis for TCEHY stock didn’t just center on the country’s 1.4 billion strong population. Instead, China was investing vociferously in its technological infrastructure, allowing companies like Tencent to thrive.
Of course, the poor relations between the U.S. and China dampened enthusiasm. As the trade war got under way in earnest, TCEHY stock absorbed the brunt of the damage. Throughout most of last year, shares were flat until Washington and Beijing agreed to take a step forward in restoring communication and hopefully reconciliation. But then the novel coronavirus happened, which brought some questions about longer-term viability.
Unfortunately, the Trump administration has not yet accepted the results of the election, so we’re left in limbo. But the available evidence suggests that Joe Biden will indeed take the White House. If so, TCEHY is a name you may wish to consider on the hopes of geopolitical normalization.
Obviously, Volkswagen owns Volkswagen, a brand that was designed to deliver a car for the common people, at the behest of a certain “gentleman” named Adolf Hitler. Today, I personally know Volkswagen not for its VW-branded cars but rather, the premium automakers under its corporate umbrella. Specifically, I’m referring to the everyday supercar manufacturer Porsche.
The relationship between Volkswagen and Porsche is a complicated one that I’d rather not dive into. Suffice to say, VW is responsible for the production of the Porsche automotive line. And it’s here where VWAGY stock gets interesting.
While Tesla and other EV manufacturers have attempted to build a reasonably priced electric car, onerous battery costs have so far prevented the effort. Well, Porsche won’t have that problem – making a cheap Porsche would be terrible for the brand. Therefore, I think the company’s Taycan will have tremendous appeal: it’s an electric platform which the C-suite “normies” love, but it’s a Porsche.
There is no substitute, so I hear. That makes VWAGY stock an enticing wager among the dumpster heap of OTC stocks.
Ammo Inc (POWW)
Before I get into it, let me just say that Ammo Inc has the cleverest (or if you’re British, cheekiest) ticker symbol: POWW stock. Personally, I love it although I’m incredibly biased. Having another pure play firearms and ammunition company to discuss affords me the ability to talk about my favorite sector without repeating myself constantly.
Ordinarily, I must admit that the freedom market, if you will, has limited appeal. Increasingly, investors are interested in environmental, social and governance (ESG) plays, not companies specializing in self-defense. However, these are no ordinary times. With social unrest sparking some ugly interactions between parties of differing ideologies, this is an opportunity for people to stock on Ammo’s, well, ammo.
Further, it’s almost guaranteed that the Biden administration will propose strict gun control measures. Now, that would be more difficult if the Democrats don’t have control of the Senate. Therefore, POWW stock is a name that could fly if liberal challengers win both Georgia runoff races.
Champignon Brands (SHRMF)
For the rest of the OTC stocks, we’re going to get into the crazy stuff. Again, please watch The Wolf of Wall Street and get into the initial mentality that Jordan Belfort had. Politely, we would call these companies high-risk, high-reward ventures.
First up on the crazy list is Champignon Brands. Euphemistically branded as a human optimization sciences provider, the crux of the company involves mushrooms. And by mushrooms, I’m not talking about the kind that goes on your pizza. Rather, I’m referring to the psychedelic kind.
Now, before you brush off SHRMF stock as a wildly inappropriate play, consider that psychedelic medicines offer significant therapeutic potential. While it’s still a pioneer market, public opinion has been shifting positively toward drug decriminalization. After all, it’s one of the campaign promises under Joe Biden and running mate Kamala Harris.
As well, SHRMF has a compelling demand pathway. With the Covid-19 pandemic imposing severe stress on millions of people in North America, it’s possible that the consumer market will be open to alternative therapeutics. It might take some considerable product evangelism but many possibilities exist.
American Battery Metals (ABML)
During the scene I mentioned from Wolf, the 6-cent share was associated with a company called Aerotyne. Now, Aerotyne is fictional but that’s not the point – there are many Aerotynes in this business called OTC stocks.
Is American Battery Metals one of them? When I tried to visit its website, it wouldn’t load. Therefore, we’re really not getting off to a great start with ABML stock. I don’t mention this to be negative on the issuing company. Instead, I’m just telling you to expect such situations as par for the course.
However, ABML stock is interesting because of its underlying business. As a lithium exploration and mining company, American Battery Metals at least operates in a relevant industry. Further, the company “secured industrial land in Fernley, Nevada for its first-of-its-kind lithium-ion battery recycling facility.” This location is close to Tesla’s Gigafactory 1, so it has that going for it.
Also, ABML has traded very well this year despite not much information being available about this organization. If you’re looking for a low-probability grand slam, wait for shares to settle into a range and take your shot.
Revival Gold (RVLGF)
If you’re looking for a pure gold-related gamble amid OTC stocks, you may want to consider Revival Gold. According to its website, Revival has interests in three properties: Beartrack, Arnett Creek Gold and Diamond Mountain Phosphate. Out of the three, Beartrack has some appeal because the area was once a former producing gold mine. The idea here is that there’s still some metals left to be extracted, hence the name Revival.
Whether that actually holds true or not is anyone’s guess. Therefore, you shouldn’t invest a penny more into RVLGF stock than you can afford to lose. Frankly, due to the volatility risk, that leaves out 90% of investors from even thinking about Revival.
For the 10% that are in the game, RVLGF stock may offer something because let’s face it – if there’s ever a time to consider precious metal miners, now would be it. Of course, that doesn’t guarantee anything, so buyer beware!
New Pacific Metals (NUPMF)
With so much attention paid to gold, silver sometimes gets lost in the shuffle. However, this is the one market to be excited about from a speculative perspective. While gold is trading near all-time highs, silver, though substantially elevated from the beginning of the year, remains well below its historical record of around $50. Therefore, you’d imagine that OTC stocks like silver miner New Pacific Metals should have tremendous upside potential.
Fundamentally, New Pacific is an intriguing play on the silver exploration front. Primarily, the company is focused on advancing the Silver Sand project in Bolivia. The country is one of the world’s top silver producers, extracting 1,153 metric tons of the precious metal last year. Therefore, NUPMF stock could jump higher, especially if demand rolls over from gold into silver.
Still, I can’t stress this enough: mining companies are notoriously volatile, especially the OTC stocks. While you can make a killing here, make sure you don’t get yourself killed in the process.
On the date of publication, Josh Enomoto held a long position in SNE, SHRMF, gold and silver.
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.