While penny stocks offer high potential gains, they are among the riskiest sub-$5 investments an investor can make. The low stock price penny stocks offer often reflects weak business models, high debt, and uncertain prospects. Regardless, finding hidden gems is every investor’s dream.

However, low-priced and less regulated penny stocks can be volatile, especially for the inexperienced. Thus, those are the stocks to avoid.

That’s not to say there aren’t diamonds in the rough. Let’s examine three penny stock enigmas that could potentially benefit in the long term.

Surge Battery Metals Inc. (NILIF)

Surge Battery Metals Inc. (OTCMKTS:NILIF) owns the Nevada North Lithium Project in Granite Range, Nevada. The initial drilling in October 2022 revealed a long zone of lithium-rich clays over 1,620 meters.

CEO Greg Reimer stressed sustainability and welcomed collaboration with Kautz and local cultural groups. Surge Battery Metals Inc. stock showed positive signals from both short and long-term moving averages. The short-term average surpassed the long-term one, a crucial buy signal for traders.

The company has received from M3 Metals Corp a regulatory approval for its option agreement. Under that plan, Surge could acquire a 20% interest in M3M Lands by paying $250,000, issuing 2,000,000 common shares, and investing $250,000 in exploration. An additional 10% interest could be gained by paying M3M $500,000 and issuing 1,000,000 more common shares.

If Surge reached 80% interest, a joint venture with M3M was required. Surge acted as the operator of M3M Lands during the Option Agreement, unless both parties agreed otherwise. I’m going to keep my eye on this potential catalyst, and monitor how this acquisition proceeds. On favorable news, NILIF stock is one that could pop, but as mentioned, it’s also a high-risk option at this stage in its life cycle.

Invitae (NVTA)

In October, Invitae (NYSE:NVTA) saw an impressive increase in its stock price, without apparent news from said company. No new press releases, SEC filings, or analyst coverage explained this rise.

Despite the lack of news, NVTA stock has seen multiple days of surges, interspersed between broader selling pressure over the period. On a year-to-date (YTD) basis, NVTA stock is down considerably, leading this biotech stock to become one many investors have overlooked.

On September 29, the FDA issued a press release, authorizing the marketing of Invitae’s Common Hereditary Cancers Panel. This IV diagnostic test examines blood-extracted DNA to detect genetic variants linked to elevated cancer risk. It’s the first of its kind authorized under the FDA’s De Novo premarket review pathway for new, low-to-moderate-risk devices.

Therefore, this marks a clear victory for Invitae’s expansion of hereditary cancer panels. Given the stock’s need to meet NYSE listing standards and its price below $1.00 for over a month, Invitae needs to rally (or reverse split) soon. Thus, this is an extremely high-risk pick, but one that could be a big winner for investors willing to stomach some near-term volatility.

Li-Cycle (LICY)

Li-Cycle Holdings (NYSE:LICY) is the top North American lithium-ion battery recycler. The company recently initiated their first processing line in Germany, with a second to follow this year.

Each main line can recycle up to 10,000 tonnes of battery material annually. And with an additional 10,000 tons of capacity planned, the facility is expected to reach 30,000 tons annually. This would make it one of the largest recyclers on the continent.

The company is establishing a global recycling network in North America, Europe, and Asia. Spokes handle end-of-life battery pre-processing to extract nickel, lithium, and cobalt, while hubs refine the powder into battery-grade materials. Moreover, the U.S. Department of Energy (DOE) conditionally committed to a $375 million loan to Li-Cycle for financing their North American LIB resource recovery facility.

Truthfully, some construction-related hiccups to its expansion plans have derailed its stock price in the near-term. However, this may be a buying opportunity for investors bullish on this space.

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.

Read More: Penny Stocks — How to Profit Without Getting Scammed

On the date of publication, Chris MacDonald 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.