It’s the dream of every investor to make millions from the markets. However, that requires risk taking ability. Investing solely in blue-chip stocks is unlikely to create massive wealth. The portfolio needs to be well diversified with blue-chip, growth and penny stocks.
I must mention that not all penny stocks carry significant risk. There are penny stocks that represent reasonably good businesses. The focus of this column is on stocks that represent companies working towards making the business big. In the next few years, these companies could be well recognized names in their fields.
Having said that, I would still limit exposure to 10% to 15% of your overall portfolio. It’s important to note that macroeconomic conditions remain challenging. It’s not the best time to go overboard on growth and penny stocks.
Standard Lithium (SLI)
Standard Lithium (NYSE:SLI) is a hidden-gem among lithium stocks. The penny stock is likely to deliver multibagger returns considering the current asset base.
To put things into perspective, Standard Lithium currently trades at a market valuation of $600 million. However, the Company’s Lanxess Project and South West Arkansas Project, have a combined net present value (NPV) of $3.7 billion. This provides an insight on the level of undervaluation. I must add that the Company’s 45,000-acre project at Bristol Lake, California, remains undeveloped. These projects can potentially add to the overall asset value and long-term production visibility.
Production from Lanxess is expected in 2026 with South West Arkansas production due in 2027. Even with the extended time-line, I expect meaningful stock price action based on project development. Additionally, if lithium reverses and trends higher, the NPV estimates are bound to change.
Kinross Gold (KGC)
With a few positive business developments, it would be easy for Kinross Gold (NYSE:KGC) stock to strike gold for investors. KGC stock looks significantly undervalued at a forward price-earnings ratio of 13.3 and trades just above $5. I believe that the 2.26% dividend yield stock can quadruple in the next 36 months.
With geopolitical tensions, gold has surged and currently trades close to $2,000 an ounce. I can say with some conviction that multiple rate cuts are likely in 2024 as global GDP growth decelerates. If that occurs it would be positive news for gold and I would expect a big breakout for the precious metal.
Kinross Gold is well positioned to benefit with an investment grade balance sheet. Further, a strong liquidity buffer of $1.9 billion, the Company can make aggressive investments.
It’s also worth noting that for Q2 2023, Kinross reported operating cash flow of $459 million. With gold trending higher, the annualized operating cash flow visibility is around $2 billion. This adds to the flexibility for organic and acquisition driven growth.
Curaleaf Holdings (CURLF)
There are several attractive penny stocks in the cannabis industry. Curaleaf Holdings (OTCMKTS:CURLF) stock is among the favorites and can be a multibagger in the next few years.
There are two reasons to like Curaleaf. First, the Company has established strong presence in the U.S. Even without federal level legalization, the U.S. cannabis market is expected to be worth $71 billion by 2030. Further, Curaleaf is focused on growth backed by research and development. Last year, the Company launched 171 new products. With presence in medicinal and recreational cannabis markets, product innovation will ensure growth and EBITDA margin expansion.
It’s also worth adding that Curaleaf is making inroads into the European markets. Curaleaf already has import and distribution capabilities in the U.K., Germany, Italy, Poland and Portugal. This is another growth catalyst with Europe having a big addressable market.
Solid Power (SLDP)
Solid Power (NASDAQ:SLDP) stock has been a massive underperformer in the last few quarters. However, the business progress remains positive and I am bullish on a strong reversal rally. As an overview, Solid Power is working towards the commercialization of solid-state batteries. Even if progress is on the right track, commercialization is likely only in 2025 or 2026. However, there are potential catalysts for SLDP stock.
Among the positive news, Solid Power has commenced production of EV cells. The target is to deliver A-sample EV cells to automotive partners for validation testing. Positive result on this front are likely to be a big catalyst.
Another big positive is that Solid Power has the backing of strong automotive partners. The company continues to execute its joint development agreements and has further extended their agreement with Ford (NYSE:F). Additionally, in December 2022, the Company licensed its cell design and manufacturing technology to BMW (OTCMKTS:BMWYY). This will support parallel research and development initiatives.
Ring Energy (REI)
Oil has remained firm even with sluggish global economic activity. The reasons include production cuts coupled with geopolitical tensions. Among oil and gas penny stocks, Ring Energy (NYSE:REI) looks attractive and can deliver multibagger returns if oil trades around $100 per barrel.
As an overview, Ring Energy has Permian Basin assets in Texas. As of 2022, the Company reported proved reserves of 138.1 million barrels of oil equivalent. This implies a current reserve life of 21 years. Further, their PV10 of proved reserves is $2.77 billion. With Ring Energy commanding a market valuation of $370 million, the stock trades at a deep valuation gap.
From a financial perspective, Ring Energy reported a liquidity buffer of $204 million as of Q2 2023. With deleveraging, financial flexibility is high to make investments towards exploration with the company having significant proved undeveloped reserves. Further, with positive adjusted free cash flow, there is headroom for value creation.
Bitfarms (BITF)
Bitfarms (NASDAQ:BITF) is another name among penny stocks that can skyrocket. The bull thesis largely depends on Bitcoin (BTC-USD). I am bullish on the outlook for the digital asset for multiple reasons.
First, a Bitcoin ETF might be approved soon, and that could translate into a big rally. Further, Bitcoin halving is due in 2024 and past instances of halving indicate a surge in the cryptocurrency. I must add that interest rates have peaked out and potential rate cuts in 2024 will be an additional catalyst.
Specific to Bitfarms, the Company is a Bitcoin miner and has been pursuing aggressive growth in hash rate. As of September, the Company reported capacity of 6.1 EH/s, which was higher by 45% on a year-on-year basis. I must add that Bitfarms reported a liquidity buffer of $65 million as of Q2 2023. The Company is also targeting to be debt free by February 2024. With high financial flexibility, Bitfarms is positioned for aggressive expansion in the coming quarters.
Polestar Automotive (PSNY)
Polestar Automotive (NASDAQ:PSNY) stock has been on a sustained correction mode. However, the selling seems to be overdone and I expect a strong reversal rally. Further, Polestar seems to be among the EV stocks that are positioned to survive and grow.
For Q2 2023, Polestar reported vehicle delivery of 13,900. On a year-on-year basis, deliveries increased by 50%. I am bullish on further acceleration in vehicle deliveries in the coming year. The first deliveries of Polestar 4 are expected in China towards the end of this year. Additionally, the Company expects to commence delivery of Polestar 5 next year. These models will boost growth.
It’s worth noting that Polestar has also initiated cost cutting. With operating leverage being another factor, the Company expects to achieve profitability in 2025. The outlook is therefore positive and Polestar has presence in 27 markets, which will support deliveries growth.
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.
