Penny stocks are a trading bet. They are favored by investors looking for some quick returns in a short time-frame who aren’t risk-averse. For comparison, blue-chip stocks and high-quality growth stocks that are preferred for the long-term portfolio. I largely agree with this idea, but there are some millionaire-maker penny stocks that are worth holding for few years. If these stocks fire, the health of the portfolio can change within a few quarters.

Of course, the risk of exposure to penny stocks is always high. I would therefore look at a 10% allocation to penny stocks with multi-bagger potential. I must mention here that it’s important to screen stocks with average to good fundamentals. Or ideas that are turnaround stories. It’s important to eliminate purely speculative stocks from the list.

Let’s therefore talk about three millionaire-maker penny stocks that represents companies with a good business and positive industry tailwinds.

Standard Lithium (SLI)

Standard Lithium (NYSE:SLI) stock had touched lows of $1.66 earlier this month. From those levels, SLI stock has surged by 43% in a matter of weeks. I am not surprised with SLI stock trading at deeply undervalued levels. At the same time, I expect 5x to 10x returns from this lithium stock in the next 36 months. Of course, the basic assumption is that lithium trends higher. For that reason, I am bullish on that front with the prospects of a supply shortage for lithium.

Coming to the fundamentals, the company’s first production of lithium is still a few years away. However, SLI stock is likely to skyrocket based on asset valuation. To put things into perspective, Standard Lithium commands a market valuation of $367 million.

In comparison, the company’s largest asset (25 miles west of the Lanxess) has an after-tax net present value of $4.5 billion. Further, the Lanxess project has an after-tax NPV of $722 million. Once these assets start delivering cash flows, valuations will skyrocket.

Wallbox (WBX)

Wallbox (NYSE:WBX) is another stock has witnessed a sharp rally from recent lows of $1.24. In fact, WBX stock is already higher by 57% and trades at $1.95. I believe that Wallbox is among the electric vehicle (EV) charging infrastructure companies that are positioned to survive, grow, and create value.

For Q3 2023, Wallbox reported revenue of €32.5 million with a gross margin of 35%. On a sequential basis, its margin improved by 530 basis points. It’s worth noting that during the quarter, the company reported 285%-unit growth and 350% revenue growth in DC public charging.

After the quarter, the company has partnered with Atlante to deploy the largest EV fast-charging network in Southern Europe. The partnership aims at deploying 35,000 fast-charging points across Spain, Italy, France, and Portugal by 2030. Additionally, Wallbox has also made inroads into Germany through the acquisition of ABL GmbH.

Wallbox expects to achieve profitability in 2024 through cost cutting, new products, and global partnerships. As margins expand coupled with healthy growth, WBX stock is likely to remain in an uptrend.

Tilray Brands (TLRY)

Tilray Brands (NASDAQ:TLRY) has undertaken business transformation in 2023 and the results are beginning to show. In the last one month, TLRY stock has trended higher by 26%. I expect the positive momentum to sustain and I believe that it’s another 10-bagger story in the making.

The first point to note is that even without federal level legalization, the cannabis market in the U.S. is expected at $71 billion. Cannabis stocks have therefore been subject to overreaction on the downside. It’s also worth noting that for Q1 2024, the Company reported healthy cannabis segment revenue growth. International business was driven by the medicinal cannabis segment. Tilray has guided for positive adjusted free cash flow in financial year 2024.

Besides the cannabis business, Tilray is now the fifth-largest craft beer brewer in the United States. This diversification through a series of acquisitions will support growth. At the same time, Tilray has a strong strategic infrastructure in the U.S. for aggressive growth if cannabis is legalized at the federal level. If this scenario plays out, I would expect TLRY stock to deliver 20x returns.

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.

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