Penny stocks have always fascinated investors. That’s because higher-risk, lower-priced penny stocks to buy can be portfolio game-changers. While it’s never a good idea to go overweight on penny stocks, investors can always safely allocate 10% to 20% to these stocks.

We should also note that penny stocks are not purely speculative. In fact, there are emerging businesses that can make it big in the long-term. Oftentimes, exposure to these penny stocks can be rewarding over a period of three to five years.

Granted, current markets find themselves in uncertain times. All thanks to inflation, interest rate hikes and GDP growth. Still, it’s not difficult to spot deeply undervalued penny stocks to buy. Some allocation to these stocks is helpful in creating a diversified portfolio. Let’s take a deeper look into four penny stocks to buy.

Heron Therapeutics (HRTX)

Heron Therapeutics is one of the top penny stocks to buy. Any good or bad news related to clinical trials can send the stock skyrocketing or plunging. With a short-interest of 35%, I believe that Heron Therapeutics (NASDAQ:HRTX) is poised for a big short-squeeze rally.

With a high level of operating losses, financing research and development have been a concern. However, Heron recently raised $76.5 million through stock and warrant offering. With a total cash buffer of $158.7 million, Heron has cash runway through 2024. At the same time, Heron has focused on cost cutting and operating margin is likely to improve in the coming quarters.

Recently, Heron received U.S. FDA approval for post-operative agent to address nausea and vomiting. This is the fourth drug approval for the company.

I expect revenue growth to accelerate in the coming quarters. Overall, I would bet on the stock doubling from current levels within the next 12months.

MINISO Group (MNSO)

Shares of MINISO Group (NYSE:MNSO) have declined by almost 65% in the last 12months. The reasons include growth deceleration thanks to the pandemic and dilution of equity.

However, the retail store operation with increasing global presence seems poised for a comeback. For the last financial year, MINISO reported revenue growth of 21% in China. However, international revenue increased by 49%. Further, for Q4 2022, the company also reported the highest adjusted operating margin in the last 10 quarters.

It’s also worth noting that on a year-on-year basis, the number of MINISO stores globally increased by 450. If this growth sustains, the company could accelerate top-line growth as pandemic-related headwinds wane.

In July 2022, Blue Orca Capital’s short report had allegations regarding the company’s franchise model and land deals involving the chairman. Recently, Miniso completed an independent investigation, which concludes that the allegations by Blue Orca were not substantiated.

Going forward, investor focus is likely to be on growth and margin improvement. I am optimistic on that front and MNSO stock is likely to trend higher.

Bitfarms (BITF)

Bitcoin (BTC-USD) mining stocks have plunged with the correction in cryptocurrencies. Bitfarms (NASDAQ:BITF) traded at 52-week highs of $9.40 and is currently at $1.04. Assuming a scenario that Bitcoin gradually trends higher in the next 12 to 24 months, BITF stock could deliver multi-fold returns.

While Bitcoin struggles, business development has still been positive for Bitfarms. As of September 2022, the company achieved hashing capacity of 4.1EH/s. The company’s hashing capacity has surged by 82% as compared to December 2021.

Another reason to like Bitfarms is the fact that the company is generating positive cash from mining operations even at $20,000 Bitcoin. For Q2 2022, the company reported an adjusted EBITDA margin of 45%. With higher mining capacity, BITF stock is likely to skyrocket if Bitcoin surges and margins expand significantly.

Bitfarms also reported cash and equivalents of $46 million as of Q2 2022. For the same period, the company reported $62 million in digital assets. Additionally, with $38 million in credit facility, Bitfarms is well positioned to pursue aggressive growth.

Cronos Group (CRON)

In 2019, Cronos (NASDAQ:CRON) stock touched highs of $22. After a big correction to around $5, the CRON stock again tripled in early 2021 on hopes of accelerated legalization of cannabis. Nowadays, if regulatory headwinds wane, CRON could be a big winner again.

At current levels of $2.82, the stock is significantly undervalued. It’s therefore among the top penny stocks to buy.

From the perspective of growth, the outlook seems optimistic. For Q2 2022, Cronos reported revenue growth of 48% on a year-on-year basis to $23.1 million. For the same period, revenue from Israel surged by 212% to $7.2 million. Medicinal cannabis can be a potential game-changer for the company.

For the first half of 2022, Cronos has also narrowed EBITDA losses. The company reported cash and equivalents of $790 million as of Q2 2022. Therefore, there is ample financial flexibility to make big investments to accelerate growth.

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Read More: Penny Stocks — How to Profit Without Getting Scammed

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.