Learn how to find the best penny stocks under $1 for great high-return investments
Nation, we’re all about those penny stock returns here on the channel. More than 129,000 of you saw the five penny stocks nobody was watching in our August video…you can bet they’re watching now because in less than a month, one of those is up 49% and another, Velocity Financial shot up 70% after the video.
But I got a lot of questions and comments on that video about the price of these ‘penny stocks’ some with share prices as high as $10 each.
Now understand that penny stocks aren’t just those under $1 per share. There’s actually no technical definition for these high-return investments but a widely-accepted one is any company under a billion-dollar market cap.
That’s it. It’s not stocks under $10 or $5…the stock price really has nothing to do with it being a penny stock!
But for this video, I’m coming over to the dark side and picking the best penny stocks under $1 per share. Not only will I show you how to find these moonshot investments, I’ll show you the risks and what to watch for, then I’m going to reveal the five penny stocks with a stock price under a dollar that need to be on your radar!
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Screening for High-Return Penny Stocks
I’ll be using the Stockcard.io platform to find and research these stocks. Besides some of the investing tools we’ll use today, Stockcard makes it easy to analyze a stock because it takes all the financial measures like quick ratio and debt-to-equity, and then puts them in these easy-to-understand levels for growth potential, operations and valuation.
Besides those research tools, Stockcard is really going to help us with this one because it allows you to explicitly screen for stocks under $1 along with the fundamentals and ratios we’re looking for.
Check out this penny stock screener on Stockcard now
I want to get into our list of penny stocks but I’ll take you through that stock screener and show you what to look for in these stocks later.
First on our penny stock list is Kraken Robotics, ticker KRKNF, a $73 million maker of underwater sensors and robotics for the military and industrial sectors.
And while that oil and gas segment has been weak lately, the military and other segments have driven sales for the company and could be a $5 billion market.
Revenue has grown at an 88% annualized pace over the last three years with the company booking 26% sales growth even in the uncertainty of 2020.
The company has a very strong balance sheet with $3.4 million in cash against just $2.2 million in total debt, so net cash positive. The current and quick ratio are both looking good and the company should have no trouble with funding growth.
Researching the company, I found a huge catalyst and an interesting twist on the business strategy. This year, the company is shifting to highlight data analytics as a revenue driver. The four underwater systems and three sensors have been collecting data for nearly a decade and the data side of the business could be big.
More than 15 acquisitions of these underwater systems companies have been made since 2016 and I think Kraken could be the next target for a buyout.
Why Invest in Penny Stocks?
People invest in penny stocks for an attractive reason and that is the potential to get big returns fast. Take this as an example, a $50 stock that doubles in five years with an average gain of 15% can be deemed as an ideal investment. And because their prices are relatively cheap, some of these penny stocks double in value, and in most cases, sometime triple or quadruple. Wow! Worth the risk? Yes. But first, you have to be an expert penny stock investor if you want to bet on that. Producing huge gains in a short span of time is possible in penny stocks, and that’s what makes it attractive to risk-taker investors.
In traditional investing, waiting for long term or many years can be the norm. But in penny stock investing, you can actually get rich quick. For investors with high risk appetite, penny stocks is the fastest way to get rich. But really, the big rule of thumb in this is to invest only what you can afford to lose and not go beyond that limit.
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Researching Penny Stocks to Find the Best Investments
We’ve got four more $1 penny stocks to highlight including my favorite in the AI video security space but I wanted to show you the screener I used to start our search on these.
I started on the Discover tab here on Stockcard and then to Filters where you can name and save your stock screeners. The filter will continuously update and you’ll always have a list of penny stock ideas.
First I’ll toggle this box for stocks under $1 – then I want to narrow it down to companies with strong sales growth and good operations which is going to factor in sales, profitability and management effectiveness.
Finally here, I also want to screen for companies with strong cash availability, a hugely important factor lately.
I’ll click Apply and it’s narrowed our list to 26 stocks under $1 that I can research to find our best picks.
So some of those filters might seem obvious but I want to expand on each. We start with companies with strong sales growth, and this usually means at least 20% annually or more. The core of these small-cap, penny stock companies is that they’re growing exponentially every year and soon could be multi-billion dollar leaders.
But I also want to look deeper into operations to make sure management is putting on growth responsibly. Besides strong sales growth, I want to see that the company is doing it profitably with increasing profit margins and return on assets. Any company can throw money at marketing to grow sales, I want to find companies that can grow sales AND cut costs at the same time.
Finally, I’m looking for companies with the cash available to survive. This means lower debt and higher balance sheet cash and it’s probably the #1 thing I’m watching lately in stocks. Nation, we might not be out of the recession. Whether it’s in these small, startup companies or the mega-caps, I want to make sure my stocks have the cash cushion to withstand whatever the economy brings.
Next here is our sole major exchange penny stock, $240 million Tellurian, ticker TELL.
Tellurian is a pre-construction LNG export terminal in Louisiana that could spin off up to $2 billion in free cash flow when its fully up and running with a target valuation of $14 per share.
The company has secured its permitting and is ready to raise financing with construction to start soon. The facility would enjoy a cost advantage from the proximity to Haynesville gas production at around $2 per million-BTUs regardless of the spot market price.
Tellurian’s pipeline and other business is already bringing in some revenue with sales growing at 19% on a year-over-year basis and expected up 24% this fiscal year.
Now it’s not going to hit that $14 estimated share price for quite a while but analysts expect the shares to reach somewhere under $4 per share over the next year.
Risks in Penny Stocks Under $1
Now I like these five picks but they come with a HUGE warning. All five are extremely small companies with risks ahead of them but four of these are only traded on what’s called the pink sheets. Pink sheet stocks are those too small to trade on the major exchanges like the New York Stock Exchange or the Nasdaq. They’re called pink sheets because the quotes used to literally come out on these pink sheets of paper.
And you can find some real undiscovered investments here but there’s also a pile of dogshit to sift through.
The problem here is these over-the-counter stocks aren’t regulated like the ones you find on the Nasdaq or the NYSE. They don’t have the same audit or reporting requirements, most have a very low volume of shares traded daily and there’s just generally a lot less known about the companies.
That makes the pink sheets a breeding ground for scammers and just generally weak companies that will never amount to much.
But the idea isn’t that every one of these is going to become the next Apple or Tesla…or even that all five will even be around in a year’s time. The idea behind investing in penny stocks, especially these extremely small pink sheet stocks, is that startup investing mentality.
If you look at a chart of returns on angel investments, that’s private investments in startup companies before they issue shares, more than half the companies return less than the original investment. Upwards of 55% of these investments are complete turds and about a third return nothing at all!
But it’s those few moonshots. The ten- or 15% of the companies that get an acquisition offer or IPO that makes it all worth it. Look at these last three columns, returns of five-, ten- and 30-times your money that take the portfolio return to 2.6-times or a 27% annual return!
Now since most investors can’t invest the tens of thousands in these angel startups or can’t get access because of government regulations, then we go to these small-cap penny stocks as the next best thing!
So you’re looking for companies like Amazon that issued shares in 1997 as a $300 million, to grow into the $1.5 trillion powerhouse.
And I think this next one, GateKeeper Systems, ticker GKPRF, could easily be one of those runaway returns.
Gatekeeper is a $55 million provider of tech hardware and video solutions in the public and private market. I really like this market and in fact, the company has a hand in some of the best trends I’m watching.
Besides providing the video capabilities for smart cities and security, its system is AI-driven and combines video analytics to make better decisions. Its platform as a service model will also mean consistently growing revenue as cities adapt to the IoT revolution.
Sales have grown at an 11% annual pace over the last three years but are up almost 26% this year. It’s also cash positive with $1.75 million in cash against just $240,000 in total debt with all the cash availability it needs.
Now one thing you’ll notice here is I’m not just using Stockcard for the research. The platform includes a lot of great data and boils down the ratios into these easy-to-understand cards there’s going to be gaps in the data for any penny stock, and especially the pink sheet stocks.
That’s actually where the biggest opportunity comes from though, finding the best penny stocks that nobody is watching and using your own research.
For that, I’ll go download the company’s financial reports and presentations from its investor relations page. You can always find this with a Google search for the name of the company plus the words investor relations.
You can use some of the analysis we talk about on the channel to study the financial reports or get management’s perspective with the company presentation or check out the news and press releases.
Now you have to take this with a grain of salt because this is what management wants you to see but these are invaluable for investors in these penny stock companies.
Our next penny stock, $114 million Rapid Therapeutic Science Laboratories, ticker RTSL, owns a sublicense agreement to two metered dose inhaler devices.
The company is currently looking for applications for the devices to deliver anything from cannabinoids to medications to a user’s blood stream through the pulmonary tract.
Medical devices and healthcare in general are a strong market for startups and while the balance sheet isn’t as strong on this one, they do have the cash necessary to play the idea out.
It wouldn’t be my first pick among the five but this one has some strong upside potential if it can carve out a market for the inhalers.
Kraig Biocraft Laboratories, ticker KBLB, is a $103 million producer of protein-based fibers using DNA technology with an eye to changing the apparel industry.
This one triggered that spider-sense for the nerd in me because the company is using genetic engineering to develop what it calls a spider silk fiber that is light-weight, flexible and high-performance for use in all kinds of apparel applications.
The company isn’t booking sales yet and the balance sheet isn’t as strong as the others but it is applying for trading on the Nasdaq exchange. That means stricter oversight and regulatory requirements so gives me more confidence in the company as a legit business.
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It’s a long-shot like all of these penny stocks but an interesting idea and all you need is for one or two of these companies to go big to produce those five- and ten-times returns on your money. Investing in the smallest penny stocks, those under $1 per share is one of your best shots at those huge venture capital returns!
Read the Entire Penny Stocks Series