Penny stocks can be massive wealth creators in quick time. Of course, there is an ocean of penny stocks and investors need to be selective. There are dozens of speculative ideas that are likely to trend lower and destroy capital. It’s usually a challenge to screen fundamentally strong stocks under $5. However, it’s not impossible, and there are several ideas that are worth considering.
Following are three stocks under $5 that have the potential to triple or quadruple in the next 12 to 18 months. These stock ideas represent fundamentally sound companies with potential triggers for growth and value creation.
Many believe that rate cuts are impending in the second half of 2024. So, this may be an underlying catalyst for a big rally in growth and penny stocks. Therefore, it’s a good time to accumulate these stocks under $5 while remaining overweight on blue-chip stocks and high-quality growth stocks.
An image of a rising bar graph on top of gold bars, representing gold stocks
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IAMGOLD (NYSE:IAG) has rallied by 25% in the last one month. However, the gold miner remains deeply undervalued. I expect a bigger move in the coming quarters, and my view is backed by two positive catalysts.
First, gold has been surging higher and trades near $2,200 an ounce. Positive momentum could sustain with potential rate cuts coming in the second half of 2024. Therefore, IAMGOLD is positioned to benefit from higher realized prices.
Further, IAG expects to commence production from the Cote Gold asset in March 2024. This asset has the potential to become the third largest gold mine in Canada. I expect healthy production growth this year and in 2025.
Both these factors are likely to ensure revenue growth and strong free cash flow upside. IAMGOLD has strong fundamentals, ending 2023 with a liquidity buffer of $754.1 million. Therefore, there is ample flexibility for organic and acquisition driven growth.
Ring Energy (REI)
Panorama of Oil and Gas central processing platform in twilight, offshore hard work occupation twenty four working hours. Best oil stocks to buy
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I believe that Ring Energy (NYSE:REI) is among the most undervalued stocks under $5 to but for multibagger returns.
The oil and gas stock trades at $1.6 and commands a market valuation of $308 million. As of 2023, the company reported PV10 (present value of estimated future oil and gas revenues, net of forecasted direct expenses) of $1.65 billion. This puts into perspective the extent of undervaluation.
Another point to note is that since 2018, Ring Energy has increased production at a CAGR of 26%. The track record is healthy and with a strong asset base. Also in Q4 2023, the company was cash flow positive for the 17th consecutive quarter.
On the flip-side, macroeconomic headwinds have depressed oil prices. However, with potential rate cuts due in the second half of the year, I am bullish on oil trending higher. This is likely to be a key catalyst for upside in REI stock.
Cronos Group (CRON)
Forget Legalization: CBD Is Good Enough for CRON Stock
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Cronos Group (NASDAQ:CRON) is among the most undervalued cannabis stocks to buy. From current levels of $2, I would bet on five-bagger returns in the next 24 months.
While CRON has remained depressed, the company has strong fundamentals. Cronos Group ended 2023 with a cash buffer of $862 million, which is higher than the market valuation of the company. Also, Cronos Group has guided for positive net change in cash for the current financial year.
In a federal level cannabis legalization scenario, Cronos Group will be well positioned to make big investments to accelerate growth. CRON already holds 6.3% stake in PharmaCann, one of the largest U.S. multi-state operators in the cannabis industry. Recently, Germany legalized recreational cannabis, and I believe that European markets hold immense promise.
Finally, Cronos Group is making inroads in the medicinal cannabis segment. Besides presence in Canada and Israel, it has entered the German and Australian medicinal cannabis market.
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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.
