The year 2021 will be remembered for price-action among penny stocks and meme stocks. On a relative basis, the penny stock investing euphoria has declined. However, that does not imply absence of good short- to medium-term money-making opportunities.
It’s also nice to start a new year by beating the index or pocketing some quick returns. With the Federal Reserve looking to tighten liquidity, I would not go overboard on penny stocks. There is a possibility of markets remaining jittery.
However, it makes sense to consider some exposure to penny stocks that can provide quick returns at the blink of an eye. Exposure to penny stocks also diversifies the portfolio and can be a potential catalyst for returns that comfortably beat inflation.
My focus is on penny stocks that are attractive for the near-term and can be considered through 2022. If business developments remain positive, these are names that can provide multi-fold returns.
Let’s discuss seven penny stocks to buy for January:
- Hive Blockchain (NASDAQ:HIVE)
- BTCS (NASDAQ:BTCS)
- Transocean (NYSE:RIG)
- ObsEva (NASDAQ:OBSV)
- Electrameccanica Vehicles (NASDAQ:SOLO)
- Hecla Mining (NYSE:HL)
- Cronos Group (NASDAQ:CRON)
Penny Stocks to Buy: Hive Blockchain (HIVE)
The recent correction in Bitcoin (CCC:BTC-USD) has been sharp and it seems that there is panic among investors. However, Bitcoin has been historically volatile and the decline presents a good buying opportunity. Among proxy cryptocurrency investments, HIVE stock looks attractive.
From November 2021 highs of $5.60, HIVE stock has corrected to current levels of $2.17. The company is a diversified miner with Bitcoin and Ethereum (CCC:ETH-USD) mining operations. From a growth perspective, Hive reported Q2 2022 revenue of $52.6 million. For same quarter a year earlier, the company’s revenue was $13 million. Clearly, the growth trajectory is robust.
Further, with more miners to be deployed in 2022, the growth momentum is likely to sustain. Hive Blockchain has also been active on the front of strategic investments. The company has a 4.9% stake in DeFi Technologies. Recently, the company also acquired a stake in Network Entertainment (OTCMKTS:NETWF), which gives exposure to the NFT world. Overall, HIVE stock looks oversold and I expect a sharp rally once Bitcoin resumes an uptrend.
BTCS stock is another interesting name among penny stocks that’s worth considering for near-term gains. The company has been in news recently with the announcement of a Bitcoin dividend. Investors will have the option of receiving a cash dividend or Bitcoin equivalent dividends.
As an overview, BTCS operates validator nodes on next generation blockchains. The validator nodes allow BTCS to receive a percentage of token holders staking rewards. Staking payouts were $9 billion in 2021. It’s expected to increase by over 400% by 2025. This presents a big growth opportunity for BTCS.
Proof-of-stake (PoS) blockchains are integral to innovation in DeFi, NFT and Metaverse. The company’s business model is therefore integral to the growth of the industry.
Talking about the growth momentum, the company’s digital asset holdings were $4.15 million as of Q4 2020. Holdings have increased to $36.45 million as of Q4 2021. As the company broadens its operations and the blockchain industry growth, the digital assets will swell. This also provides visibility for dividend growth in the next few years.
Penny Stocks to Buy: Transocean (RIG)
With Brent oil trading at $80 per barrel, there are attractive investment opportunities in the oil and gas space. Among penny stock, RIG stock looks attractive for a break-out on the upside.
Transocean is a provider of offshore contract drilling services globally. The company currently has 37 ultra-deep water and harsh environment rigs. With rising oil price, I believe that day-rates are likely to be favorable. This will boost the company’s EBITDA (earnings before interest, taxation, depreciation and amortization) margin. The company’s EBITDA margin has improved in recent years.
It’s worth noting that the company has an order backlog of $7.1 billion. The backlog provides cash flow visibility for the next 12-24 months. Additionally, with $2.7 billion in liquidity buffer, Transocean is well positioned from a fundamental perspective.
Another point to note is that Transocean still has 12 cold stacked rigs with two rigs under construction. If Brent sustains above $80 per barrel, it seems likely that these rigs will be contracted. This provides visibility for backlog and cash flow upside.
Once cash flows accelerate, Transocean will also be positioned to deleverage. Considering the current order backlog, debt servicing is unlikely to be a concern.
RIG stock had touched highs of $5.13 in July 2021. I will not be surprised if the stock revisits the highs considering the backlog and the macro-outlook.
In the bio-pharmaceutical segment, OBSV looks like an attractive name among penny stocks. The stock has been an under-performer in the last 12 months. However, with positive clinical developments, a big break-out seems very likely.
As an overview, ObsEva is a clinical stage bio-pharmaceutical company. The focus is on therapeutics for women related to reproductive health and pregnancy. Currently, the company’s late-stage clinical pipeline related to conditions that include treating uterine fibroids, endometriosis and preterm labor.
According to ObsEva, 9 million women in the United States are affected by fibroids. This will open-up a big addressable market for the company. Similarly, 176 million women worldwide suffer from endometriosis.
Therefore, there is a big unmet need. It remains to be seen if ObsEva can clear the clinical trials and commercialize its drugs globally. Things seem to be moving in the positive direction with the U.S. Food and Drug Administration approving the review application for linzagolix (for uterine fibroids). The company is also on-track for an approval from the EU.
Overall, OBSV can deliver multi-fold returns from current levels. Some exposure to the stock can be considered as the markets wait for a positive regulatory outcome.
Penny Stocks to Buy: Electrameccanica Vehicles (SOLO)
Source: Luis War / Shutterstock.com
SOLO stock has witnessed a deep correction in the last 12 months. During this period, the stock has declined by 69%. I believe that a sharp reversal rally is round the corner from oversold levels.
One reason to be bullish is the commencement of deliveries. As of November 2021, the company had delivered 42 SOLOs. With a base price of $18,500, it seems likely that the EV will grab more attention.
Further, the company has commenced construction of a U.S. assembly and engineering technical center. The facility will have an annual capacity of 20,000 vehicles. Electrameccanica is therefore positioning itself for deliveries growth in the coming quarters.
It’s also worth noting that Electrameccanica is targeting markets that include their EVs for restaurant deliveries, corporate ride sharing and courier service. Partnership on this front can take SOLO stock higher.
From a financial perspective, the company has cash of $228 million and almost no debt. Therefore, there is ample financial flexibility to invest in creating visibility for SOLO vehicles. The company also has plans to enter international markets in the coming years.
Overall, SOLO stock seems to be significantly oversold. Encouraging booking numbers in the foreseeable future can translate into a meaningful rally.
Hecla Mining (HL)
HL stock is another name that has been in a correction mode, but looks oversold at current levels of $4.87. Hecla Mining is the largest silver miner in the United States. Additionally, the company is also into gold mining.
An important point to note is that Hecla Mining reported operating cash flow of $86.3 million for Q2 2021. However, for the last quarter, the company’s OCF declined to $42.7 million. The reason is relatively depressed gold and silver prices. Hecla still managed to generate free cash flow of $15.8 million.
With Fed tapering and rate hike coming in 2022, there are concerns on performance of precious metals. However, real interest rates are likely to remain negative through 2022. I will not be surprised if precious metals perform well, especially if high inflation persists.
In terms of production upside, Locky Friday asset will continue to deliver growth. By 2023, the asset is likely to have production of 5 million ounces. This will be 2.5 times 2020 production. Therefore, if silver prices remain firm, there is ample top-line and cash flow upside visibility.
Overall, HL stock looks attractive after a sharp correction. It’s also among the penny stocks that delivers regular dividends.
Penny Stocks to Buy: Cronos Group (CRON)
The cannabis industry seems to be at an inflection point. Several countries have already legalized medicinal cannabis. Federal level legalization of recreational cannabis is also likely.
However, cannabis stocks have remained depressed. A key reason is slower than anticipated growth. Cash burn and regulatory headwinds have further depressed cannabis stocks.
CRON stock is oversold after trending lower by 57% in the last 12 months. While cash burn is a concern for Cronos, the backing of Altria (NYSE:MO) is a big advantage.
Cronos has built a wide portfolio that includes wellness, premium and mainstream adult-use brands. Additionally, the company also has presence in hemp-based supplements and cosmetics in the United States.
From a geographical perspective, Cronos has presence in Canada, Germany, Israel and the United States. These are likely to be the biggest cannabis markets in the coming years.
The company has also been making the right moves in the medicinal cannabis segment. As an example, Cronos has tied-up with Technion for clinical research on skin treatment. Evidence backed medicinal cannabis is likely to be a game-changer in the coming years. Overall, CRON stock looks attractive at current levels for a strong reversal rally.
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On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.