Quality blue-chip stocks provide steady total returns that help beat inflation and preserve purchasing power. However, it is growth and penny stocks that can deliver potential multibagger returns — if the objective is to create big wealth from the markets.
For sure, it’s advisable to restrict exposure to penny stocks to between 10% and 15% of your total portfolio. However, this allocation is enough to boost total returns. That said, it does not necessarily take time for penny stocks to skyrocket. Even in relatively challenging market conditions in the first half of 2023, several penny stocks delivered multibagger returns.
The good news is multiple penny stocks look massively undervalued. I believe these stocks can surge higher in the coming quarters as market participants look for value. I must add that the names discussed are non-speculative, with average fundamentals and a decent business model.
Let’s discuss the reasons to be bullish on these penny stocks now.
Hecla Mining (HL)
Amidst volatility, Hecla Mining (NYSE:HL) stock has remained sideways in the last 12 months. I believe it’s a good opportunity to consider exposure to the largest silver miner in the United States. A positive long-term outlook for precious metals is the basis for being bullish on HL stock. At the same time, Hecla is fundamentally strong, and positive business catalysts are on the horizon.
For Q2 2023, Hecla reported revenue of $178.1 million, with 45% and 35% revenue contribution from gold and silver sales, respectively. It’s important to note that silver operations generated free cash flow (FCF) of $38.8 million for the quarter even as overall FCF was negative.
The outlook for the silver segment is bullish, considering the point that Hecla is poised to accelerate production growth. For the year, 18% production growth is expected on a year-on-year basis. However, Hecla has guided for 35% production growth in 2025. If silver trends higher, the impact on FCF will likely be meaningful.
Among electric vehicle charging stocks, EVgo (NASDAQ:EVGO) looks undervalued at current levels of $3.86. Intensifying competition is a risk in the industry, but I believe that EVgo is likely to survive and grow.
It’s worth noting the company reported stellar numbers for Q2 2023. Revenue increased by 457% year-over-year to $50.6 million. Further, adjusted EBITDA losses narrowed to $10.6 million. Of course, EBITDA losses will be sustained throughout the year. However, with operating leverage, I expect significant improvements in the next 24 months.
EVgo has guided for 3,400 to 4,000 fast DC charging stalls under operation or construction by the end of 2023. That would imply revenue growth will remain stellar. On the flip side, EVgo could be required to dilute equity again in the next 12 to 18 months. I, however, believe this factor is discounted in the stock.
Nordic American Tankers (NAT)
Nordic American Tankers (NYSE:NAT) has surged nearly 50% in the last 12 months. Still, I believe the penny stock remains massively undervalued at a forward price-earnings ratio of 6.6. NAT stock also offers an attractive dividend yield of 14.22%. Considering the valuations, I believe total returns in the stock could be 50% to 100% in the next 12 months.
As an overview, Nordic American owns and operates oil tankers. For Q1 2023, the company reported an average time charter equivalent rate of $51,902 per day per vessel. For the same period, the company’s per day costs per vessel was $8,000. That translated into a healthy EBITDA margin and cash flows. Further, with time charter rates remaining strong, I expect dividends to remain steady.
It’s worth noting that macroeconomic factors support the case for healthy time charter rates. The company believes that growth in India and Asia will ensure that TCE remains strong in the next few years.
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, Faisal Humayun did not hold (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.