While the S&P 500 index has been on a tear in recent weeks, entering into a new bull market, the rising tide has yet to lift all boats, including some of the best penny stocks. For this speculative category of stocks, broadly defined as those trading for $5 per share or less, the performance has been mixed. Yet, while “bull market mode” hasn’t necessarily returned for underfollowed equities, there are some worthwhile penny stocks to buy.
If macro concerns like inflation and interest rates are waning, these stocks have a good chance of joining in on the recovery over the next few months. Not only that, but over a longer time frame, both sector and company-specific catalysts can help send these stocks to significantly higher prices.
Below you will find the seven best penny stocks to buy.
Brandywine Realty Trust (BDN)
Brandywine Realty Trust (NYSE:BDN) is a real estate investment trust (REIT) focused on office buildings and mixed-use properties. Based on this year’s headlines about the health of the commercial real estate market (or lack thereof), this may seem like a “no-go” situation.
Among REITs, office REITs appear the most vulnerable. They’ve been negatively affected by the work-from-home trend, rising interest rates and other macro challenges. Still, that doesn’t mean you should take a pass on BDN stock.
As Seeking Alpha commentator Brad Thomas noted in May, there’s a good chance BDN cuts its super-high dividend, which currently gives it a forward yield of 17.2%. However, he points out that investors could be overestimating how much office demand trends will affect Brandywine’s future performance “when looking at its land bank, which it does own and could use to develop properties that are 36% residential, 27% office, and 21% life science.”
The recent alleviation of macro worries has provided BDN a boost, with shares up 18% in the past month to $4.43, and could continue to do so.
Butler National (BUKS)
Butler National (OTCMKTS:BUKS) is a name I’ve discussed numerous times in past coverage of both the best over-the-counter (OTC) stocks and the best penny stocks. The main appeal with this aerospace and casino gaming company, which also owns a small architecture and design firm, is its low valuation compared to peers.
BUKS is a bonafide deep-value stock, sporting a price-earnings (P/E) multiple of less than 9. That’s better than 92% of its peers in the aerospace and defense industry. Yet, Butler National may be on the verge of a major turning point, after which shares move to a price more in tune with the company’s underlying value.
As I wrote recently, “In May, longtime CEO Clark Stewart resigned, with Christopher Reedy (previously COO) taking the helm. BUKS stock rallied on this news, perhaps due to investors speculating that Reedy will take more active steps to maximize shareholder value.”
BUKS stock is up 14.5% since the announcement, to 79 cents a share, and could go much higher if a changing of the guard leads to divestitures and spin-offs.
Comstock Holding Companies (CHCI)
Alongside BDN stock, Comstock Holding Companies (NASDAQ:CHCI) is another name to consider if you are looking to bottom-fish in the hard-hit commercial real estate sector. In fact, CHCI may be a less risky way to make such a contrarian wager.
Comstock is a commercial property management company, not a REIT. It collects steady fees from its portfolio of managed properties, located primarily in the Northern Virginia suburbs outside of Washington, D.C. Therefore, Comstock may be less at risk of experiencing a deterioration in its operating performance if the current downturn lasts longer than expected.
As I have argued previously, CHCI could experience a major re-rating once conditions in the commercial real estate market improve. The stock currently trades for just 4.6 times earnings. A doubling in price may be possible given shares would still sport a single-digit earnings multiple if this were to happen.
Vaalco Energy (EGY)
Given that crude oil prices have dipped back to the high-$60s per barrel, many may question my view that Vaalco Energy (NYSE:EGY) is one of the best penny stocks right now.
However, if you believe that fossil fuel prices, pushed lower recently as demand concerns outweigh Saudi production cuts, will spike again, EGY stock may be a great opportunity. Trading at 4.5 times forward earnings, while many larger oil and gas exploration companies currently have high-single-digit earnings multiples, a rebound in oil may have an outsized impact on Vaalco shares, which currently trade for $3.92.
Alongside strong appreciation potential, EGY also has a high dividend. After raising its quarterly payout to 6.25 cents per share last month, Vaalco now pays 25 cents per share annually in dividends. This gives shares a forward yield of around 5.8%, increasing EGY’s total return potential.
Entravision Communications (EVC)
To some extent, it makes sense that Entravision Communications (NYSE:EVC) has fallen out of favor, with shares down 27% over the past three months to trade at $4.50.
Current economic conditions have led to a slump in advertising demand for the company’s legacy business, Spanish-language television and radio stations, as well as digital marketing, which has become its bread and butter in recent years.
Yet, two factors could help shares make a massive recovery from here. First, as ad demand bounces back, so too will Entravision’s earnings. Analysts expect earnings per share (EPS) to jump 38% this year to 29 cents, followed by a 31% increase in 2024 to 38 cents.
Second, as the company continues to bulk up its digital ad business, most recently through its acquisition of BCNMonetize, Entravision could finally shake off its “broadcaster discount” and make a permanent move to a higher valuation.
Greystone Logistics (GLGI)
After experiencing a sharp price decline in late 2022 into early 2023, Greystone Logistics (OTCMKTS:GLGI) shares have made a strong comeback to once again trade above 80 cents. This rally for the recycled plastic shipping pallet manufacturer kicked off in mid-April, following a well-received quarterly earnings release.
Although Greystone reported a year-over-year revenue decline of 39.5%, investors were pleased to hear that it received $3.3 million in Employee Retention Credit (ERC) proceeds from the U.S. federal government. The company’s benefit from this pandemic-era program was relatively large when compared to the market cap of GLGI stock at the time, which was around $21 million.
Investors also reacted positively to CEO Warren Kruger’s upbeat commentary made on the post-earnings conference call, which included the prospect of gross margin improvements.
GLGI stock is up about 15% since the earnings announcement to trade around 82 cents a share. If operating earnings bounce back from here, further upside likely remains.
Pitney Bowes (PBI)
Pitney Bowes’ (NYSE:PBI) high turnaround potential is what makes it one of the best penny stocks to buy. From October through February, shares bolted higher, thanks to the mailing and shipping equipment and services company becoming an activist investor target.
In recent months, PBI stock has given back some of these gains. Yet, while the market may have gotten ahead of itself, don’t assume another big jump for shares isn’t in the cards. The activist catalyst has not gone away. Far from it, in fact.
In May, activist firm Hestia Capital Management prevailed in its proxy fight, gaining control of four of the company’s nine board seats. With this, Hestia is well-positioned to push for the implementation of its turnaround plan for the company.
As detailed in its April investor presentation, Hestia believes that this plan could help send the stock back to double-digit price levels, up from $3.61 currently.
On the date of publication, Thomas Niel 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.
