The S&P 500 and the Dow Jones Industrial Average are trading near all-time highs. Interestingly, this is despite September’s and October’s reputation for being tough on the markets. Most stock market crashes have occurred during October. With a potential widespread correction looming, investors are taking a chance on penny stocks.
Fears of inflation are running high. Then, there is the increasing tension between the U.S. and China. And to add fuel to the fire, we have the recent turmoil in Afghanistan. Understandably, an investor might be squeamish about adding new stocks to their portfolio at this stage. If you are one of them, then perhaps penny stocks will interest you more.
These companies are dirt cheap but have interesting business models. Remember, there are several hidden gems just waiting to be uncovered in this space.
Take Ford (NYSE:F) as an example. During the 2008 financial crisis, shares of the iconic car company hit an all-time low of $2 per share. Now they are changing hands for just under $13 a pop.
These penny stocks are all available on Robinhood (NASDAQ:HOOD) and have the potential to take off:
- Rolls-Royce Holdings (OTCMKTS:RYCEY)
- Parks! America (OTCMKTS:PRKA)
- Dynatronics (NASDAQ:DYNT)
- ElectraMeccanica (NASDAQ:SOLO)
- Verb Technology (NASDAQ:VERB)
- Grom Social Enterprises (NASDAQ:GROM)
Penny Stocks: Rolls-Royce (RYCEY)
Rolls-Royce might seem like an oddity on this list, considering its rich history and brand name. But the novel coronavirus pandemic was devastating for the luxury automaker.
Although it is most famously known for its high-end luxury cars, Rolls-Royce has diversified. The civil aviation business, in particular, has been the backbone of its recent success. However, this segment suffered the most at the hands of the pandemic.
But now things are getting back to normal and aircraft engine servicing revenue will recover this year, which is why Rolls-Royce expects it will become cash flow positive by the second half of this year. This is great news for RYCEY stock, which has survived during the worst of times.
Before the pandemic, the company was stabilizing cash flows and was doing reasonably well. But everything was upended due to recent events.
After reporting record-low traffic numbers in 2020, air traffic is steadily picking up the pace this year. There is a lot of pent-up demand out there as vacationers and business travelers look to restart their lives and go back to work and leisure. Transportation Security Administration (TSA) checkpoint numbers show travel is back, albeit not at 2019 levels.
As we get more of the population vaccinated, these figures will improve exponentially, leading to a net-positive impact on companies like Rolls-Royce.
Parks! America (PRKA)
People have spent the last year under stay-at-home restrictions. However, the good news is that a large portion of the U.S. population is vaccinated. As a result, people are getting back to their normal routines and pastimes.
One of the things we missed out on last year is amusement parks, and people are going back. According to a survey conducted by Cardify from a sample of 1,044 consumers, 72% of people are looking forward to a return to amusement parks. In comparison, only in-person concerts and sporting events came close to generating the same level of excitement.
Parks! America will benefit from this enthusiasm since its focus is on owning and operating regional theme parks and attractions. Recent financials show the company is already on the mend.
Total net sales for the nine months ended July 4, 2021 came in at $8.6 million, a 73% increase compared to $4.96 million last fiscal year. Meanwhile, net income was $2.03 million, or 3 cents per share, which compares very favorably to $987,000, or 1 cent per share, in the prior year. This fits perfectly with the reopening narrative, making PRKA one of the best penny stocks out there.
Penny Stocks: Dynatronics (DYNT)
Dynatronics manufactures healthcare equipment and products for chiropractors and physical therapists. Its offerings include physical therapy supplies, medical equipment and treatment tables. Shares have oscillated wildly this year, going as low as 52 cents in November.
That was when Dynatronics was still struggling to shake off the effects of the pandemic. The physical therapy industry took a turn for the worse during Covid-19, and it’s understandable why.
With most people stuck at home, the sector was bound to nosedive since no one was making the regularly scheduled trip to the local chiropractor. However, things are getting back to normal and business is picking up.
The company recently came out with preliminary results for its fiscal fourth quarter ended June 30, and they instill a lot of hope if you are a DYNT stockholder. Total net sales for the quarter came in at about $12.1 million.
Meanwhile, the company updated shareholders on the progress of the strategic actions it is taking to improve financial performance. Needless to say, the report has had a positive impact on the share price and is further proof that this company is on the mend.
The hype surrounding electric vehicle (EV) stocks is starting to weaken a bit, with recovery plays getting renewed interest. That paints an ideal backdrop for swooping in and accumulating some great EV options at a discount.
Canada’s Electrameccanica is an example of an EV company that has lost considerable steam in the last few months. The company is known for its all-electric three-wheeled vehicle, an interesting concept that sets it apart from the sea of EV companies out there.
However, investors have been brutal, and SOLO stock has been down 19% in the last three months.
But considering the exciting plans it has in place, there should be considerable interest in the stock soon. Electrameccanica has expanded its product line with an additional all-electric vehicle, and its Arizona manufacturing facility is still being built.
Penny Stocks: Verb Tech (VERB)
Verb Technology’s Software-as-a-Service (SaaS) platform provides video-based customer relationship management (CRM) sales and marketing solutions. The rapidly-growing tech company is active in more than 60 different countries, serving various business lines.
In July, the company released VerbMAIL, a marketing tool meant to provide a more personal sales experience. A business can create and email a quick interactive video to customers and track the recipient’s response to the content.
The program enables users to integrate Verb’s interactive video capabilities into Microsoft (NASDAQ:MSFT) Outlook. The software can be integrated with several other sales and communications tools, including Salesforce (NYSE:CRM).
Considering VERB shares are down 8.3% year-to-date, I believe this is an excellent opportunity to add this to your portfolio at a discount.
Grom Social Enterprises (GROM)
Grom Enterprises offers original content for kids below the age of 13. Founder Zach Marks started the platform to provide a safe place where kids could go for online experiences with social media.
The platform includes a host of services, including kid-friendly shows and a messaging service as well as photo and video editing software. All of the activity on the platform is monitored to ensure there is no cyberbullying.
To keep the flow of content going, Grom has purchased two animation studios, Top Draw Animation and Curiosity Ink Media.
Now, many investors are probably wondering why GROM is down 30% in the last three months if everything is going so well. I believe the main concern is that, with schools reopening, children will have less time to spend online. This could lead to less engagement and less revenue as a result.
But when investing in GROM stock, you have to take a long-term view. The idea behind the product is solid, and undoubtedly we need safe places for kids to go online. Considering these factors, GROM stock is a smash hit in my eyes.
On Penny Stocks and Low-Volume Stocks: 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.
On the publication date, Faizan Farooque 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.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio. Faizan does not directly own the securities mentioned above.