Many might disagree, but penny stocks are ideal diversification vehicles. Although they often possess outlying risks, penny stocks have low correlations with traditional investment portfolios, providing investors with diversification benefits. Moreover, if selected correctly, penny stocks can produce asymmetrical returns.
Given the above, I embarked on a screening journey to present my readers with three best-in-class penny stocks. Methodologically, I focused on fundamental performance, industry positioning, valuation and technical analysis. In addition, I looked at the prevailing market sentiment to ensure systematic alignment.
My take on penny stocks is merely one of many. However, if yours is similar to mine, then here are three penny stocks to consider.
Gaiam Inc. (GAIA)
Gaiam (NASDAQ:GAIA) is an ad-free streaming platform with content ranging from traditional series’ to niche topics like yoga and meditation. The firm generates revenue from subscription fees, which start at around $11.99 per month with annualized discounts available.
I don’t know about you, but I’m tired of being bombarded by unsolicited advertising. As such, I won’t mind paying $11.99 per month. Moreover, Gaiam presents niche content, which adds value in a crowded streaming industry.
Gaiam has produced tangible financial results, proving its worth. The firm reported a membership count of 839,000 in its latest fiscal quarter, a 9% year-over-year (YOY) increase. Additionally, the company’s membership growth translated into $21.69 million of quarterly revenue, beating analysts’ estimates by $290,000.
Lastly, GAIA stock looks good from a capital market’s point of view. Its price-to-sales ratio of 1.25x indicates absolute value, given its scintillating five-year compound annual growth rate of 12.72%.
Jaguar Mining (JAGGF)
Canadian-based Jaguar Mining (OTCMKTS:JAGGF) mines in Brazil. The firm emphasizes low-cost gold mines with long-life abilities. Moreover, Jaguar Mining focuses on regions with conducive infrastructure to support its scalable mining endeavors.
Although it has yet to achieve large-scale status, Jaguar Mining’s access to the Iron Quadrangle presents various potentials. The company’s land position spans 58,000 hectares, making it one of the most substantial participants in the region. As mentioned, Jaguar Mining is a small-scale miner. But, its vast land accessibility provides it with the necessary latitude to reach large-scale status one day.
Furthermore, the quality of Jaguar Mining’s salient features is echoed by its key metrics. The company has a commendable return on common equity ratio of 7% and trailing quarterly earnings growth of 14.3%, showing its operational resilience.
JAGGF stock has shed approximately 10% of its value in the last month, dragging its relative strength index below 40. As such, I consider JAGGF stock a terrific buy-the-dip opportunity, especially given its comprehensive fundamental attributes.
Broadwind (BWEN)
Broadwind (NASDAQ:BWEN) has a market capitalization of sub-$100 million. However, don’t underestimate this asset; it has plenty of potential.
The company operates as a manufacturer, primarily catering to the cleantech industry, a domain forecasted to grow by 9.1% annually until 2032. Broadwind operates through three segments of heavy fabrications, gearing and industrial solutions.
Combined, they provide noteworthy synergies, including sharing human capital and cross-sales initiatives. In fact, Broadwind’s segmental synergies are echoed by BWEN stock’s scintillating return on common equity ratio of 15.9%.
Furthermore, Broadwind’s short-term value drivers are intact, conveyed by its successful first-quarter earnings report, which saw it surpass its revenue estimate by $2.53 million. Moreover, BWEN stock has firm liquidity ratios, evidenced by its current ratio of 1.47x, providing its price-to-book ratio of 2.68x fundamental support.
I believe BWEN stock is undervalued and ready to prosper!
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, Steve Booyens did not hold (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.