The sell-off in the broader stock indexes such as the S&P 500 and the Nasdaq has led to the rise of penny stocks to buy.
True, it’s tempting to buy high-performing momentum stocks. But beware of the pattern of investors buying high in hopes of selling even higher later. On the other hand, buying stocks that show some marginal weakness may let people buy low and sell high instead.
The depressed prices of these penny stocks mean one can scoop up more shares at a discount. If you subscribe to the Dividend Irrelevance Theory, you’ll appreciate that growth matters than income. Penny stocks generally don’t pay dividends, as they invest almost all of their earnings into future growth. But is this a good or a bad thing for investors?
In this article, I’ll attempt to answer that question by covering three great penny stocks to buy. Each company has a unique value proposition that may lead to strong returns moving forward.
Ardelyx (ARDX)
Ardelyx (NASDAQ:ARDX) is a biotechnology company that focuses on developing novel therapies for unmet medical needs. The company’s growth and potential breakthroughs in medical treatments could lead to substantial gains.
Most recently, ARDX stock reported a Q1 loss of $0.13 per share, a negative earnings surprise of -18.18% compared to the consensus estimate. Despite the loss, the company surpassed revenue estimates by 12.83%, posting revenues of $11.37 million for the quarter ended March 2023.
The company also presented positive data at the National Kidney Foundation 2023 Spring Clinical Meetings. This reinforced the potential efficacy and safety of XPHOZAH (tenapanor) treatment for treating hyperphosphatemia, an electrolyte disorder.
Even conservative investors may find benefit in investing in biotech stocks due to their high growth potential. This makes ARDX one of those penny stocks to buy.
Snowline Gold (SNWGF)
Snowline Gold (OTCMKTS:SNWGF) is a Canadian mining company that explores and developes gold-producing properties in the Yukon. With the global demand for precious metals and the company’s strategic focus on untapped regions, Snowline presents an opportunity for significant upside.
Indeed, the company has had a hot run in 2023. The company’s share is up 73.96% year to date, showing more benefit to come. With only 134 million shares outstanding, investors who buy in on the ground floor could see an appreciable upside even if the company decides to raise capital via equity.
A short-term weakness in SNWGF could signal a buying opportunity soon. It reported a net loss of CAD 6.84 million for Q2 2023, compared to CAD 2.59 million a year ago, with a loss per share of CAD 0.05. For the first six months of 2023, the net loss was CAD 9.73 million, up from CAD 3.46 million a year ago.
It’s not unusual for a company as small as SNWGF to have volatile fundamentals. So if you are looking for a gold-mining penny stock to add to your portfolio, choose Snowline Gold.
Nordic American Tankers (NAT)
Nordic American Tankers (NYSE:NAT) is a Bermuda-based international shipping company that owns and operates oil tankers. With the global economy recovering and the oil industry poised for growth, Nordic American’s recent profitability and expansion strategies make it a compelling investment.
NAT stock reported Q1 2023 earnings of $0.22 per share, surpassing analyst consensus estimates of $0.20. It also marks a significant improvement from a loss of $0.14 a year ago. The company’s revenues reached $87.09 million for the quarter, a substantial increase from $15.52 million year prior, beating estimates by 9.48%.
In the short term, a buying zone could be developing before our eyes. NAT is currently undervalued on several key multiples including on a forward P/E basis compared with its peer universe. Nordic American Tankers makes for a solid penny stock pick.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines