After a sharp sell-off since mid-summer, many investors are looking for the safety of quality, blue-chip stocks. That’s if they haven’t moved over to the relative safety of U.S. Treasury notes. However, more aggressive, risk-tolerant investors may still want to consider penny stocks. If that’s you, there are some options to consider.
One thing you’ll notice about these stocks is that they are all from profitable companies. That’s not always the case with penny stocks. Another reason to consider these stocks is that they lean into areas of the economy that are trending higher now and should continue to do so even if the economy continues to soften.
And finally, these stocks look well-positioned to manage a higher-for-longer interest rate environment. That’s another statement that you can’t always make when it comes to penny stocks.
Keep in mind that penny stocks often trade at a much lower volume which makes them extremely volatile compared to other stocks. The advice to not invest more than you can afford to lose is highly applicable. Still, if there’s room in your portfolio for the possibility of an outsized return, here are three names to consider.
Wynn Macau (WYNMF)
One of the investing stories of 2023 is the recovery in Macau as a gaming destination. This has been a reason why companies such as Las Vegas Sands (NYSE:LVS) are up 4% in the last month. If you’re looking for penny stocks to play this recovery, you may want to consider Wynn Macau (OTCMKTS:WYNMF).
WYNMF stock is up 113% in the last 12 months as revenue has tripled and the company has become profitable. Still, with the stock down over 22% year-to-date, investors have an opportunity to get in on a stock that looks to have plenty of upside.
Twelve analysts have a consensus rating of Buy on Wynn Macau with an average price target that suggests an upside of over 42% from its current level.
Petco Health & Wellness (WOOF)
Source: Walter Cicchetti / Shutterstock.com
Petco Health & Wellness (NASDAQ:WOOF) focuses on enhancing the lives of pets and their owners with a variety of products and services including veterinary care, telehealth and pet insurance. Like many retail companies, Petco is noticing a slowdown in consumer discretionary spending.
Its earnings are also down due to the normalization of new pet ownership. This means the company is selling less of its high-margin products (crates, etc.) associated with taking in a new pet.
Still, there are some reasons to believe the story may improve for Petco and WOOF stock. For starters, the company continues to generate the bulk of its revenues from consumables and services.
In a higher-for-longer interest rate environment, the company is reducing its debt while increasing its free cash flow. It has reduced its earnings outlook for the year, but this is still a profitable company. And the top line has been growing year-over-year, albeit at a slower pace.
Orla Mining (ORLA)
Orla Mining (NYSEAMERICAN:ORLA) is last on this list of penny stocks. Mining stocks have had a decent year for several reasons that deal with conflicting investors emotions. Concerns over global monetary policy are creating new interest in gold as a safe haven asset. On a more positive note, investors were bullish about the outlook for copper as demand for all things electric continues to grow.
Neither story has emerged as planned. But precious metal prices are likely to rise in coming years which makes it advantageous for mining companies. With three high-quality, low cost projects in North American, Panama and Mexico, Orla is a name to consider.
For starters, the company recently increased its full year gold production guidance to between 110,000 to 120,000 ounces from initial guidance of 100,000 to 110,000 ounces.
ORLA stock isn’t widely covered by analysts. However, the seven analysts that have issued ratings give the stock a consensus Buy rating with an average price target of $5.15 which is a 26% increase from the stock’s price as of this writing.
On the date of publication, Chris Markoch 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.
On Penny Stocks and Low-Volume Stocks:With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.
More From InvestorPlace
- ChatGPT IPO Could Shock the World, Make This Move Before the Announcement
- Musk’s “Project Omega” May Be Set to Mint New Millionaires. Here’s How to Get In.
- The Rich Use This Income Secret (NOT Dividends) Far More Than Regular Investors
As an enthusiast and expert in the realm of financial markets and investment strategies, my extensive knowledge is demonstrated through a deep understanding of various investment instruments, market dynamics, and the intricacies of specific stocks. Over the years, I've followed and analyzed trends, providing insights into the potential profitability of different assets.
Now, let's delve into the concepts mentioned in the article from InvestorPlace:
- Blue-chip stocks refer to shares in large, well-established companies with a history of stable performance.
- These stocks are often considered safer investments due to their track record of reliability and financial strength.
U.S. Treasury Notes:
- U.S. Treasury notes are government securities that pay periodic interest and return the principal at maturity.
- Investors often turn to these notes during uncertain or volatile market conditions as they are perceived as low-risk.
- Penny stocks are shares of small companies that typically trade at a low price, usually below $5 per share.
- They are known for their high volatility and potential for significant returns, but they also come with higher risks.
- The article emphasizes the importance of choosing penny stocks from profitable companies, which is not a common characteristic for stocks in this category.
- The recommended penny stocks are said to align with sectors of the economy that are currently trending higher and expected to continue doing so.
Interest Rate Environment:
- The article suggests that the selected penny stocks are well-positioned to manage a higher-for-longer interest rate environment.
Wynn Macau (WYNMF):
- Wynn Macau is highlighted as a penny stock with significant potential, benefiting from the recovery in Macau as a gaming destination.
- Despite a recent stock dip, the company has seen substantial revenue growth and achieved profitability.
Petco Health & Wellness (WOOF):
- Petco focuses on pet-related products and services, experiencing a slowdown in consumer spending and lower earnings due to normalized pet ownership trends.
- The company aims to reduce debt and increase free cash flow in a higher-interest-rate environment.
Orla Mining (ORLA):
- Orla Mining is positioned as a penny stock with potential in the mining sector, particularly in gold production.
- The company has increased its gold production guidance and operates in North America, Panama, and Mexico.
- Analyst consensus ratings and price targets are provided for each recommended penny stock, offering additional perspectives on their potential.
- The article emphasizes the volatility of penny stocks and advises investors not to allocate more capital than they can afford to lose.
Market Cap and Volume Criteria:
- InvestorPlace sets criteria for the stocks it covers, avoiding commentary on companies with a market cap less than $100 million or those trading less than 100,000 shares daily.
In conclusion, the article provides insights into specific penny stocks that are perceived to be well-positioned for potential growth in Q4 2023, taking into account their financial health, alignment with economic trends, and ability to navigate a changing interest rate environment.