I believe there’s not a single person out there who believes we’re not in an extended bull-market. With economic growth and artificially low interest rates, it seems very likely that equities will remain in an uptrend. In these market conditions, it makes perfect sense to consider allocation to penny stocks.
In the last 12-months, there have been dozens of penny stocks that have delivered multi-fold returns. The Reddit army and Robinhood traders have made the penny stock space exciting and lively.
There continues to exist opportunity among penny stocks for multi-fold returns in the near to medium-term. This column will focus on seven penny stocks that have reasonable business fundamentals.
Let me quickly talk about an indicator that points to further upside for equities. The Fear and Greed Index shows that the “fear” sentiment is dominant in the markets. In general, this sentiment is not indicative of the end of a bull-market. It’s extreme greed that marks the end of a bull-run. Therefore, a part of a portfolio can be allocated to high-beta stocks.
Let’s look at the reasons that make the following penny stocks worth considering.
- Sundial Growers (NASDAQ:SNDL)
- ObsEva (NASDAQ:OBSV)
- HIVE Blockchain (NASDAQ:HVBT)
- Timber Pharmaceuticals (NYSEAMERICAN:TMBR)
- Genius Brands (NASDAQ:GNUS)
- Ring Energy (NYSEAMERICAN:REI)
- Nexe Innovations (OTCMKTS:NEXNF)
7 Hottest Penny Stocks Right Now: Sundial Growers (SNDL)
SNDL stock has been an under-performer in the last six months. During this period, the stock has declined by nearly 50%. However, the stock is among the top penny stocks to consider and has the potential to deliver multi-fold returns.
I believe that with a strong cash buffer, Sundial is at a growth inflection point. On one hand, the company is focused on inhalables through the in-house brand. Furthermore, the company is likely to use the cash buffer for acquisition and strategic investments in cannabis companies globally.
Last month, the company announced that it will be increasing commitment to SunStream Bancorp to $538 million. This is significantly higher than the previously announced commitment of $188 million. The joint venture is expected to pursue investments in debt, equity and hybrid instruments in cannabis companies. Few attractive acquisitions can take SNDL stock higher.
In terms of growth from in-house brands, the company is focused on branded cannabis to boost EBITDA margin. The closure of the acquisition of Spirit Holdings is likely to benefit as the company’s retail presence expands.
Overall, the worst of the downside seems to be over for SNDL stock. Over the next few quarters, the penny stock is likely to beat the index and possibly sector returns.
OBSV stock is another attractive name among penny stocks that looks good for strong upside from current levels. As an overview, ObsEva is a clinical stage bio-pharmaceutical company focused on novel therapies to improve women’s reproductive health.
The company currently has a multi development program with a big addressable market. Yselty, which is a drug focused on uterine fibroids, is currently in Phase three of development. According to the company, nine million women in the U.S. are affected by fibroids. With NDA submission expected in the third quarter of 2021, OBSV stock has a key upside catalyst.
Another medical condition that the company is focused on is Endometriosis. The condition impacts 176 million women worldwide. The company expects complete phase 3 enrollment and primary endpoint readout by Q4 2021.
Recently, ObsEva also announced that another candidate nolasiban has the potential to increase pregnancy rates following in-vitro fertilization (IVF). Clearly, the company has an attractive pipeline, which can deliver results in the next few years.
From a financial perspective, the company reported cash and equivalents of $59 million as of June 2021. This provides buffer for investment in clinical trials in the next few quarters.
7 Hottest Penny Stocks Right Now: HIVE Blockchain (HVBT)
Bitcoin (CCC:BTC-USD) has witnessed significant downside and volatility in the recent past. However, there is little doubt that cryptocurrency adoption is on a rise. Data from Coinbase (NASDAQ:COIN) indicates strong growth in a number of institutional investors holding Bitcoin.
HIVE stock seems to be among the most attractive crypto penny stocks. The company has a diversified exposure to Bitcoin and Ethereum (CCC:ETH-USD) mining. For Q3 2021, the company mined 165 Bitcoins and 21,500 Ethereum. This translated into revenue of $13.7 million.
With the company pursuing mining expansion, it’s likely that revenue will continue to increase in the coming quarters. Last month, the company announced the purchase of 4,000 next generation miners.
The acquisition is likely to help the company reach $200 million in annual run-rate. Clearly, top-line growth is likely to be robust in the next few quarters as new miners are deployed.
It’s also worth noting that in April 2021, the company invested in DeFi Technologies. The decentralized finance sector is likely to be big in the coming years. With diversification, HIVE seems well positioned for growth. Overall, HIVE stock looks positioned for strong upside from current levels of $3.09.
Timber Pharmaceuticals (TMBR)
TMBR stock currently trades at $1 and the stock has seen some consolidation around current levels. A breakout on the upside seems imminent with the pharmaceutical company having a promising pipeline.
As an overview, Timber Pharmaceuticals is focused on high impact dermatologic diseases. These include congenital ichthyosis, facial angiofibromas and sclerotic skin diseases. The company believes that the annual market opportunity for these conditions in the United States is worth $250 million.
In terms of the pipeline, TMB-01 and TMB-02 are currently in Phase 2b of clinical trials. Further, TMB-03 (sclerotic skin diseases) is in the pre-clinical stage. With two candidates at an advanced stage, the stock seems attractive.
It’s worth noting that there are no current approved treatments for the company’s focus area. With orphan drug market exclusivity, the company is well positioned to benefit if the clinical trials deliver results.
The next few quarters are likely to be critical, with the company expected to initiate Phase three for TMB-01 in Q2 2022. Further, the FDA meeting for TMB-02 is planned for Q2 or Q3 of 2022. From a financial perspective, the company reported $6.1 million in cash as of June 2021. Equity dilution seems likely in the coming quarters. However, the stock seems to have largely discounted that factor.
7 Hottest Penny Stocks Right Now: Genius Brands (GNUS)
Genius Brands is a media company that’s involved in the development of content for children entertainment. Additionally, the company is also involved in the licensing of branded children’s entertainment properties.
GNUS stock has under-performed in the last 12-months. However, the stock has seen some consolidation around $1.50 levels. If business developments remain positive, a strong rally seems likely.
In May 2021, Genius Brands announced 240 hours of content for the Kartoon Channel. The content seems to be delivering results. As an example, Stan Lee’s Superhero Kindergarten exceeded 40 million views on the channel.
For Q1 2021, the company reported a three-fold increase in revenue to $1.1 million. The company is still therefore at a nascent growth stage. However, an important point to note is that the company ended Q1 2021 with cash and equivalents of $143.6 million. The cash buffer provides the company financial flexibility for content creation and acquisition driven growth.
It’s also worth noting that the company’s consumer product licensing segment is gaining traction. Currently, the company has merchandising licenses in the global market for 500 product SKUs. Over the next 12-months, the company expects to launch another 450 SKUs. This is likely to boost top-line growth.
Ring Energy (REI)
Even after some correction in the recent past, Brent oil trades near $70 per barrel. With accelerating global growth, it’s likely that oil prices will remain firm. REI stock is among the attractive penny stocks from the oil and gas sector.
Currently, Ring Energy is focused on Permian assets in Texas and New Mexico. For Q1 2021, the company reported sales of 7,960 boep/d with 85% oil.
It’s also worth noting that as of 2020, the company reported proved reserves of 76.5 MMBoe. The PV10 of proved reserves was $638 million. Therefore, the stock is attractive at a current market capitalization of $270 million.
Further, for Q1 2021, Ring Energy reported adjusted EBITDA of $19 million and free cash flow of $2.9 million. FCF for Q1 2021 was impacted by the winter storm. For Q4 2020, the company’s FCF was $12.7 million. With robust resources, it’s likely that EBITDA and cash flows will accelerate if oil remains firm at current levels.
With positive FCF, Ring Energy has also been pursuing deleveraging. For Q2 2020, the company’s debt was $375 million. This has reduced to $305.5 million as of Q1 2021. Further debt reduction seems likely in the coming quarters. This will improve the company’s credit health.
7 Hottest Penny Stocks Right Now: Nexe Innovations (NEXNF)
NEXNF stock had touched a high of $4.66 in February 2021. However, after profit booking and the impact of equity dilution, the stock now currently trades at 76 cents. Current levels seem attractive for exposure and I would not be surprised if the stock doubles from these levels in the next 6-12 months.
As an overview, Nexe Innovations is in the business of manufacturing and commercialization of compostable, plant-based coffee pods. The company believes that the market size for single-serve coffee pods is $30 billion globally.
With environmental concerns, the compostable pod is likely to make inroads in the big addressable market. The company is expecting to have a production capacity of 220 million coffee pods by Q1 2022.
It’s also worth noting that the company is not limited to the coffee pod market. In the coming years, the company intends to expand into areas that include plant-based masks, make-up containers, eyeglass frames and meat trays. Therefore, there is an opportunity for sustained growth.
Currently, Nexe Innovations has a total cash buffer of over $50 million. Therefore, there is ample liquidity to fund the current expansion activities.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.