It’s difficult to find penny stocks worth buying, particularly if you want to invest rather than trade. That’s made even more challenging when you’re looking for super cheap stocks to buy.
When you look across all markets, stocks under $3 are plentiful — particularly in the biotech sector. But if you’re looking for an investment, we think it’s wise to focus on the larger indexes, the NYSE or NASDAQ, to narrow your search. That’s because these stocks are more liquid and easier to trade, making them ultimately safer picks.
Plus, stocks that list on the NSYE or NASDAQ are subject to more scrutiny than their over-the-counter peers, which adds another layer of security to an inherently risky arena.
Here’s a look at seven cheap stocks to buy for under $3:
- Golden Minerals (NYSE:AUMN)
- Tilt Holdings (OTCMKTS: TLLTF)
- Motus GI (NASDAQ:MOTUS)
- Waitr Holdings (NASDAQ: WTRH)
- Blue Hat Interactive Entertainment Technology (NASDAQ:BHAT)
- Castor Maritime (NASDAQ:CTRM)
- Biolase (NASDAQ:BIOL)
Cheap Stocks: Golden Minerals (AUMN)
Golden Minerals is a mining company with a portfolio of precious metals mining properties and oxide and sulfide processing plants in North America. Mining and exploration penny stocks are a dime a dozen, but AUMN’s financials set it apart from many of its peers.
Like the majority of penny stocks on the market, AUMN is not yet turning a profit — but that’s expected to change by the end of the year, when the group’s net income is seen turning positive on a quarterly basis. By 2022, the group expects to be profitable for the full year. Of course, that’s assuming things go according to plan for the next two years — a tall order considering the uncertainty that comes with being an up-and-coming miner. Still, the group’s most recent earnings suggest that’s not a pipe dream — revenue rose 66% from the fourth quarter to the first quarter.
We should caution, AUMN’s cash flow situation isn’t pretty. The group’s free cashflow has always been negative, and it has been moving in the wrong direction over the past few years. That makes sense — it’s expensive to expand a mining operation because of the equipment and manpower needed. However, some of those investments will need to start giving back in order to keep the company afloat long-term, so it’s worth keeping an eye on.
Tilt Holdings (TLLTF)
Marijuana penny stocks may have passed their peak as the industry gains mainstream traction and many of the most successful players have made their way into the major leagues. But there are still some opportunities to get in on the ground level for those with an appetite for risk.
Tilt is one such opportunity. The company isn’t a grower or distributor. Instead, it works as a consultant to help marijuana-based businesses scale and grow. Tilt owns a portfolio of businesses that assist marijuana firms in different ways — from offering tech and hardware know-how to growing and cultivation advice. While marijuana is growing in popularity, it’s still illegal in many states and countries. That makes it more difficult to access resources to support growth. TILT helps alleviate some of this pain with specialized consulting services.
So far, TILT’s business has been thriving. Underlying cash profits came in at $16.9 million last year, compared to a loss of $0.8 million in 2019. That was the result of a 17.7% decrease in operating expenses as well as a 35.4% revenue bump.
The future certainly looks bright for this niche cannabis player, but investors should keep in mind that investing in any OTC stock, no matter how promising, comes with an added layer of risk.
Cheap Stocks: Motus GI (MOTS)
Medical technology is another sector that’s rife with penny stocks — but Motus GI offers a simple value proposition that makes it stand out from the crowd. The company makes specialized devices that work with standard colonoscopes to cleanse poorly prepped colons during a colonoscopy. At first glance, that might not sound like a revolutionary device, but consider how much time and money is wasted when a doctor is unable to perform a routine colonoscopy as expected. A simple, effective way to avoid that waste of time means doctors can be more efficient.
I’ll admit, profits are a long ways off, but the group’s balance sheet is in relatively good shape. At last check, the group’s net cash position was $19.7 million, and although free cash flow is still negative, it’s trending in the right direction.
Like every stock on this list, Motus is a ground-level investment, which means it carries a high degree of risk. But analysts covering the stock believe it could head as high as $2.50 per share, offering an upside of more than 100%.
Waitr Holdings (WTRH)
Unless you’ve been living under a rock for the past year, you know that food delivery has become a hot trend with plenty of players vying for a piece of the pie. In some ways, that makes investing in a delivery service risky — because competition is fierce, and picking a winning horse is challenging.
But on the other hand, there’s no denying that the public’s obsession with getting everything at the click of a button is here to stay. That means we can expect to see big, powerful companies looking for ways to grow their own delivery network for the foreseeable future. It’s a space that’s rife for consolidation, and for that reason, I think Waitr is a good penny stock pick.
Waitr operates an online food-ordering platform primarily in the southeastern United States. It’s small enough that it doesn’t necessarily pose a risk to the industry’s major players, but large enough to make for an appealing acquisition target. The firm has struggled to maintain profitability over the past year, but the business is cash generative, and its balance sheet isn’t in terrible shape with net debt of $12.4 million. All of that together is going to look very compelling to a larger delivery player looking to expand its footprint in the southeast.
Cheap Stocks: Blue Hat Interactive Entertainment Technology (BHAT)
It’s rare to find a penny stock that’s profitable, but BHAT fits that bill. The China-based company makes augmented reality games and toys in China. That includes mobile games, educational materials and toys with online features. As the world becomes increasingly more digital, this isn’t a bad place to be.
The company has been profitable for years, and its most recent full-year results showed an impressive 26.7% revenue increase. However, before you jump in with both feet, it’s important to note that the group’s underlying profits actually decreased to $8.3 million from $9.1 million. Free cash flow was also negative for the year, another red flag that investors should keep an eye on.
However, with a net cash position of $9.9 million, BHAT is in a much better place than many of its penny stock peers making it a good option to consider.
Castor Maritime (CTRM)
Castor Maritime is a Cyprus-based shipping company that uses dry bulk and tanker vessels to transport commodities around the world. At just 42 cents per share, the stock looks like a bit of a bargain right now.
The pandemic weighed on the shipping industry last year, and it showed in the group’s full-year results. While revenue nearly doubled to $12.5 million, operating expenses were also significantly higher, leading to an overall loss of $1.8 million. Cash flow was also negative, and the group is carrying a substantial amount of debt around.
This is certainly not a pick for the faint of heart. However, the shipping industry should be party to the global economic recovery. Furthermore, a big reason for CTRM’s shaky financials is expansion. This is probably one of the riskiest plays on this list, but ultimately the group looks likely to come out from under its pandemic-related challenges in the coming year.
Cheap Stocks: Biolase (BIOL)
Biolase is a medical and dental supplier of laser systems. The group’s WaterLase system combines water and laser energy to make incisions, while its Diode laser provides everything from pain therapy to teeth whitening. As you can imagine, developing and selling that kind of equipment is an expensive undertaking, and for that reason Biolase isn’t yet profitable.
With that said, things are moving in the right direction for the company, with losses narrowing to $16.8 million last year. Free cash flow is also in the red, but the group gets closer to becoming free-cash-flow-positive each year. The company’s balance sheet is in good shape with slightly more cash than debt on the books.
All told, Biolase is in a strong position to continue growing and eventually become profitable.
On the date of publication, the author did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.