If finding undervalued stocks is good, then finding undervalued penny stocks is even better. That’s because, with penny stocks, investors’ capital appreciation upside potential is amplified.
Of course, risks are also amplified, making such companies often all-or-nothing bets. Penny stocks, which for this article I define as stocks trading for less than $5, are cheap for a reason. Many of these companies are not profitable. Some are even in the pre-revenue stage.
Not surprisingly, many penny stocks were hit hard in 2022 as investors moved away from risk-on assets. It appears one of the reasons investors are enjoying some relief to start 2023 is the “January Effect.” Stock prices have mostly climbed to start the year, with bullish expectations around what the Federal Reserve will do sparking interest in riskier assets.
Accordingly, this means that now could be the best time to start speculating on a few high-quality penny stocks. If such a high-risk high-reward investing style suits you, here are three such companies to consider right now. Each of these penny stocks appear undervalued relative to the consensus analyst price target.
Kinross Gold (KGC)
Kinross Gold (NYSE:KGC) is first on this list of undervalued penny stocks for a reason. Over the past year, KGC stock is down roughly 11% at the time of writing. However, considering most mining stocks are up around 10% over the past month and 40% since last September, there’s some strong momentum with this group. Kinross Gold has outpaced those averages, and there’s reason to believe it can continue to do so.
Gold was a quietly strong performer in 2022, outperforming all three major indexes. Many analysts believe the price of gold will surge to $2,000 an ounce or more by the end of the year. That makes this an excellent time to consider having some exposure to gold in your portfolio.
Mining stocks are a low-risk way for investors to jump into precious metals without concerns about safely storing the physical metal. On Jan. 30, Barclays downgraded KGC stock from overweight to equal weight (the equivalent of moving it from a buy to a hold). The consensus outlook, however, is still bullish, and at a price below $5, now is an excellent time to jump aboard.
Uranium Energy (UEC)
Next on this list of undervalued penny stocks is Uranium Energy (NYSE:UEC). As the United States continues pivoting towards a clean energy future, nuclear energy is once again coming into focus. That’s bullish for uranium prices, and the producers that benefit from rising prices.
According to the research firm Global Data, uranium production will grow at a compound annual growth rate of more than 5% between 2023 and 2026. Canada will continue to be the world’s leading supplier, but the United States is taking steps to support its nuclear fuel supply chain.
A critical step in this endeavor is the creation of the U.S. Strategic Uranium Reserve, a 10-year $1.5 billion program. And UEC has been tapped to supply 300,000 lbs of Triuranium octoxide (U3O8) – a compound of uranium – to the reserve.
Uranium Energy Corp is a pure-play uranium company with a strong balance sheet that has no debt. UEC stock is up 65% over the last 12 months. However, I think the likely demand surge with uranium overall could push this price much higher over the long-term. This is a penny stock to keep on the radar right now.
Harpoon Therapeutics (HARP)
In December, I put Harpoon Therapeutics (NASDAQ:HARP) on my list of stocks that had a chance to grow 10x. That’s partly due to what this biotech company does. It’s a clinical-stage immune-oncology company attempting to develop wholly-owned immunotherapies that harness the power of T-cells in patients with hard-to-treat tumors.
Harpoon holds tantalizing possibilities. But the company is years away from having a commercially-available product. However, the company is partnering with AbbVie (NYSE:ABBV) to bring its lead candidate, HPN217, through the clinical trial phase. Having a partner with the heft of AbbVie should do plenty to reassure investors.
At the time of writing, HARP stock has surged 78% over the last month alone. However, this stock still remains relatively depressed, down roughly 75% over the past year. That’s the kind of risk profile penny stock investors should be accustomed to. However, should this stock surge once again, it could be among the undervalued penny stocks that make investors very well off over the next few years.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Chris Markoch 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.