In recent weeks, the stock market has stabilized after June’s sell-off, but it may take time before bullishness makes a comeback. Plenty of uncertainty remains, including further interest rate hikes, continued high inflation, and the growing chance of a recession. Even so, while stocks may still be in a slump, now may be the time to start looking for the best penny stocks to buy before the bull market returns.
More volatile than large, widely-held stocks like blue chips, penny stocks have taken a beating so far this year. Conversely though, when market sentiment shifts back to positive, names in this category (stocks trading for $5 per share or less) could deliver outsized returns for investors buying them today.
That said, don’t go out and buy every penny stock you can find, of course. Fundamentals, not the mere fact a certain stock trades in the low single-digits (or lower), should drive your investing decisions. Stick with high-risk, yet high potential-return opportunities, such as these 7 penny stocks to buy before the bull market returns.
|Super Group Limited
Assertio Holdings (ASRT)
If you’re looking for an under-the-radar value play in the pharmaceutical space, Assertio Holdings (NASDAQ:ASRT) is one to consider. A few weeks back, Louis Navellier argued why this is one of his top-rated penny stocks to buy during the current market downturn.
Per Navellier, ASRT stock has fallen to a super-low valuation. Shares in the pharmaceutical company, which markets a variety of treatments, have been pushed to a discounted price, due to an expected drop in earnings next year.
However, even when accounting for the earnings drop, the stock still trades at a favorable multiple (12.2x). Furthermore, the high end of analyst estimates call for slight earnings growth (44 cents per share in earnings in 2023, versus 40 cents per share in 2022).
If it turns out investors are overreacting at present, Assertio (which is actually up for the year) could move higher.
Clovis Oncology (CLVS)
Like Assertio, Clovis Oncology (NASDAQ:CLVS) is a healthcare stock. Albeit, one in a more risky segment of the sector (biotechnology). Success in biotech investing is easier said than done. Given the risks, and the complexities of the space, doing your homework before investing is imperative.
Having said that, if you are active in biotech stocks, CLVS stock is definitely one to add to your watchlist. Setbacks and victories go hand-in-hand with biotech companies, and this one is no exception. Recently, it had a setback in Europe with its treatment Rubraca. In terms of victories, one of note is promising news about one of its key therapies (tumor treatment FAP-2286).
Again, know this speculative biotech play in and out before buying, but this definitely a stock worth further investigation. It currently trades for more than 65% below its 52-week high. More positive news may result in a big rebound.
Greenidge Generation (GREE)
Are you bullish on a crypto comeback? If so, you could go out and buy Bitcoin (BTC-USD), as it attempts to bounce back after briefly falling below $20,000 per coin. Or, for even greater upside potential, you could take a small position in Greenidge Generation (NASDAQ:GREE), a crypto mining company.
Yes, many speculators got burned dabbling in it last year. If you may recall, the predecessor to GREE stock (SPRT stock) saw a tremendous short-squeeze ahead of the reverse merger that created this current entity, only to crater once the deal went through.
Yet the meme madness is now in the past. Going forward, Greenidge stock will likely trade mainly on its fundamentals. Expanding its crypto mining capacity, even if BTC prices only make a partial recovery, it could result in a big jump in profitability for this firm. In turn, a massive jump in its stock price.
Pitney Bowes (PBI)
At first glance, Pitney Bowes (NYSE:PBI) may seem like a “dinosaur” stock. This old-school office equipment provider, best known for its postage meters, may appear to have a slow-and-steady decline ahead of it.
But while it may not have hypergrowth in its future, I wouldn’t dismiss PBI stock right off the bat. The very mature nature of its business is more than reflected in its current valuation. The stock trades for just 13.4x earnings. It also pays out a high dividend yield of 5.05%.
Furthermore, its business goes beyond merely providing postage meters to businesses. As a Seeking Alpha commentator recently discussed, the company also provides a wide variety of shipping and e-commerce related digital offerings. Positioned to ride out a likely economic downturn, an economic rebound may result in a big jump in earnings. With this, its hard-hit shares (down 41.3% year-to-date) could bounce back.
POSaBIT Systems (POSAF)
It’s no surprise that POSaBIT Systems (OTCMKTS:POSAF), which zoomed in price during late 2021, has struggled so far in 2022. Pot stocks, stocks with crypto exposure, and penny stocks are all out of favor right now.
But with sentiment not on its side, now may be the time to consider adding shares to your portfolio. As InvestorPlace’s Thomas Yeung (who made POSAF stock his pick for InvestorPlace’s 10 Best Stocks for 2022 contest) argued on July 12, the underlying business is performing a lot better than the market currently thinks.
Although there was a slowdown in transactions earlier this year, there are signs that growth is re-accelerating. It’s still a company in high-growth mode. More importantly, as traditional payment processors remain unable to enter the business of providing services to U.S. dispensaries, POSaBIT (which found legal, viable ways around federal laws) continues to have a competitive advantage.
Ammo Inc. (POWW)
As its name suggests, Ammo Inc. (NASDAQ:POWW) is in the ammunition business. It provides ammo to both retail customers, as well as to governmental end users like law enforcement and the military.
That’s not all. It also owns the popular gun auction site GunBroker.com. With gun and ammo sales on a tear since 2020, the company has reported strong growth in recent fiscal years. During fiscal year ending March 2020, it generated just $14.1 million in sales. Last fiscal year (ending March 2022), it reported $225.6 million in sales.
This record growth resulted in a big run-up for POWW stock in 2021, but 2022 has been a different story. Blame the bear market, plus the renewed push for more stringent firearms laws. However, trading for just 12x forward earnings, and set to see more earnings growth, regulatory risk may be more than accounted-for at today’s prices.
Super Group Limited (SGHC)
Following the big plunge among sports betting stocks, you may be looking for an underdog contender among the many plays in the space.
The company, which operates sports betting platforms around the world under the Betway brand, is set to deliver positive earnings next year. Analyst forecasts call for earnings of around 42 cents per share in 2023. That means SGHC stock may be trading for just 10.7x forward earnings right now.
With a profitable European business to sustain it, Super Group can continue to expand Betway’s U.S. presence. Prioritizing profitability over market share, it could continue to grow earnings. This, plus increased awareness of this lesser-known sports betting stock by U.S. investors, could propel it to higher prices.
On the date of publication, Thomas Niel held BTC. He 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.