Everyone loves a good deal and that certainly includes investors. And preconceptions of what makes deals good go a long way toward explaining why so many market participants are consistently fond of penny stocks.
The logic, flawed as it may be, usually goes along the lines of, “if a stock is cheap by price, it must also be a good value.” Then there’s the familiar notion of being able to own more shares in a company by accessing penny stocks.
Currently, there are more than 1,000 U.S.-listed stocks with price tags of $5 and less trading on major exchanges. That doesn’t include a vast universe, likely thousands, of penny stocks trading over the counter.
With that in mind, here are 7 sensible penny stocks to buy for value in December:
- Full House Resorts (NASDAQ:FLL)
- Banco Santander (NYSE:SAN)
- Nokia (NYSE:NOK)
- Sundial Growers (NASDAQ:SNDL)
- Liberty TripAdvisor (NASDAQ:LTRPA)
- Transocean (NYSE:RIG)
- Ambev (NYSE:ABEV)
Investors should bear in mind the vast difference between being cheap and being of good value. And while many penny stocks fit the bill for the former, plenty of these names are legitimate value plays.
Penny Stocks To Buy: Full House Resorts (FFL)
With a market capitalization of just $101.1 million, Full House is one of the smallest publicly traded casino stocks in the U.S. But this name has mighty potential.
This Nevada-based company operates just a handful of venues, but investors shouldn’t dismiss this penny stock based solely on its diminutive portfolio. In the week ending December 4, FLL stock surged 11.24%, extending its one-month gain to 39.26%.
That’s a lot of action in a short time. However, investors may not be too late to the Full House party. One analyst theorizes that if the company is successful in procuring a license to open a casino in Waukegan, Ill., that alone could be worth $4.81 a share in equity value. That’s well above the $3.76 handle the stock closed at last week.
Combine the company’s growing sports betting footprint, which includes exposure to the fast-growing markets of Colorado and Indiana, and there’s a credible near- to medium-term path for FLL stock to get to $7, according to Roth Capital analyst David Bain.
Interestingly, Bain’s $7 price target doesn’t include the Illinois possibility, so it can be said FLL stock could eventually be a $12 stock, implying it’d more than triple from current levels.
Banco Santander (SAN)
Spanish banking giant Banco Santander qualifies as one of the more interesting sub-$5 names out there, if for no other reason than that it has a market capitalization of $56.88 billion. And this is another hot penny stock, surging almost 75% over the past month.
Obviously there are issues here, as the share price indicates. SAN stock is being clipped on multiple fronts, including weakness in the Spanish economy caused by the novel coronavirus pandemic and low interest rates in the U.S., where it has a presence in the Northeast and Mid-Atlantic regions.
The company is conserving cash via layoffs and branch closures, unpleasant but necessary moves. In better news, the bank is resisting mergers and acquisitions, opting to focus on the faster-growing fintech industry.
Any material uptick in the Eurozone economy would benefit SAN stock, as the lender operates across the region. While investors wait, there is a decent 3.26% dividend yield to take in.
With a market capitalization north of $22 billion, Finnish telecom gear maker Nokia is another example of small price tag on a not-so-small company.
Nokia is also an example of a company that tries investors’ patience. Entering 2020, the Nokia narrative centered its presence in the 5G universe. Indeed, the company is “still there,” but continues vexing investors even as the 5G rollout moves forward.
Nokia’s next act involves a gambit to autonomize its various business units, but this is a longer-ranging scheme that will take sometime to pay dividends, if it ever does. In the meantime, NOK stock is technically challenged, indicating that only highly risk-tolerant investors should inquire within.
Sundial Growers (SNDL)
Sundial Growers is a Canadian cannabis company and right away, that means some risk is involved. However, the industry is presently resurging, as highlighted by SNDL stock gaining a whopping 283.53% over the past month.
The company smartly took advantage of that surge, filing to sell $200 million worth of stock which will be used to retire debt or for deal-making. Corporate action aside, much of the recent ebullience in SNDL stock is tied to the U.S. House of Representatives voting to decriminalize marijuana. That means another catalyst could be on the horizon because if the Democrats win both Georgia Senate runoff elections, marijuana will almost certainly become legal at the federal level.
That would be a boost for Sundial, but it also means the company needs to find a way to effectively enter the U.S. market. In the meantime, it’s still a speculative name given its scant revenue and a lack of profitability, but these kind of junky names can generate exciting upside in the cannabis space.
Liberty TripAdvisor (LTRPA)
As a provider of online travel reservations and services, Liberty TripAdvisor makes for an ideal play on the reopening of the global economy and progress when it comes to Covid-19 vaccine development.
LTRPA stock already reflects those prospects. Last Friday, shares surged 20.33% on volume that was more than quadruple the daily average. That came in spite of a disappointing November jobs report.
The near-term outlook for Liberty TripAdvisor boils down to Congress executing another stimulus package that actually puts cash directly into the hands of Americans and the ability of the government to ensure a significant portion of the U.S. population is able to access a vaccine within the first few months of 2021.
Up a staggering 135.48% over the past month, this stock is telling investors they can’t wait for the aforementioned developments to come to light. In other words, this is an anticipatory play.
With the energy sector ranking as the worst-performing group in the S&P 500 this year, it’s not surprising that some oil services providers have penny stock status. Down 68.46% year-to-date, Transocean is part of that group because oil services equities are highly correlated to the price of oil in the spot market.
More importantly, Transocean, like many of its peers, is financially challenged. The company received a listing notification from the New York Stock Exchange in October and its credit rating dwells in “C” territory, which implies elevated default risk.
The grade “reflects the company’s rising risk of default in light of its very high financial leverage, diminishing liquidity and Moody’s view on overall recovery on the company’s debt,” according to Moody’s Investors Service.
All that makes it sound like RIG stock is dead in the water. But the company is adding to its order backlog and with commodities market observers bullish on oil’s prospects heading into 2021, Transocean can potentially add to its recent gains.
Brazilian beer giant Ambev is down 37.55% year-to-date, a performance reflective of ongoing weakness in the traditional beer market. Around the world, beer sales are languishing as consumers flock to hard seltzers and cannabis-infused beverages. Ambev is also being crimped by the coronavirus pandemic, but the company is touting its response to the challenging operating environment.
“We quickly adapted to changes brought by Covid-19 in terms of consumption and volumes are sequentially improving since April,” says CEO Jean Jereissati.
At this juncture, Ambev is a sensible margin recovery story, but it’s going to take time. That is to say with the company’s status as a large-cap consumer staples company, it’s unlikely to notch exhilarating gains overnight as many penny stocks do. There is a 4.12% dividend yield to compensate investors for their patience.
On the date of publication, Todd Shriber did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Todd Shriber has been an InvestorPlace contributor since 2014.