One of the my co-workers was telling me a funny story the other day. She had informed some people that her job was hunting down the best penny stock investments, and they looked at her as if she was crazy. “Are there any good penny stocks out there?” they asked. “Aren’t they all just, like, really bad?”
I had to laugh. The truth is those people are almost right – it is likely that 99% of equities selling below $5 are indeed very bad bets. But I maintain that there are a few high-quality penny stocks in the market that have been unfairly forgotten, ignored, or treated by investors.
In this column, I aim to highlight these “diamonds in the rough” for retail investors like you. Below, you’ll find some penny stocks my team and I are considering carefully. Like all low-priced stocks, they’re associated with a lot of risk … but equally, I believe, a great deal of potential upside.
Some of the set-ups I describe below may no longer be relevant or intact as of the time you read this article. Please conduct your own due diligence. Many stocks mentioned here were also discussed in the Peter Leeds Newsletter. Peter may own shares in some of the investments mentioned, in which case that fact will be clearly indicated. Please note that penny stocks are notoriously volatile.
First, Some Updates
RF Industries, Ltd. (RFIL)
Last month, I wrote here that RF Industries, Ltd. (RFIL) was still undervalued at $5.91 and encouraged readers to investigate this “interconnect products and systems” manufacturer further. I hope you did, because midway through March, the stock price burst up to the $7.50 levels after news of a hot new $6.5 million contract for RF Industries was announced.
Despite news of a smaller contract emerging a week later, RF Industries stock has fallen back down to $6.03. This may be due to some insider selling. If this is the case, however, I think shareholders are over-reacting – and once again, the stock appears to be oversold.
After all, the company is exceedingly well placed to benefit from the 5G revolution, and its financials are strong. I wouldn’t be surprised if RF Industries popped up again any day now. It does seem as if the stock has trouble keeping up momentum, however, so investors may want to move quickly here.
VerifyMe, Inc. (VRME)
As a reminder, VerifyMe, Inc. (VRME) helps (in its own words) “brand owners monitor, control, and protect their supply chain with software and counterfeit prevention technologies.” Imagine, for example, that the owner of a luxury handbag brand sees the resale market swarming with cheap counterfeits of its products. VerifyMe can help that company stem the tide of fakes.
Overall, the stock didn’t do great over the past month, losing about 6% of its value since I last discussed it. This is despite a spike to around $5.25 in the middle of the month, which led to VerifyMe stock recovering some previously lost terrain – but only briefly, because since then prices have dropped to close to $4.
Investors seem to be disappointed by the company’s full-year results released on March 26. I don’t entirely blame them, with the group’s net losses widening significantly from the previous year. That said, revenues have grown 40% on an annual basis compared with the 2019 figures, and that alone suggests to me that VerifyMe is worth more than the $4.07 price at which its shares are currently trading.
Gold Resource Corporation (GORO)
Anyone who’s familiar with my work knows that I’ve been bullish on the junior precious metals miners over the past few years. To some extent, this call has come to fruition, particularly with the silver miners. But we’re still very far from the major gains I expect gold and silver prices to see over the next 12 to 24 months.
I believe that Gold Resource Corporation (GORO) is going to benefit hugely when this happens. Shares have been dogged over the past few months by investor concerns over the Fortitude Gold Corporation (FTCO) spinoff, but a multiple bottoms chart pattern and Fortitude Gold’s broadly positive 2020 results may suggest that Gold Resource stock will climb out of its rut soon.
And Some New Ones
Elys Game Technology, Corp. (ELYS)
Elys Game Technology, Corp. (ELYS) has been around since 1998. But in many ways, the world of gambling and sports betting – the industries in which Elys operates – is one that is still taking shape … with all the potential and risks that this entails. That’s because various forms of gambling that were previously illegal are now increasingly becoming legalized, or are coming closer to it, all over North America.
Meanwhile, Elys Game Technology’s sales are doing well. Like, incredibly well. The five-year revenue average shows 83% growth, with the most recent quarter showing a jump in sales of 43%. Quite simply, the global appetite for gambling via interactive platforms seems to be growing – much in the same way that ordinary people have taken up investing via virtual platforms like Robinhood.
I would have liked to see a better balance sheet here, although technically the quick and current ratios, both at 1.0, do meet my checklist requirements. Still, that’s not as much breathing room for the company as I’d prefer. Nonetheless, I believe that Elys Game Technology investors are in for some much higher prices over the medium to long term. The stock is likely to reach a price of $8 not too long from now, in my view, and $10 could be plausible depending on legislative catalysts.
AbraSilver Resource Corp. (ABRA/ABBRF)
At a price tag of approximately $0.40, AbraSilver Resource Corp. (ABRA/ABBRF) is a true penny stock, with all the abundant risk/reward this entails. However, as risky junior precious metals explorers go, I believe that AbraSilver is looking incredibly well positioned within the space.
A quick summary of the numerous positives: the company has a huge indicated resource (1.7 million ounces of gold equivalent) in Argentina, with all the key infrastructure already in place; it’s exceedingly well-funded, with cash at C$18 million as of Dec. 30, 2020; and it has an enterprise value at C$222 million. Interestingly, AbraSilver also counts Eric Sprott, billionaire precious metals investor extraordinaire, among its major investors (with a 16% stake), as well as the reputable miners Altius Minerals Corporation (ATUSF) at 11% and SSR Mining Inc. (SSRM) at 10%.
Now, this next part is especially important: I note that AbraSilver has yet to produce a single dollar in revenue. Generally speaking, I don’t like the precious metals explorers because of how risky they are. And there are already a ton of excellent, undervalued precious metals miners out there you can look into. Specifically, Gold Resources, Avino Silver & Gold Mines Ltd. (ASM), Fortuna Silver Mines Inc. (FSM), and Silvercorp Metals Inc. (SVM) are dirt-cheap at the moment, in my opinion.
However, if you’re a big risk-taker, and if you have as much faith in the eventual outperformance of the precious metals as I do, AbraSilver stock may be worth some further research on your part. I for one am very interested to see where it takes us.
Best Brokers for Penny Stocks
Interactive Brokers’ very low per-share trading commission of $.005 ($1 minimum per trade) and up-to-the-split-second real-time margin calculations are ideal for penny stock traders. IBKR Lite clients can trade penny stocks for $0.
Low commissions, maximum 1% of trade value for IBKR Pro, $0 for IBKR Lite
Streaming real-time data, including account information
IBot, IB’s AI-powered online assistant, can help find features
Data streams on only one device at a time
Traders Workstation a steep learning curve
IBKR Pro customers charged fees to trade, though they are low
Schwab’s research pages point out the exchange on which a stock trades, which will keep you informed of the inherent risk. There are a variety of platforms available; the StreetSmart platforms have customizable charting and streaming real-time quotes. Schwab does not charge trading commissions on all stocks (including penny stocks) and ETFs.
Excellent screeners available on StreetSmart Edge
Free access to a wide array of news feeds
Strong customization and personalization options on StreetSmart Edge
The sheer number of features and reports available sometimes overwhelming
Transaction history for just 24 months online
Uninvested cash not swept into a money market fund
Penny stocks are volatile and can generate catastrophic losses. Price levels in this article are hypothetical and do not represent buy recommendations or investment advice. Keep in mind that it’s your responsibility to make trading decisions through your own skilled analysis and risk management.
Peter Leeds is the author of several books, including the international bestseller, “Penny Stocks for Dummies.” He and his team also issue a newsletter devoted exclusively to penny stock picks and analysis, as well as a popular YouTube channel PeterLeedsPennyStocks.