In a time of high market volatility, penny stocks may not seem like the best place to invest. Many risky picks that performed well earlier this year have tanked. However, as these names decline, plenty may still be worth rolling the dice on.
Why? Well, some of these low-priced stocks could soon see a boost from company-based factors rather than market-based ones. For instance, biotech names could surge on potential U.S. Food and Drug Administration (FDA) approval for one or more of their candidates. Likewise, bargain turnaround plays could deliver jaw-dropping returns — especially smaller companies with big exposure to rising commodities prices.
Of course, with the potential for high upside comes a higher degree of risk. That’s why taking small positions — a setup where heavy potential losses are manageable — is better than taking a “bet the ranch” approach.
So, if you are an investor looking for high risk but high possible returns, spreading your bets widely could be profitable in aggregate. With that in mind, which penny stocks should you put into your basket? These seven picks all have strong company-specific catalysts:
- Asensus Surgical (NYSEAMERICAN:ASXC)
- Vinco Ventures (NASDAQ:BBIG)
- Globalstar (NYSEAMERICAN:GSAT)
- Mind Medicine (NASDAQ:MNMD)
- Sundial Growers (NASDAQ:SNDL)
- Uranium Energy (NYSEAMERICAN:UEC)
- Exela Technologies (NASDAQ:XELA)
Penny Stocks to Buy: Asensus Surgical (ASXC)
Earlier this year, I was critical of ASXC stock, which was very popular among Reddit investors at the time. Trading for over $3 per share, a lot of this robotic surgery company’s potential was priced-in — and then some.
However, that has since changed. ASXC has moved to prices last seen before the meme-stock mania that made it well-known. Now, taking a small position in this speculative “future of medicine” play could be a worthwhile risk.
For one, the company’s flagship Senhance Surgical System continues to become a more commercially competitive product — one that can better compete with rivals like Intuitive Surgical (NASDAQ:ISRG). Back in September, the FDA gave Asensus clearance for an additional set of capabilities for Senhance. These include 3D measurement, enhanced camera control, digital tagging and image enhancement.
With these improvements, Asensus could see a ramp up in Senhance hospital installations. In turn, that could bring materially stronger financial results. Of course, this pick of the penny stocks is still very risky. As seen from ASXC’s continued slide, momentum is not working in its favor. But if you’re looking for a low-priced play in the medical technology space, this one could potentially have big upside.
Vinco Ventures (BBIG)
Currently trading above $5 as of this writing, Vinco Ventures may not technically be one of the penny stocks. However, as recently as mid-August, BBIG stock was well into that territory. At the time, the holding company was trading for between $2 and $2.50 per share. More importantly, though, this speculative name offers some huge upside potential.
What do I mean? As you may know, Reddit traders have become bullish on Vinco Ventures thanks to two things. For one, there’s the planned spinoff of its non-fungible token (NFT) unit, Cryptyde. Second, there’s also the potential of its part-owned video-sharing platform Lomotif becoming the next TikTok. (Vinco indirectly owns 40% of Lomotif.) Further developments on either of these fronts could give this stock — down over 50% since its September high — a stunning rebound.
Of course, there are some caveats, as is par for the course with speculative names. Ted Farnsworth’s involvement may be a red flag (Farnsworth was the chairman of now-defunct MoviePass). Additionally, fellow InvestorPlace contributor Muslim Farooque recently pointed out that BBIG still needs to prove it’s on track to become profitable.
As such, you may want to wait for BBIG stock to become a true penny stock again before entering a position. However, it’s too early to write this one off just yet. It may be worth the risk.
Penny Stocks to Buy: Globalstar (GSAT)
Put simply, GSAT stock is an interesting situation. To some extent, it is a value stock — B. Riley analyst Mike Crawford argued this back in June, pointing out how cheap it was relative to the value of its spectrum assets.
Along with its value stock attributes, Globalstar is a bit of a growth play as well. This is mainly due to its exposure to the rise of IoT (Internet of Things) technology. Demand from this end market could enable the company to see much better results down the road.
Admittedly, recent investor disappointment will likely keep GSAT shares depressed for now. The stock popped back in early September on rumors of an Apple (NASDAQ:AAPL) partnership for the upcoming iPhone 13. Those hopes were quickly dashed when the tech giant did not mention any satellite communications features for the new iPhone at its launch event.
However, after sliding back to around $1.50 per share, you may want to buy $100 worth of this one of the penny stocks. Rumors or news of similar deals could give it another short-term pop. In the long run, mainly because it could see improved results thanks to IoT, GSAT may have room to move higher.
Mind Medicine (MNMD)
Mind Medicine (also known as MindMed) is probably many years away from experiencing its first “payoff” moment. That is, seeing its psychedelic-based mental health therapies go from the candidacy to commercialization. In the meantime, that may mean MNMD stock is at risk of drifting lower. However, there’s some merit in going against shifting sentiment — and to adding a small position of MNMD to your portfolio at current prices of around $2.25.
This pick may look overpriced now. Today, the company sports a $828 million market capitalization against zero revenue and high cash burn. But progress in bringing its LSD-based anxiety treatment to market could help spark a comeback for the stock.
And on a longer time horizon, as psychedelic medicine starts to lose its social stigma? MindMed could roll out not one, but several blockbuster $1 billion-plus drugs. Once that happens, the stock could be worth many times its current valuation.
Given the uncertainty over whether this trippy healthcare play will deliver on its promises, this is definitely not a “back up the truck” situation. Yet as a $100 position? Consider MNMD stock a high-risk play worth adding to your basket of penny stocks.
Penny Stocks to Buy: Sundial Growers (SNDL)
Sundial Growers has more than one potential catalyst. However, the one that matters most to investors is U.S. federal pot legalization. In fact, SNDL stock is one of the top legalization lottery tickets out there, a penny stock that could see a triple-digit percentage pop on any progress toward marijuana reform.
With this, it seems like a no-brainer to buy $100 worth of SNDL stock. True, the perceived likelihood of sooner-than-later reform has dipped since the start of 2021. Back in November, “blue wave” election results were a boon to pot stocks. Investors bet big that Democrats would fast-track legalization. However, with so many pressing issues at hand, legalization has since fallen to the back burner.
So, with pot reform a work-in-progress, what’s the appeal of buying Sundial? For starters, the work toward legalization is still in motion. Plus, the prospect of federal marijuana reform garners widespread support. So, the chances of reform getting stymied by political gridlock may be slimmer than it seems at first glance.
Despite looking very risky, the losses may be limited here as well. Sundial’s large cash position (worth around 37 cents per share) may mean downside of around 40% at most (based on the current price). Compare that to SNDL’s potential to surge to $2, $3 or even past the high of $3.96 and risk-return appears to be in your favor here.
Uranium Energy (UEC)
A few weeks ago, heavy buying from the Sprott Physical Uranium Trust (OTCMKTS:SRUUF) fueled a big run-up in uranium prices. In turn, this created enthusiasm for mining penny stocks in the space, such as UEC stock.
During the frenzy, this uranium mining play saw a rapid rise in price. Trading for around $2 per share in mid-August, UEC rose to as much as $3.77 per share on Sept. 16. But since then, the buzz has taken a breather and the stock has fallen back to around $3.
As the prices of its underlying commodity trend lower, Uranium Energy could continue to decline in the short term. That said, even as the latest uranium rally was based mainly on Sprott’s buy-up, there are signs that prices could rise in a more sustainable way down the line.
Given its bona fides as a clean energy source, governments around the world are looking to nuclear power as a viable alternative to fossil fuels. So, as demand from end-users (utilities) keeps going up, prices for this commodity — long stuck at depressed levels due to the Fukushima disaster — could keep climbing. With this, UEC stock could move even higher despite already being up 207% for the past 12 months.
Penny Stocks to Buy: Exela Technologies (XELA)
XELA stock is another low-priced name that I’ve gone bearish to bullish on as it’s moved back down to reasonable prices. At over $4 per share in July, it was too hot to touch. But back at the $1.70 mark, near its pre-meme price levels? The risk-return proposition may be back in your favor here.
Sure, with short interest down to levels where a squeeze is no longer possible, I wouldn’t count on another round of Reddit mania. But what could play out for this business process automation provider is a digitalization of its currently low-margin, labor-intensive work. As one Seeking Alpha commentator calculated, a successful digital transformation for Exela Technologies may enable it to send the stock back to $5 per share.
Granted, a turnaround here may be easier said than done. The highly leveraged nature of Exela’s balance sheet is what gives it the potential to see shares deliver outsized gains. But it’s a double-edged sword. A failed turnaround (and continued bad performance) could result in another high double-digit percentage drop.
Still, if you’re just putting $100 into it? XELA stock is surely a name to add to your basket of risky penny stocks.
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On the date of publication, Thomas Niel 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.
Thomas Niel, a contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.