It’s been an amazing year so far for initial public offerings (IPOs). The bull market’s resilience and low-interest rates made this space very popular with investors. At the same time, stimulus money helped bring about frenzied activity in all corners of Wall Street. In addition, we have seen tremendous progress in growth stocks as well. However, there is a neglected area of the investment world worth looking at, one offering excellent upside — penny stocks.
A penny stock is a common share of a listed entity that trades for less than $5 per share. As they trade at low price multiples, they offer tremendous profit potential, though they also carry risk with higher chances that stocks could go down if markets take their unpredictable turns.
Penny stocks are risky, but they can still be an excellent investment if you know what to do. People should research penny stock companies thoroughly before investing in them because there’s always the chance that they will go bankrupt or turn out less profitable than expected.
With all of that in mind, the five best penny stocks to buy right now are:
- American Resources Corporation (NASDAQ:AREC)
- Seanergy Maritime Holdings Corp. (NASDAQ:SHIP)
- Professional Diversity (NASDAQ:IPDN)
- Rolls-Royce (OTCMKTS:RYCEY)
- TDH Holdings (NASDAQ:PETZ)
Now, let’s dive in and take a closer look at each one.
Penny Stocks to Buy: American Resources Corporation (AREC)
It has been a few months since President Joe Biden announced a comprehensive $2 trillion infrastructure package to support the post-pandemic economy.
The plan includes roughly $2 trillion in spending over ten years and would raise corporate tax rates to 28%, up from 25%. The new funds generated will go towards funding public works projects like roads construction or airport renovations.
Naturally, the construction industry will benefit from the passage of this plan. So, it makes sense American Resources is generating a lot of interest. The Indiana-based company is a supplier of raw materials for the global infrastructure marketplace. The company’s primary focus has been on providing metallurgical carbon and PCI. Rapid expansion into other areas like transportation services for finished goods or temporary storage facilities during construction processes is considered a potential opportunity in the future.
Total revenue for the latest quarter was $393,210 compared to 226,836 during second-quarter 2020. In addition, it raised $30.1 million in the sale of 8.6 million shares to institutional investors through a registered direct offering. However, investors were decidedly miffed at the company’s overall loss, which was attributable to supply chain issues caused by the pandemic. Now that things are clearing up, though, the time is right to invest in this one and take advantage of the upside.
Seanergy Maritime Holdings (SHIP)
Seanergy Maritime is a premier provider of marine and offshore services. On a fully delivered basis, its fleet of 16 Capesize vessels will average 11 years old and has a cargo-carrying capacity of approximately 181,000 deadweight tons (DWT). The company’s success in the past year mirrored that of its industry. However, they’ve made an impressive recovery this time around.
Net revenue is up 208% in the second fiscal quarter compared to the year-ago quarter. During the year thus far, Seanergy Maritime purchased six Japanese-built Capesize vessels. In the meantime, it is retiring certain ships from the existing fleet. The purchases are financed mainly through equity raises. Unfortunately, this is leading to substantial dilution. Moving forward, this is not going to change.
On the bright side, the company will have a massive fleet once the industry fully recovers from the pandemic. Certainly, the first half of the year highlights that things are already steadily improving. For the first half of 2021, revenues came in at $48.2 million compared to $22.4 million in the year-ago period, an increase of 115%. So, looking ahead, the company expects things to continue improving as the shipping industry gets back to normal.
Penny Stocks to Buy: Professional Diversity (IPDN)
Professional Diversity Network is a global developer and operator of online networks that provide networking opportunities for diverse professionals through member support services, including learning events with seminars on leadership skills or how best to network effectively in the business world.
The diverse workforce is a growing trend in today’s society. Diversity can encompass many different things. But the most obvious difference between people who don’t work out of doors and those that do involves where they’re from — whether it be an island kingdom off Asia or Latin America, or rural Appalachia.
With all of that in mind, companies like Professional Diversity are not moving the needle right now. But they stand to gain immensely in the current environment. More companies than ever want to make sure they have a diversified team to best address customer needs worldwide. According to a research report by McKinsey & Company, around $8 billion per year is allocated to diversity training. Even getting a slice of this market will be a major coup for Professional Diversity.
It might seem strange that an iconic name like Rolls-Royce is a penny stock. But there are a couple of reasons for this. The return of air travel is a welcome one for investors, but there have been setbacks. Demand is inconsistent, and Rolls-Royce as well as other companies in the space are suffering as a result.
A second reason is that the company’s liquidity has been boosted at the expense of shareholders. A substantial dilutive rights issue did not go down well with shareholders. Although the move was to shore up the balance sheet, it has dampened investor enthusiasm. In addition, since the crisis is not over, there could be further equity raises along the way. One can understand the reason for skepticism.
However, there are several positives in adding or initiating a position in RYCEY stock when trading at such a discount. First, Rolls-Royce has repeatedly said it expects to become free cash flow positive in the second half of this year. It has already returned to profit in the first half of 2021. The company reported a profit of £133 million in the first half of the current fiscal year. After recording billions of losses last year and considering prospects, shares are trading at just 3.1 times trailing price-earnings ratio (P/E).
Penny Stocks to Buy: TDH Holdings (PETZ)
TDH Holdings is a Chinese producer and distributor of pet food products. It has been producing innovative solutions for dogs’ health needs since 2002. Their extensive line includes dry snacks like chews or biscuits alongside wet cans ideal for any pup’s diet requirements, including dental hygiene essentials.
Revenues are not massive for this one, $815.23k on a trailing 12 months (TTM) basis. But the potential is massive. According to a Chinese Pet Industry White Paper, in 2020, China’s urban pet market was worth close to 300 billion yuan — a number that has been on an upward trajectory for six years now. The pandemic only exacerbated an already growing trend. And with more people being around their pets, PETZ stock has a good outlook ahead.
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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.