When the momentum turns bullish for penny stocks, there is little chance of making an entry. The best time to consider some of the best penny stocks to buy is when there seems to be some consolidation. As the broad market gradually trends higher, it makes sense to consider some non-speculative penny stocks for the portfolio.
This column discusses three strong penny stocks that can deliver at least 100% returns in the next 12 months. Of course, returns can be higher depending on the broader market momentum and business developments.
I must caution you it’s best to refrain from exposure to purely speculative penny stocks. The markets are far from the euphoria in growth and penny stocks last seen in 2021.
Selected names that are strong will rally. Some weak stocks will continue to trend lower even after a deep correction.
Let’s discuss the catalysts that make these penny stocks worth considering.
Nordic American Tankers (NAT)
Nordic American Tankers (NYSE:NAT) is the top penny stock pick to buy now. The massively undervalued stock trades at a forward price-earnings ratio of 5.3 and offers investors an attractive dividend yield of 17.2%.
As an overview, Nordic American is a crude oil tanker company that continues to benefit from attractive time charter rates. To put things into perspective, the company’s fleet of 19 tankers earned a day rate of $51,902 for Q1 2023. For the same period, the company’s operating cost per vessel per day was $8,000.
This has translated into robust EBITDA and operating cash flows. Besides healthy dividends, Nordic American is using the excess cash to deleverage. As credit metrics improve, NAT stock is likely to trend higher.
Another point to note is that the industry order book for new tankers is low according to the company. With no oversupply concerns, it’s likely that day rates will remain healthy. This makes a strong case for NAT stock doubling from current levels in the next 12 to 18 months.
Kinross Gold (KGC)
Kinross Gold (NYSE:KGC) is another name among penny stocks to buy that offers a healthy dividend yield. KGC stock trades at an attractive forward P/E of 13.2 and offers yield of 2.6%.
However, this is not the key reason to talk about Kinross. Bloomberg recently reported that Kinross has rejected a takeover approach from Endeavour Mining (OTCMKTS:EDVMF).
There could be two reasons. First, the price offered was unattractive. Further, Kinross is bullish on its assets and growth potential and intents to avoid any takeover attempt.
Both cases point to sound reasons to buy KGC stock. There is a possibility of another big at a better price. Leaving this scenario aside, Kinross has an investment grade balance sheet and quality assets.
The company expects stable gold production through 2025 and with gold above $1,900 an ounce, cash flows will be robust. The company reported a liquidity buffer of $1.7 billion as of Q1 2023. I believe Kinross is well positioned to pursue opportunistic acquisitions to boost the production outlook.
Bitfarms (BITF)
The reason to be bullish on Bitfarms (NASDAQ:BITF) stock is the point that Bitcoin (BTC-USD) has been trending higher. If the rally sustains for the cryptocurrency, I expect 5x to 10x returns from BITF stock.
As an overview, Bitfarms is a Bitcoin miner with two advantages. First, the company is a low-cost miner and reported direct mining cost of $12,000 per Bitcoin for Q1 2023. As the cryptocurrency trends higher, Bitfarms will be positioned for healthy EBITDA margin expansion.
Furthermore, Bitfarms has a quality balance sheet after reducing debt by $140 million in the last 10 months. With $41 million in liquidity buffer, the company will pursue aggressive mining capacity expansion.
It’s also worth noting that Bitcoin halving is due in 2024. If the cryptocurrency trades near all-time highs, Bitfarms will witness a significant jump in free cash flows. The outlook is therefore positive for BITF stock for multi-bagger returns in quick time.
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.
