Put simply, 2021 was a great year to trade penny stocks under $1 per share — largely thanks to the Reddit meme stock phenomenon. Many may have believed elevated retail interest in day trading would cool with the recovery from the pandemic. But as we’ve seen over the past few months, that has hardly been the case.
Granted, finding success in penny stocks may prove more difficult in 2022. In fact, you could argue it already is. Market participants have started to embrace a more “risk off” mindset ahead of the Federal Reserve’s fiscal policy changes.
Run a screener on Finviz.com and you’ll see that, out of 214 sub-$1 per share penny stocks, zero trade within 10% of their respective 52-week high. In contrast, 211, or slightly over 99% of them, trade 40% or more below their respective 52-week high. Even so, while the fading of the meme stock trend has made investing in these plays tougher, that doesn’t mean you should stay away.
Assuming, of course, that you do your homework rather than buy what’s hot on Reddit.
So, if you’re looking for some of the more promising situations involving penny stocks under $1 per share, where should you start? Consider these six names, a mix of growth and value plays that are trading at bargain basement prices:
- DSS Group (NYSEAMERICAN:DSS)
- Gee Group (NYSEAMERICAN:JOB)
- Sesen Bio (NASDAQ:SESN)
- Sundial Growers (NASDAQ:SNDL)
- Surgalign (NASDAQ:SRGA)
- Waitr Holdings (NASDAQ:WTRH)
Penny Stocks Under $1: DSS Group (DSS)
Formerly known as Document Security Systems, this holding company changed its name after jettisoning its namesake division. Through its operating units and investments, DSS is involved in a wide variety of industries, including direct-to-consumer, healthcare, blockchain security and renewable energy.
Unfortunately, despite (or perhaps because) of this diversification, DSS has dropped nearly 88% year-to-date (YTD). Much of this may have been due to the heavy shareholder dilution resulting from several secondary offerings. The company raised $24 million in January, $34.5 million in February, and $50 million in June. More recently, it raised another $15 million from Alset EHome International (NASDAQ:AEI).
The company’s aggressive use of dilutive secondary offerings has been bad for long-term investors. Shares are down 88% in the past year, and 96% over the past five years. However, at today’s prices, investors who have yet to enter a position may want to do so. DSS stock a good deep value play. Shares trade for just 52% of tangible book. Better yet, the bulk of its tangible assets are liquid or fairly liquid. For example, as of Sept. 30, it had $69.1 million in cash, plus a note receivable worth $19.7 million.
Yes, this valuation discount is countered by the company’s high cash burn. It’s spending aggressively to get some of its more early-stage ventures off the ground. There’s definitely a risk it burns more through its war chest, and engages in more shareholder dilution. Even so, the potential upside from improved operating performance may exceed the risk of a further drop from today’s prices.
Gee Group (JOB)
Another one of the best penny stocks under $1 per share, like DSS stock, JOB stock is a value play. At least, based upon the staffing/job placement company’s projected results for 2022.
Assuming Gee Group hits projections, it may be trading for just 9.5x next year’s earnings, and at an enterprise value/EBITDA (EV/EBITDA) ratio of 5.7 times. Given its performance in recent quarters, why do I think that in the quarters ahead, it will deliver results in line with expectations? Mainly, due to the current state of the labor market and how it bodes well for this low-margin, cyclical industry.
As InvestorPlace Markets Analyst Thomas Yeung argued back in November, staffing stocks like this one could see big gains in the coming year, thanks largely to a tight labor market. Staffing stocks like Volt Information Science (NYSEAMERICAN:VOLT) have spiked in price during past labor crunches, and the same could play out here as companies struggle to fill millions of open positions.
JOB stock may not be something you want to hold for the long haul. It’s a cyclical business, with low margins and not much of an economic moat. But if you’ve been looking for a way to play the labor crunch, and are in the market for a high-risk, high-possible return proposition, then this may be a solid choice. JOB stock currently trades for about 47 cents per share (down from as much as $2.17 per share earlier this year).
Penny Stocks Under $1: Sesen Bio (SESN)
Tanking to below $1 per share during the late summer as its flagship drug candidate Vicineum, failed to obtain FDA approval, biotech play SESN stock made up back above this price point in October, on news it would try a second time to get the regulatory go-ahead for the bladder cancer treatment.
Lately though, hopes have again faded for a Sesen Bio comeback. After releasing more details about its resubmission plans, the stock is now back down to sub-$1 per share prices. Yet, despite the challenges it’s faced in 2021, and its murky prospects of ultimately getting approval for its main candidate, investors looking for speculative biotech play may want to consider it.
Already beaten down, any progress getting approval for Vicineum will likely result in an outsized move higher for SESN stock. Trading for around 89 cents per share today, it traded for as much as $6.04 per share in the past year. That said, as is par for the course with biotech plays, the risk of high volatility remains.
That is, while shares have a shot of seeing an epic rebound in price, they could also experience another round of heavy losses, if its resubmittal efforts fail to result in helping this clinical-stage company move into the commercialization stage. Nevertheless, out of scores of names in this industry trading for less than $1 per share, this is one of the more promising ones.
Sundial Growers (SNDL)
Down nearly 85% from its meme stock high, once-hot pot play SNDL stock has fallen out of favor. As Reddit traders have moved out of secondary meme plays like this one, the market has moved it down to a price more reflective of its underlying value. Potential needle-moving catalysts, like U.S. pot legalization, are also no longer seen as things that will play out in the near-future.
So, what exactly makes Sundial Growers one of the best penny stocks under $1 per share to buy? American pot law reform would definitely send it soaring again. But as I discussed earlier this month, that’s not it’s only way out of its current rut.
With the millions it raised through the sale of new shares this year, it has plenty of dry powder to play with. In recent months, it’s been using this cash to make strategic debt/equity investment in other cannabis companies. This strategy provides it both an additional income stream, plus gives it exposure to U.S.-based cannabis companies that for now it cannot fully own directly.
Also, the legalization catalyst is on the back burner, but isn’t completely off the table. More U.S. states continue to move to legalize pot. Add in that it’s becoming a more bipartisan issue, and pot law reform is still something that could happen in the next few years. At 65 cents per share today, this is another opportunity where many paths to upside counter the risk of additional losses.
Penny Stocks Under $1: Surgalign (SRGA)
Shares in spine surgery products manufacturer Surgalign have struggled through 2021, due to two factors. First, continued headwinds from the coronavirus pandemic. Revenue dipped from $308.4 million to $101.7 million between 2019 and 2020, as patients delayed elective procedures because of the Covid-19 outbreak.
As new variants continue to impact demand, the company recently cut its full-year revenue guidance for 2021. Before anticipating between $95 million – $100 million in sales, it projects it’ll generate just $88 million – $92 million in sales this year.
Second, SRGA stock has suffered due to another delay. That would be delays in getting FDA approval for its Holo Surgical platform. Being able to commercialize this platform may be something that helps get it out of its current slump. But until then, and/or when the pandemic headwinds finally fade, SRGA stock will likely continue to struggle. However, a bit of positive news may be enough to send it well above where it trades today. Granted, the market is not too confident this will happen.
Yet, taking into account recent insider buying, management may be hinting that big improvements are on the horizon. That’s not to say, of course, that shares won’t dip further in the short-term. As it continues to incur heavy operating losses, the company may decide to have another dilutive secondary offering. This may put more pressure on shares. Even so, while keeping its riskiness in mind, at its current price of 80 cents, it may be an opportune entry point for SRGA stock.
Waitr Holdings (WTRH)
An operator of a food delivery platform, Waitr Holdings is similar to DoorDash (NYSE:DASH), with one key difference. Fast-growing DoorDash commands a rich valuation, with a price-to-sales (P/S) ratio of 11.9x.
Waitr, on the other hand has had an anemic revenue growth, so investors give it much more modest valuation (0.6x 2021 sales). Yet while it’s no growth story, after its nearly 70% drop in 2021, and 75% drop in the past 12 months, there may be merit in buying it.
Why? Well, it may have two paths to higher prices. First, if it decides not to pursue high growth anymore, it could further reduce its operating costs. Already profitable on an EBITDA basis, reducing costs could possibly get it out of the red in terms of earnings per share (EPS). Second, WTRH stock may have solid upside, even if the company pursues a slow-and-steady growth strategy.
At least, that’s the argument a Seeking Alpha contributor made back in October. Per the commentator’s numbers, all Waitr needs to do is steadily grow its sales by high-single digits over the next decade. Plus, become more efficient in its marketing spend. Together, this could dramatically improve its profitability, and in turn send it to prices far above today’s levels. While investors remain bearish, now may be the time to buy. At 83 cents per share today, it could see triple-digit percentage returns if it successfully turns itself around.
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 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.