3 Penny Stocks With Surprisingly Superior Fundamentals
The question of when to add risk to a portfolio is a difficult one to answer. A rush toward riskier equities after the pandemic-induced sell-off led to a surge in many stocks. Among the biggest winners were penny stocks whose relatively low market capitalizations meant outsized returns for some lucky investors.
However, a reversal of the Federal Reserve’s overly accommodative monetary policy has changed the game. Investors are increasingly wary of putting capital to work in growth stocks. Instead, they appear to be taking a more favorable view of companies that return capital to shareholders rather than those that simply provide a return on capital.
That said, for long-term investors interested in putting a small amount of capital toward higher-growth companies, there are a few penny stocks that look attractive right now. The names on my watch list all have superior fundamentals relative to their peers, adding a modicum of safety in what is still a highly speculative game.
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Borqs Technologies (BRQS)
Source: iStock
Few investors have even heard of Borqs Technologies (NASDAQ:BRQS). Technically this penny stock is a nano-cap, as it has a market capitalization of less than $50 million. It doesn’t get much smaller than that.
Borqs provides 5G wireless, Internet of Things (IoT) and clean energy solutions, predominately in the United States, India and China. Perhaps its most exciting current endeavor from an investment perspective is the company’s plans to help build out India’s 5G ecosystem. If Borqs is successful at making inroads into the populous country’s 5G market, the growth opportunity will be huge.
It’s worth noting that there’s a lot of work to be done to make this dream a reality. The ability to provide 5G gateways to residential and commercial customers is going to require a lot of capital. And while the Indian market is incredibly large and fast-growing, it’s one that still carries risks.
That said, should Borqs execute on its Indian expansion plans, the penny stock could soar, making it an attractive option for speculative capital.
Calithera Biosciences (CALA)
Source: motorolka / Shutterstock.com
Calithera Biosciences (NASDAQ:CALA) is another nano-cap, valued at around $18 billion. This clinical-stage biopharmaceutical company is focused on developing small molecule compounds for treating cancer.
Curing cancer is the Holy Grail of the biotech sector. With incredible amounts of R&D capital being poured into this space on a continuous basis, companies like Calithera are a dime a dozen. Yet, it may be one that’s worth watching.
In June, the company announced it was enrolling its first patient into Phase 2 trials for its Mivavotinib drug, which it picked up on the cheap from Japanese pharmaceutical company Takeda last year. As Fierce Biotech’s Ben Adams notes, Mivavotinib is an “SYK inhibitor targeting non-Hodgkin’s lymphoma, as well as a ‘first-to-market approach’ for patients with diffuse large B-cell lymphoma (DLBCL) whose tumors harbor MyD88 and/or CD79 mutations.”
These mutations make the cancer harder to treat with current therapies, and Calithera hopes its drug will improve outcomes for patients who have them. Should trial results show Mivavotinib is effective and Calithera is able to secure FDA approval and bring it to market, this penny stock could explode higher.
Vizsla Silver (VZLA)
Source: Phawat / Shutterstock.com
Vizsla Silver (NYSEARCA:VZLA) is the biggest of the penny stocks on this list with a market cap of $207.5 million, making it a microcap as opposed to a nano-cap.
Like many precious metals miners, it has seen its shares fall sharply this year. Despite concerns about a recession, precious metals have underperformed, with higher real yields in the fixed-income market lessening demand for gold and silver.
That said, there’s a lot to like about this exploration and development company. In June, Vizsla announced its expansion of operations in its key Panuco mine in Mexico. This operation led to the excavation of 2,098 grams per tonne of silver equivalent over a 4.3-meter width.
This high-concentration vein has done little to sway investors, though. Despite it and additional finds in and around the area, it’s clear the appetite for micro-cap precious metals miners isn’t there.
However, if you believe rising silver prices are on the horizon, this penny stock represents a compelling speculative opportunity, as well as a potential takeover target.
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.
Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Chris MacDonald 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.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
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