The stock market is pretty complex, which is why several brokerages and specialists analyze the stock markets and their patterns for a livelihood. Penny stocks are popular among value investors who believe that the price of these stocks would rise following a trigger such as a new product launch or a merger with a larger firm.
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What Are Penny Stocks?
Penny stocks are often stocks that trade for less than $1 per share. However, many investors consider stocks that trade for less than $5 per share to be penny stocks.
Companies whose shares sell for less than $5 a share are often not well-known, and they are often tiny enterprises in terms of market capitalization and trading volume. There are, however, a few exceptions to the norm.
Penny stocks are traded on the Toronto Stock Exchange (TSX), the TSX Venture Exchange, the Canadian Securities Exchange, and the NEO Exchange in Canada.
They trade on the United States and the New York Stock Exchange (NYSE), Nasdaq, Over-The-Counter Bulletin Board (OTCBB), and Pink Sheets.
Penny stocks may trade on bigger exchanges such as the TSX and NYSE, although they are typically linked with smaller and less-famous exchanges.
When a Canadian publicly listed firm becomes sufficiently significant, it often graduates from the TSX Venture Exchange to the TSX. The TSX Venture Exchange was formerly known as the Canadian Venture Exchange (CVE), and stock searches will refer to the exchange by its abbreviated name CVE.
A firm will go to the TSX to strengthen its liquidity, chances of gaining analyst coverage, and visibility among small and major investors.
Why Are Penny Stocks So Cheap?
Penny stocks are frequently issued by firms that do not fulfill the rules or have the financial resources to be listed on larger exchanges. Consequently, they often have modest market capitalizations and laxer standards.
A greater share price is a need for listing on major markets. There is no minimum investment requirement for penny stocks, and as a result, these stocks can trade for pennies or even fractions of a penny. The key to determining a company’s size is not its share price but its market capitalization, which is vital.
Why Invest in Penny Stocks?
Penny stocks are among the most volatile types of securities; there is the potential to earn huge gains in a short period, but there is also the possibility to lose a great deal of money in a short amount of time.
Similar to other traders, people who deal in penny stocks may be short- or long-term investors. In Canada, penny stock stocks are often conducted on smaller markets such as the TSX Venture Exchange, which have fewer limitations.
Consequently, penny stocks are not for everyone, and these investments are very dangerous and should be treated with caution.
We propose that beginning investors begin with safer investments such as GICs. Suppose you’re retired, and most of your income is from the Canada Pension Plan or Old Age Security. In that case, you should avoid penny stocks since their prices can change significantly from day to day, and you don’t need that kind of portfolio volatility.
Are Penny Stocks A Prudent Investment?
Herein lies the argument around penny stocks. According to some investors, penny stocks are a good investment that makes it simple to generate substantial profits.
Penny stocks are volatile, and over-the-counter marketplaces are less regulated than big exchanges.
Any investment may be dangerous, but buying penny stocks adds an additional element of unpredictability.
They should be handled more like lottery tickets and only exchanged with funds that can be afforded to be lost.
Can You Become Wealthy With Penny Stocks?
Penny stocks are stocks, so to speak. Consequently, you may profit by investing in them. However, it will be extremely difficult to accumulate considerable money, much alone become wealthy, through penny stocks alone.
Consider the most prevalent way penny stock investors generate money: short-term profits. In time to growth and value stock investment, which involves searching for firms that will exhibit long-term growth, penny stock investors seek companies that will achieve rapid success. When this increase occurs (if it occurs), penny stock investors generally sell their shares for a quick investor.
What’s wrong with this? First, we are discussing penny stocks. Even if a $5 penny stock appreciated by 100%, you would only get $5. To get wealthy with penny stocks, you must trade at high levels, and even then, you would likely make less than you would with a successful growth stock.
The second issue is uniformity. It’s possible to generate a rapid profit from a number of penny stocks, but it’s uncommon for an investor to do so regularly over extended time periods. Those who do are professionals who invest considerable amounts of time and money in penny stock endeavors (even pros lose). You should not expect to amass fortune just through penny stocks unless you are prepared for this type of trading.
If you have spare cash and desire to invest in penny stocks, by all means, give it a shot. However, if your objective is to invest for your retirement or if you’re a novice investor, penny stocks are not the best choice.
The Hottest Canadian Penny Stocks to Buy
Kodiak Copper (CVE: KDK)
The Canadian mining business Kodiak Copper holds copper porphyry prospects in Canada and the United States. The business is now in the process of building its fully-funded copper mine in British Columbia, which has just revealed highly encouraging findings from its first drilling.
Although the firm does not yet have operational performance since its mine is still in development, it has a bright future owing to the importance of copper in renewable energy. Copper is essential in solar panels, wiring, wind turbines, and electric vehicles. In addition, it is anticipated that copper consumption will increase about tenfold by 2030 owing to the substitution of fossil fuels with renewable energy.
Kodiak Copper has lately provided investors with a phenomenal return because of the ongoing bull market in commodities caused by huge infrastructure expenditure by major nations such as the United States and China. As a consequence, Kodiak has increased by 145% over the past year.
Athabasca Oil (TSX: ATH)
Athabasca Oil (TSX: ATH) was added to this list when it was valued at around $0.22. Therefore, if you had seen this update in 2020, you would be sitting on a near 10-bagger since the stock has benefited from a higher oil price and is currently trading in the $2 level.
The firm produces light oil in the Motney and Duvernay fields in Alberta, Canada, and heavy oil in the vicinity of Fort McMurray. The reserve life of the heavy oil assets is extensive.
Athabasca expects to begin generating free cash flow over the next few years but must spend around $125 million annually on sustaining expenditures. It has cash on the balance sheet, but it must also refinance almost US$450 million in debt maturing this year.
This is a corporation that might potentially gain even more if oil prices continue to trend upward. At the time of writing, the firm has earned over $100 million in free cash flow over the past twelve months, following a difficult 2020.
Namesilo Technologies
Namesillo Technologies is an ICANN-accredited domain registrar that provides inexpensive, secure, and user-friendly domain registration and administration. Namesillo is distinguished from other domain registrars by the fact that the more domain names you purchase, the greater your discount.
Despite the fact that the stock price was higher in 2019, hitting $0.51, experts’ predictions remain optimistic, forecasting that the price will double during the next 12 months.
We cannot deny that technology influences our daily life. Due to the reliance of businesses on digital marketing, the demand for domain names is quite strong. All of these indicators imply that it is prudent to consider purchasing Namesilo stocks now.
Hive Blockchain Technologies (TSX: HIVE)
Currently, there may be no sector as fashionable as blockchain technology. Hive is a firm that directly engages in the crypto mining market and is the first Canadian mining company to go public. These qualities make Hive one of the best Canadian penny stocks.
Hive, headquartered in Vancouver, British Columbia, has operations throughout North America and in Scandinavian nations such as Sweden and Iceland. Iceland, in particular, has a cheap and widely available green energy infrastructure, making it a desirable site for cryptocurrency mining.
Temperatures in the Nordic area are inherently colder, making it simpler to keep mining rigs and data centers at a lower temperature. Hive mines just Bitcoin, Ethereum, and Ethereum Classic, the three cryptocurrencies that serve as benchmarks.
As of September 2021, Hive had mined and held 656 Bitcoin, a number whose worth will continue to climb. Hive has also acquired substantial holdings in DeFi Technologies and Network Media Group, the latter of which is a prominent NFT brand.
Hive has the potential for a relatively high floor among Canadian penny stocks if it invests its crypto reserves in additional revenue streams. Keep in mind that Hive’s stock price follows the prices of Bitcoin and Ethereum.
5N Plus
5N Plus, a Canadian firm founded in Saint-Laurent, Quebec, manufactures high-purity metals and chemicals for use in the production of medicines, thin-film solar panels, LEDs, etc. There are sales offices and production facilities for 5N Plus across Europe, North America, and Asia.
During the COVID-19 epidemic, 5N plus’s global sales and average stock value dropped, as they did for many other businesses. The average stock price peaked in April 2019 at $3.66, then dipped to $1.12 in March 2020 before rising to $2.26 in February 2022.
Since its price stability over the past several months, 5N Plus has been one of the top inexpensive Canadian stocks for investment.
OrganiGram Holdings (OGI)
Organigram Holdings is Canada’s largest medicinal and recreational cannabis grower and supplier. Its principal indoor plant is located in Moncton, New Brunswick, and it accounts for sixty percent of the company’s entire output and encompasses more than fourteen acres.
Organigram manufactures edibles and derivatives, and in 2021 it bought the Edibles and Infusions Corp. (EIC), a major retailer in Manitoba. Since then, its sales have increased, but its quality has remained consistent. OGI controls all environmental parameters within its indoor facilities in order to maximize yield and maintain appropriate microclimates for each plant strain.
FP Newspapers (TSXV: FP)
Shares of FP Newspapers (TSXV: FP), a Canadian penny stock with poor liquidity, must be traded with extreme caution. The typical daily trading volume for the stock is only a few thousand shares, and the stock can go an entire day without trading.
There is no doubt, though, that it is an amazing addition to this list. When we first featured FP Newspapers as a solid Canadian penny stock, it was trading within the area of 30 cents, and it is at $1.19.
I’ll be the first to confess that a corporation that owns 49% of the distributable cash of multiple Manitoba newspapers, including The Winnipeg Free Press, does not sound like a particularly interesting penny stock prospect for 2022. However, despite the price increase, it is still absurdly inexpensive.
In the twelve months before writing, the corporation had earned around $0.12 per share. Its stock price is less than tenten times this amount. Very few penny stocks are successful today, much less selling at tenten times profits.
The stock might possibly pay a big dividend in a few years as it begins to generate more revenue and brings its finances under control. If this occurs, you’ll be glad you came in today.
Unfortunately, just one analyst follows the stock, and therefore, there are no projections for 2022 and beyond. However, this one analyst is quite positive about FP Newspapers, recommending a price objective of $4.50 per share in 18 months.
HIVE Blockchain Technologies
HIVE Blockchain Technologies is a Canadian-based blockchain company specializing in mining and selling digital currency. They have been able to remain current and competitive throughout the years.
Despite its largest decline during the lockdown, HIVE’s value has been statistically constant over the past few years. Since January 2022, however, HIVE has maintained a price over $42, hitting $2.72 in March 2022.
CloudMD Software (CVE: DOC)
CloudMD is a software and technology firm that offers digital medical consulting services. The company’s software allows Canadians to connect virtually with registered and certified physicians for consultations without physically visiting a clinic.
During COVID, when people were compelled to stay at home, the firm profited from a large tailwind. Despite the fact that coronavirus has dominated the news for the past several months, this does not indicate that people have not contracted chronic sickness.
As a result of lockdowns and the closure of the majority of hospitals to prevent the spread of COVID, the firm experienced a large increase in adoption and user registration. In addition, the majority of hospitals were obliged to devote all of their resources to the epidemic. This helped the company’s product gain popularity since it addressed a problem faced by both doctors and patients. It is also free for the patient in many Canadian areas.
In addition to offering a platform for virtual consultations, the company’s software enables prompt follow-ups, direct prescription delivery to a pharmacy of your choosing, appointments at odd hours, and time savings on routine matters such as prescription renewals, etc.
How Do You Locate Penny Stocks Prior to Their Explosion?
Finding profitable investments requires time and effort. However, locating profitable penny stocks might be much more challenging. Be cautious of salesmen and stock promoters who attempt to offer you the next best penny stock. Frequently, they overestimate or overstate the company’s potential and may also attempt to pressure you into investing before you have the time to evaluate the investment. Similarly, you should avoid purchasing a stock because a friend, coworker, or family advised you to do so.
However, there are a few strategies for locating penny stocks. Penny stocks are marketed on several investors and market websites and news and social networking sites such as Reddit. Even financial publications make it a point to publish periodic lists of penny stocks they deem to be worthy buys.
Research penny stock lists and the firms on such lists as a starting point. The more information you can collect, the more likely it is that you will make a profitable investment. Remember that regardless of where you choose to begin your research, you must ensure that the site is trustworthy and corroborate the facts you obtain from it with another equally credible source. In addition, you may locate penny stocks by searching the TSE listings for stocks that trade for less than $5 per share.
Conclusion
Penny stocks are typically linked with high risk, but there is the potential for large profits if you know which penny stocks to purchase. However, if you lack stock market expertise, it is suggested that you retain the services of an expert. There are several fraudulent penny stocks on the market, so exercise caution before investing your hard-earned cash in any firm.
