EGY - The 7 Best Penny Stocks to Buy for 2023
2023-04-12 12:15:27 ET
InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Back in January and February, many of the best penny stocks were off to a strong start for the year, but since March, many of these names have coughed back more recent gains.
Even as some parts of the market, such as tech/growth, have performed well despite hiccups, such as the banking crisis, stocks trading for under $5 per share, in particular value stocks at these price levels, have stayed under pressure.
But while macro uncertainties such as high inflation, high-interest rates, and slowing economic growth still threaten their respective results in the near term, these risks may now be overly reflected in their respective valuation.
Although these names remain risky and are likely to stay volatile for now, it may be an opportune time to take a closer look and consider buying these seven of the best penny stocks . Each one is profitable, sports a low valuation, and has catalysts to spark a rebound.
American Shared Hospital Services (AMS)
American Shared Hospital Services (NYSEMKT: AMS ) leases radiation therapy equipment to hospitals and other medical facilities. This microcap healthcare stock performed strongly during the first two months of the year and appeared poised to add to its gains in early March.
Unfortunately, since the start of last month, AMS stock has dropped sharply in price, giving back earlier gains and then some. Trading for around $2.82 per share today, the question is whether it makes sense to “buy the dip” or if this pullback is a sign to stay away.
AMS’s latest quarterly results point to the former. While earnings growth is slowing down, as management discussed on the latest earnings conference call , management is at work pursuing opportunities to grow the business organically. This may take time, but patience could pay off, as another growth spurt will likely fuel another big jump for AMS stock.
ARC Document Solutions (ARC)
ARC Document Solutions (NYSE: ARC ) provides digital printing and document-related services. One of its main end-user markets is the construction and engineering industry. I’ve previously discussed ARC’s merits as one of the best penny stocks.
ARC stock was also one of the names in this category that kicked off the year strongly, yet now has experienced a new round of weakness. While its underlying business may appear vulnerable, given the near-certainty of a recession later this year, there may be a good reason to buy it now, at this stage of the economic cycle.
Shares are a steal at just 11.5 times trailing twelve-month (or TTM) earnings. Even better, the sell-side community expects ARC’s earnings to grow both this year and the next . This not only points to further upside for the stock. It also signals that ARC’s high dividend yield (6.45%) is sustainable.
Comstock (CHCI)
Comstock (NASDAQ: CHCI ) is yet another penny stock that’s gone from winner to lackluster in terms of performance thus far in 2023. In fact, shares in this commercial property management company took off so strongly during February that the stock briefly zoomed above $5 per share, aka out of penny stock territory.
Alas, since then, CHCI stock has slipped back below the $5 per share mark. However, now could be an ideal time to buy if you missed it after its last hot run. Despite concerns about the health of the commercial property market, this industry-specific headwind is likely accounted-for when you consider Comstock’s low valuation (4.6 times earnings).
As a Seeking Alpha commentator recently argued, there’s room for a major upside when considering potential incentive fees . If you’re looking to make a contrarian bet on commercial real estate, CHCI may be a great vehicle for making that wager.
Vaalco Energy (EGY)
Oil and Gas stocks are back in the spotlight, following crude oil’s move back above $8o per barrel. Recently, I discussed 7 of the best ways to play this trend. Vaalco Energy (NYSE: EGY ) was one of these recommendations . Even without accounting for oil’s latest jump, EGY is a stock to consider.
Why? With EGY stock, there’s upside potential for both improved earnings and multiple expansions due to its acquisition of TransGlobe Energy last year. Also, this merger has resulted in a large jump in Vaalco’s dividend. This small-cap energy stock now offers investors a forward yield of around 5.6%.
But with OPEC+ tightening supply and oil demand this year possibly becoming more robust than currently anticipated, a further rise in oil prices may be in store. Given the potential upside from this, EGY is once again one of the best penny stocks.
Enel Chile (ENIC)
In contrast to the penny stocks mentioned above, Enel Chile (NYSE: ENIC ) hasn’t skipped a beat when it comes to performing strongly in 2023. Shares in this Chilean electric utility company have kept climbing and are up 21.7% for the year.
However, I wouldn’t assume that, after this continued strong run, ENIC stock is about to run out of runway. Looking back, price action with Enel Chile over the past six months makes perfect sense. As InvestorPlace’s Muslim Farooque argued back in November, at the time, hydrology conditions were starting to improve in Chile.
This, in turn, pointed to better operating results ahead. Enel’s latest financial results show that this thesis appears to be playing out. The sell-side anticipates further improvements ahead. Forecasts call for 15 cents per share earnings, and ENIC’s bottom line could double in 2024 to 30 cents per share.
Pitney Bowes (PBI)
Hestia Capital continues moving forward with its proxy contest at Pitney Bowes (NYSE: PBI ), but the business products company’s shares have fallen back in the past month. Some in the market could be growing skeptical that Hestia will win its campaign.
Others may believe this activist has a shot of getting its slate election at the May 9 annual meeting, but at the same, remain skeptical that Hestia’s plan to “transform” the company will move the needle for PBI stock. However, despite its recent weakness, this may remain among the best penny stocks.
Between the poor performance of Pitney Bowes’ incumbent management and the support of Hestia by other PBI shareholders , the fund may have a strong chance of winning the proxy contest next month. If Hestia takes control, its six-point plan to turn the company around could go a long way in reversing past losses.
The Container Store Group (TCS)
The Container Store Group (NYSE: TCS ) gives off “value trap” vibes right now. Shares in the storage and organization products retailer have fallen significantly in the past, resulting in a drop to an extremely low valuation (3 times TTM earnings).
However, earnings are expected to drop by nearly 55% this fiscal year (ending April 2023). The struggles experienced by similar retailers like Bed Bath & Beyond (NASDAQ: BBBY ) have raised concerns that this company’s fundamentals will deteriorate. That said, while a lot of points to TCS stock being a value trap in the making, other factors point to it being oversold.
Even when accounting for the earnings drop, shares still trade at a single-digit earnings multiple. The sell-side continues to anticipate TCS’s performance will stabilize in the coming fiscal year. With so much uncertainty lingering, merely meeting expectations could be enough to drive a big rebound for shares.
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 .
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