I must admit at the onset that I am not a big fan of investing in penny stocks. To a large extent, penny stocks are speculative and therefore risky. However, there are exceptions and it’s the task of an investor to filter speculative stocks from fundamentally sound names. I believe that at least 20% to 25% of penny stocks will be value creators.

The positive side to penny stock investing is that if the idea clicks, multibagger returns are a surety. Therefore, even with aversion towards speculation, I make it a point to allocate 10% to 15% of my portfolio towards penny stocks. These are funds that I can afford to lose.

With growth stocks being battered through 2022, there seems to be lot of value in that space. The same holds true for penny stocks. This column talks about three penny stocks to buy for multibagger returns in the next 24 to 36 months.

Borr Drilling (BORR)

In general, penny stocks are screened as names that trade below $5. I am however tempted to talk about Borr Drilling (NYSE:BORR) with the stock trading at $5.3. BORR stock has surged by 200% in the last 12 months. However, I believe that it’s just the beginning of the rally as the company benefits from higher offshore drilling activity.

For 2022, Borr Drilling has guided for revenue and EBITDA of $440 million and $157 million. This would imply an EBITDA margin of 36%. Furthermore, for the current year, Borr has guided for revenue and EBITDA of $760 million and $380 million respectively.

First and foremost, robust revenue growth is on the cards and this will ensure positive stock momentum. Additionally, EBITDA margin guidance for the current year is 50%. With 1,400 basis points expansion in EBITDA margin, Borr is positioned for robust cash flows. This will also ensure that Borr can deleverage in 2023 and beyond.

Solid Power (SLDP)

After trending lower through 2022, Solid Power (NASDAQ:SLDP) stock is already in a reversal mode. In the last one month, the stock has moved higher by 32%. I remain bullish on the long-term outlook for this potential multibagger.

The first point to note is that BMW (OTCMKTS:BMWYY) and Ford (NYSE:F) are investors in the company. This provides a solid financial backing and indicates the point that the stock is more than just speculative.

Recently, Solid Power received $5.6 million from the U.S. Department of Energy to develop more affordable EV batteries. This investment backs the company’s research and effort towards commercialization of solid-state batteries.

BMW has also expanded its joint venture agreement with Solid Power. The latter will be sharing the cell design and manufacturing process with BMW. I believe that this agreement can potentially speed-up the commercialization of solid-state batteries.

The company also intends to ship EV cells to automotive partners in the first half of 2023 for validation testing. This will be another key milestone and stock upside catalyst.

Tilray Brands (TLRY)

Cannabis stocks have remained depressed as the markets wait for the federal-level legalization bill. This seems like a good opportunity to accumulate Tilray (NASDAQ:TLRY) stock. The legalization news would be enough to send the stock soaring.

For the first half of 2022, Tilray reported revenue of $297 million. On a year-on-year basis, revenue declined by 8%. However, there are other positives to note. First, Tilray reported positive operating and free cash flow. The company is on-track to reported positive FCF from all key business units in the current financial year.

Furthermore, Tilray reported cash and equivalents of $433.5 million as of Q2 2023. The company has ample financial flexibility for organic and inorganic growth. As a matter of fact, the company has acquired two brewing companies in the U.S. With this, the company has a strong strategic infrastructure for growth once cannabis is legalized at the federal level.

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.