Stocks to buy

Penny stock investing peaked in 2021 and was a massive wealth creator for high-risk takers. Given the macroeconomic scenario, investors are inclined to remain overweight on blue-chip stocks and quality growth stocks. I, however, believe that some exposure to penny stocks is healthy.

It’s important to note that significant wealth creation comes from growth stocks than large-cap companies. Even a 15% to 20% portfolio exposure to penny stocks can be a potential game-changer. The key is to buy at attractive levels and holds with patience.

Investors generally prefer a quick trade in penny stocks over long-term investing. However, fundamentally strong stories are worth holding for the next few years. If these stories play out well, multibagger returns are on the offering.

Let’s discuss three penny stocks to buy with 10x return potential in the next three years.

Solid Power (SLDP)

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Solid-state batteries are being considered the future for deployment in electric vehicles. Solid Power (NASDAQ:SLDP) stock seems like the best bet among companies working on commercializing solid-state batteries. SLDP stock has trended higher by 21% for year-to-date 2023. The worst of the correction seems to be over for this penny stock.

A major reason to like Solid Power is the backing of strong automotive partners. This includes Ford (NYSE:F) and BMW (OTCMKTS:BMWYY). In December 2022, Solid Power signed an extended agreement with BMW to license its cell design and manufacturing process. With parallel R&D by BMW, the commercialization of solid-state batteries can be accelerated.

Solid Power also expects to deliver EV cells to automotive partners for validation testing in 2023. It’s another potential catalyst for the stock.

With $496 million in liquidity buffer, the company is well financed to pursue aggressive R&D investments.

Overall, if the company is successful in developing solid-state batteries, the sky would be the limit for SLDP stock.

Bitfarms (BITF)

Source: PHOTOCREO Michal Bednarek / Shutterstock.com

Bitcoin (BTC-USD) has been surging, and the next bull run for cryptocurrencies is likely on the cards. Bitcoin mining stocks have surged from deeply oversold levels. However, several stocks still seem undervalued. Bitfarms (NASDAQ:BITF) stock has skyrocketed by 150% for year-to-date 2023. I expect the bullish momentum to sustain.

One reason to like Bitfarms is its vastly improved fundamentals. As of February, the company reported a debt of $23 million. Compared to June 2022, the company has reduced debt by 86%. Further, as of December 2022, Bitfarms reported cash and equivalents of $38 million. With strong financial flexibility, Bitfarms is positioned for aggressive mining capacity expansion.

As of March, Bitfarms reported a capacity of 4.8EH/s, which was higher by 78% on a year-on-year basis. The company expects the capacity expansion to 6EH/s by the end of the year. Considering the recent rally in Bitcoin, I would not be surprised if the company pursued further expansion.

I must add here that Bitfarms is a low-cost miner. Through 2022, the company reported positive adjusted EBITDA. With the rally in Bitcoin, I expect significant margin expansion in the coming quarters.

Cronos Group (CRON)

Source: Shutterstock

Cronos Group (NASDAQ:CRON) looks deeply oversold trading at a valuation of $706 million. To put things into perspective, the company closed 2022 with cash and equivalents of $765 million. Additionally, the company had short-term investments of $113 million.

There are two key positives from the company’s 2022 results. First, Cronos reported revenue growth of 23% on a year-on-year basis. Furthermore, the company’s adjusted EBITDA losses narrowed to $80 million from $160 million in the prior year. Operating leverage and cost savings initiatives in 2023 will potentially imply a further improvement in key margins.

CRON stock is attractive with these positive developments and a healthy cash buffer. On the flip side, the company’s revenue from the United States declined by 48% last year. However, in a federal-level legalization scenario, the outlook will change significantly. As international revenues swell, remaining invested in the stock makes sense.

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, Faisal Humayun 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.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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