When it comes to pursuing sky-high stock returns, penny stocks offer some of the best high-risk, high-reward opportunities. While these cheap stocks come with plenty of risk and volatility, the chance to turn a small investment into life-changing money is enough to entice many traders to this group.
I’ll highlight three penny stocks that could potentially deliver combined returns of 6,000% or more for risk-tolerant investors. Now, to be clear, chasing improbable returns often ends badly. Penny stocks tend to attract inexperienced traders lured in by fantasies of striking it rich overnight. I don’t recommend betting the farm or your life savings on any single penny stock, or even a basket of these names.
However, if you’re comfortable with higher risk, possess a strong conviction in a company, and size your position appropriately, certain penny stocks do offer asymmetric upside. Over the past decade, these stocks have lagged as investors flocked to mega-cap tech and low-volatility sectors. But speculative fervor may return to penny stock land with the Federal Reserve poised to cut interest rates as the economy improves.
With that said, here are three top penny stocks to consider buying right now.
BRC Inc (BRCC)
In my view, few penny stocks have the sky-high return potential to match BRC Inc. (NYSE:BRCC). This company sells coffee and other products with a focus on supporting veterans, military, first responders, and other related groups. With a fiercely loyal customer base and expanding omnichannel distribution, the company’s growth prospects appear strong, despite BRCC stock’s 90% peak-to-trough decline.
Momentum has returned in mid-2023, with shares rebounding 54% off recent lows. As financial performance improves and interest expenses potentially ease, profitability could arrive sooner than expected. Revenue grew 33% year-over-year in Q3 2023 to over $100 million. Analysts forecast sales swelling 3.5x to nearly $1.4 billion by 2028. This growth will be fueled by e-commerce, brick-and-mortar and wholesale expansion. Indeed, profitability at that scale would be transformative.
Though still posting losses mostly due to a debt load of $110 million, I believe BRC has hit an inflection point. Rising rates have driven painful interest expenses in recent quarters, but a dovish pivot could relieve this burden going forward. Losses are not worrisome to me, given the company’s revenue growth and profitability timelines. Once variable-rate debt costs decline, BRC’s path to profitability by 2024 appears achievable.
Valuation disconnects this large are rare. Yes, execution risks exist as with any small-cap stock. However, I believe the bulk of the negativity is priced in. For risk-tolerant investors, few penny stocks can match BRC’s return profile, if even a fraction of its potential is achieved. I expect to see significant upside from current levels over the long-term.
Hive Digital (HIVE)
Shifting to digital assets, Bitcoin (BTC-USD) mining outfit Hive Digital (NASDAQ:HIVE) is another ultra-speculative play with exponential return potential, albeit with gut-wrenching volatility. Now trading 90% below 2021 highs, HIVE stock now looks woefully oversold heading into Bitcoin’s next “halving” supply shock. With crypto sentiment depressed, any turnaround in Bitcoin prices could propel HIVE stock exponentially higher.
As a Bitcoin miner, Hive benefits disproportionately from Bitcoin price swings due to operational leverage. Yes, Bitcoin’s volatility cuts both ways. But for bulls on the digital asset space, the risk-reward dynamics with this stock appear to be asymmetrically skewed to the upside.
Hive recently held 1,704 Bitcoin (worth roughly $73 million at recent prices), carrying tremendous latent value. Bitcoin’s upcoming “halving” will slash block rewards and constrict new supply as demand grows, likely catalyzing the next leg higher. Hive management is well aware of this cycle, expanding computing power ahead of the event. If I’m right, they’ll be handsomely rewarded.
Trading at historical lows, HIVE stock seems to price in a crypto apocalypse scenario I simply don’t buy. For risk-tolerant traders willing to endure gut-wrenching swings, buying assets this beaten-down ahead of a momentous crypto event seems like a calculated gamble to me. If Bitcoin revisits $60,000 per token or more post-halving, HIVE stock could deliver spectacular returns from current levels.
Ammo Inc (POWW)
Finally, let’s discuss ammunition manufacturer Ammo Inc. (NASDAQ:POWW), another stock with explosive return potential. Though risky and volatile like many penny stocks, Ammo Inc. seems poised to ride powerful post-war defense industry tailwinds as governments scramble to replenish depleted arsenals.
Trading near all-time lows after a rough 2022/2023, I believe POWW stock holds tremendous recovery potential regardless of recession or market cycles. The Russia-Ukraine conflict revealed a major vulnerability – ammunition and artillery stockpiles had been severely neglected for decades. According to reports, most NATO allies only have enough ammunition for several days of high-intensity fighting. According to some estimates, rebuilding these critical stockpiles could take years or decades.
As a key player in this supply-constrained market, Ammo Inc. looks poised to ride massive tailwinds for years to come, in my view. Defense spending trends are highly counter-cyclical also, insulating POWW from downturns. Analysts expect the company’s earnings to recover into positive territory in 2024 on resurgent sales growth. With shares battered amid the broad small-cap selloff, I see POWW stock holding tremendous recovery potential regardless of markets or cycles.
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, Omor Ibne Ehsan 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.