Penny Stock Roulette: 3 High-Risk, High-Reward Plays for Daring Investors

Achintya Pasricha

Mon, May 27, 2024, 8:17 PM 4 min read

Penny stocks have the kind of risk-reward profile that appeals to few investors; those willing to tolerate a bit more risk to reap potential rewards of significant magnitude. By definition, penny stocks are shares of companies selling for less than $5 each. While they are risky, the entry price is so low that great returns are within the realm of possibility. Unfortunately, this is the double-edged sword of penny stocks: their low price tag goes hand in hand with volatility.

Today, I would like to recommend three penny stocks that could energize your returns. That’s because all of these companies show high potential growth and are well-positioned to capitalize on new trends in their respective sectors. Penny stocks can be risky due to their extreme volatility, but the growth potential of all three makes them great buy-and-hold stocks for risk-tolerant, smart investors.

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AMC Entertainment (AMC)

AMC Entertainment sell off continues as stock sees tenth straight losing day, as the markets continued to see volatility following Federal Reserve Chairman's speech.

Source: TY Lim / Shutterstock.com

AMC Entertainment Holdings (NYSE:AMC) is an American movie theater chain with 900 theaters and 10,000 screens globally. The stock is down 20.79% YTD, and the company is currently trading at $4.84, with a market cap of $1.43 billion. Despite this, AMC remains an attractive buy.

While the company’s margins need improvement, revenue has been holding steady, with earnings growing in the last few fiscal years. This is despite the chain closing some of its theatres, indicating a strong improvement in management’s efficiency. Additionally, the company doesn’t franchise, which gives it much more control over its operations.

AMC stock has a beta of 1.84, which indicates that the stock is 84% more volatile than the overall market. This beta also indicates that the stock is expected to give returns of a similar magnitude. With steady earnings, operations that are getting more efficient, and an effort to become profitable, AMC is a penny stock investors shouldn’t overlook.

Bitfarms (BITF)

A Bitcoin (BTC) token in front of the Bitfinex logo.

Source: Useacoin / Shutterstock.com

Bitfarms Ltd. (NASDAQ:BITF) engages in the mining of cryptocurrency coins and tokens in Canada, the United States, Paraguay, and Argentina. It owns and operates server farms that primarily validate transactions on the Bitcoin Blockchain and earns cryptocurrency from block rewards and transaction fees.

BITF stock has had a revenue of $166.3 million with quarterly revenue growth of 67.14%.

However that is counterbalanced by negative profit and operating margins of -63.80% and -10.68% for the past quarter. However, the profit margin appears to be getting better, as a revenue increase of 2.76% in 2022-2023 led to earnings going from $-239.05 million to $-104.04 million– a 56% increase.

While the company’s profitability faces challenges due to the volatile nature of the cryptocurrency market, revenue has been increasing consistently, with significant growth in the last few fiscal years. Due to consistent revenue growth and strategic operational control, BITF stock is definitely one of the penny stocks to buy.

iQIYI (IQ)

Source: Faizal Ramli / Shutterstock.com

iQIYI Inc. (NASDAQ:IQ) together with its subsidiaries, provides online entertainment video services in the People’s Republic of China. It offers various products and services, including online video, online games, online literature, animations, and other products.

IQ stock is currently trading at $4.78, with a market cap of 4.59 billion dollars. It has seen positive profit and operating margins of 6.24% and 11.92% respectively, indicating company growth. It has also consistently beaten EPS predictions, surprising investors by 66.70% in Q1 2024 and 16.70% in Q4 2023.

The company has faced challenges due to increased competition and regulatory changes in China, but it has continued to innovate and expand its content library, which has helped maintain steady subscriber growth. With a strong content portfolio, effective cost management, and strategic international expansion, IQ stock is something investors shouldn’t overlook.

*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, Achintya Pasricha 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.

Achintya Pasricha is a self-taught investor who has recently started to publish articles on a freelance basis.