Almost every investment resource carrying a modicum of credibility will warn you about speculative ideas, even those billed as the best penny stocks under $3 to buy. And this article will be no different: do not assume that you’ll waltz in and make it rich with these ideas. They could do that, don’t get me wrong. But the odds are against you. Thus, you must not invest more than you can afford to lose.
That said, there’s a reason why you’re here: you have some funds earmarked for speculation. Further, you figure that you want to roll the dice before bidding farewell to 2022. Fair enough. In my opinion, if you understand what you’re getting yourself involved in and wish to speculate, that’s on you.
Still, if you’re going to gamble, you might as well do so with ideas that give you better odds. In that spirit, below are the best penny stocks under $3 to buy.
Best Penny Stocks Under $3: Ambev (ABEV)
Before any ardent Ambev (NYSE:ABEV) supporters gather up their pitchforks, let me set the record straight: the Brazilian brewing company is not what you would consider a typical candidate among the best penny stocks under $3 to buy. At the time of writing, Ambev commands a market capitalization of nearly $45 billion. In any other circumstance, it’d be a blue-chip enterprise.
It just so happens that it’s priced under three bucks. To be fair, such a circumstance may arouse suspicion. Sure enough, in the trailing five-year period, ABEV did lose more than 56% of its equity value. However, on a year-to-date (YTD) basis, ABEV gained a bit over 3%. For context, the U.S. equities benchmark S&P 500 lost nearly 20% during the same period.
Fundamentally, an argument can be made that Ambev is modestly undervalued. At present, Wall Street prices ABEV at 16.2 times forward earnings. In contrast, the sector median is 21.4 times. Also, Ambev enjoys a robust balance sheet and strong profit margins. For the best penny stocks under $3 to buy, it doesn’t get much better than this.
Profire Energy (PFIE)
An oilfield technology firm, Profire Energy (NASDAQ:PFIE) specializes in the design of burner-management systems and other combustion-management technologies. These solutions serve both the upstream (exploration and production) and midstream (storage and transportation) sectors of the hydrocarbon energy industry. As a result, it’s one of the best penny stocks under $3 to buy for fundamental relevancies.
As well, PFIE brings an enticing technical narrative to the mix. On a YTD basis, PFIE lost about 3% of its equity value. However, this might bring out contrarian interest because the underlying hydrocarbon space has been red-hot. Further, some evidence suggests that traders recognize the underappreciated opportunity. In the trailing five days, PFIE gained more than 2%. Also, hedge funds have been slowly building a position since the fourth quarter of 2021.
Looking at the financials, Gurufocus identifies PFIE as significantly undervalued based on its proprietary calculations for fair market value. In addition, Profire features a strong balance sheet, particularly a robust cash-to-debt ratio of 48.6 times.
Best Penny Stocks Under $3: The Marygold Companies (MGLD)
A bit of an oddity among the best penny stocks under $3, The Marygold Companies (NYSEMKT:MGLD) represents a holding firm with a diverse range of subsidiary businesses. Under the corporate umbrella, investors can gain exposure to food products, personal care, commodities-based investments, and even a security systems firm. You might say Marygold has a shotgun approach to the market, which might come in handy due to the ambiguities of the new normal.
To be completely transparent, Wall Street doesn’t see it that way. Since the start of the year, MGLD dropped 57%. Naturally, that’s going to raise plenty of alarm bells. At the same time, over recent sessions, investors have started to pile into MGLD. For example, in the trailing month, shares gained 29%. Also, in the past five days, it’s up over 16%.
According to Gurufocus’ proprietary calculations, MGLD rates as a modestly undervalued investment. More importantly, the company enjoys a stable balance sheet, best characterized by an Altman Z-Score of 9.18. This metric indicates a very low risk of bankruptcy.
US Global Investors (GROW)
Headquartered in San Antonio, Texas, US Global Investors (NASDAQ:GROW) represents a tricky candidate for best penny stocks under $3.
Fundamentally, US Global should appeal to contrarians who love to travel off the beaten path. Per its website, the company bills itself as an innovative investment manager with vast experience in global markets and specialized sectors. As we enter a potentially difficult phase in the market, professional investment guidance has never been more important. Therefore, GROW could make a name for itself.
On the other hand, interest in capital market opportunities has waned noticeably since the implosion of global markets in 2022. Therefore, investors must be aware of volatility risks. Nevertheless, hedge funds have maintained their position in GROW stock since Q2 2021, which is interesting.
On the financial side, US Global enjoys excellent strengths in its balance sheet. Notably, its Altman Z-Score stands just a hair short into double-digit territory, reflecting low bankruptcy risk. Also, the company features outstanding revenue growth and solid gross margins, possibly indicating advantageous pricing power.
Best Penny Stocks Under $3: Dynacor (DNGDF)
Based in Canada, Dynacor (OTMCKTS:DNGDF) is an international gold producer. At present, according to its website, Dynacor produces and explores in Peru, where its management team has decades of experience and expertise. Fundamentally, Dynacor may benefit from the fear trade, especially with gold representing an asset of universally recognized intrinsic value.
Also, DNGDF may attract investors looking to ride the strong rally in the gold spot price. At the time of writing, gold reached an average price of around $1,804. At the beginning of November, the yellow metal traded hands at approximately $1,650. Nevertheless, Wall Street remains negative on DNGDF, which has shed 16% YTD. It might be one of the best penny stocks under $3, but it’s still a penny stock.
Now, what really shocked me about the enterprise was that Gurufocus identified 10 green flags and no red flags. I’ve used the platform for several years and such a status is extremely rare, even more so because DNGDF trades over the counter for about $2.10. Still, among the attributes listed were strong financial strengths, low bankruptcy risk and predictable revenue and earnings growth.
Trican Well Service (TOLWF)
Headquartered in Calgary, Alberta, Trican Well Service (OTCMKTS:TOLWF) represents one of Canada’s underappreciated hydrocarbon-based opportunities. Per its public profile, Trican provides oilfield services, including acidizing, coiled tubing, fracturing, nitrogen pumping, cementing, microseismic and industrial services. At the time of writing, shares trade hands for $2.80 a pop.
Like other hydrocarbon players, the cynical nature of 2022 — basically geopolitical tensions and inflation — bolstered TOLWF. Since the start of the year, Trican Well has gained 27%. And while near-term rumblings (such as energy price caps) hurt sentiment, demand also improved recently. In the trailing five days, TOLWF has gained 4%.
Fundamentally, efforts to suppress hydrocarbon energy prices might not succeed. As the Hoover Institution mentioned, that would be a bit like breaking a thermometer to adjust the temperature.
Further, Gurufocus labels TOLWF as undervalued based on its proprietary calculation. The company also benefits from a solid balance sheet. Overall, then, it’s one of the best penny stocks under $3 to buy.
Best Penny Stocks Under $3: Auto Trader (ATDRY)
On a technical basis, Auto Trader (OTCMKTS:ATDRY) might appear as one of the best penny stocks under $3 to buy. At the time of writing, shares trade hands at $1.51 a pop. However, it’s the context of this U.K.-based enterprise that scares prospective investors. An automotive classifieds advertising business, Auto Trader specializes in new and secondhand vehicle sales.
Of course, the issue centers on shifting business paradigms. Primarily, as the international community gradually sees improvement in global supply chain networks, inventory of new vehicles started to rise. In addition, with central banks implementing hawkish monetary policies to control rampant inflation, pricing of goods tends to decline. That’s not particularly great if you’re trying to sell things.
However, personal vehicles (outside of luxury cars) mostly represent necessities. Plus, with employers globally recalling their employees, personal transportation will become more relevant, not less so.
Finally, Auto Trader offers a good deal. Per Gurufocus, it’s significantly undervalued. The company also features a strong balance sheet and excellent profit margins. If you want to go across the pond, ATDRY may be one of the best penny stocks under $3.
On the date of publication, Josh Enomoto 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.