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7 Penny Stocks to Buy Before the Bull Market Returns

·7 min read

Amid macro-level uncertainties, figuring out which penny stocks to buy before the bull market returns is probably the last thing on your mind. With stocks taking another dive after the latest inflation numbers, it may seem as if they have plenty of room to fall before hitting a bottom. However, given that it’s near-impossible to call one, sitting on the sidelines isn’t the best course of action. Instead, the key is to use today’s volatility to your advantage by buying stocks that have become oversold due to negative market sentiment.

Some of the best opportunities can be found among penny stocks. They are more likely to become mispriced during a bear market. When the market hits bull market mode again, these names could produce outsized returns as they are re-rated.

Of course, you have to be selective. Buying every penny stock out there isn’t going to be profitable. Stick with names with favorable risk/return propositions, such as these seven penny stocks to buy before the bull market returns.

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

BTG

B2Gold

$3.37

FREE

Whole Earth Brands

$4.61

GGB

Gerdau

$4.41

NOK

Nokia

$4.94

QRTEA

Qurate Retail

$2.73

RSI

Rush Street Interactive

$5.19

UEC

Uranium Energy

$4.13

B2Gold (BTG)

b2gold (BTG) logo on a web browser enlarged by a magnifying glass
b2gold (BTG) logo on a web browser enlarged by a magnifying glass

Source: Pavel Kapysh / Shutterstock.com

Canada-based B2Gold (NYSEAMERICAN:BTG) operates gold mines around the world. Gold stocks have taken a hit in recent months on a strengthening U.S. dollar. So, with the underlying commodity struggling, why buy BTG stock now?

For one, it has low operating costs. Per its latest financial results, B2Gold’s all-in sustaining costs came in at $1,111 per ounce in the second quarter. With gold prices around $1,700 an ounce, management expects to generate consolidated cash flows from operating activities of around $575 million for the full year. This means the company is likely to continue returning cash to shareholders in the form of a high dividend. The stock currently throws off a 4.7% yield.

BTG stock could move substantially higher when stocks resume their longer-term uptrend, potentially spurred by the Federal Reserve cutting interest rates. Lower rates may weaken the dollar, pushing gold prices higher. With its costs largely fixed, a slight move higher in gold prices could result in a big jump in this gold miner’s profitability.

Whole Earth Brands (FREE)

Cupcakes on a glass tray on a blue checkered tablecloth as seen from the side. Multi-colored cupcakes with red velvet, vanilla, chocolate, lemon, and strawberry flavors with sprinkled frosting.
Cupcakes on a glass tray on a blue checkered tablecloth as seen from the side. Multi-colored cupcakes with red velvet, vanilla, chocolate, lemon, and strawberry flavors with sprinkled frosting.

Source: Patrick Civello / Shutterstock

Its corporate name may suggest it makes health foods, but Whole Earth Brands (NASDAQ:FREE) is in the artificial sweetener business. It makes and markets a wide variety of branded sweetener products, including the famed Equal brand.

The stock trades at a low valuation relative to other consumer packaged goods stocks with a forward price-to-earnings ratio of 6.3 compared with 17.9 for the sector.

Whole Earth Brands has borrowed heavily to acquire companies in its industry such as plant-based sweetener company Wholesome. Inflationary pressures are also a risk. Yet, if it begins to use its cash flow to pare down its debt, as well as wring out cost savings from integrating its acquisitions, Whole Earth could become less levered and more profitable. This could result in shares, just within penny stock territory today, making a return to double-digit price levels.

Gerdau S.A. (GGB)

A close-up shot of the Gerdau (GGB) office sign in Sao Paolo, Brazil.
A close-up shot of the Gerdau (GGB) office sign in Sao Paolo, Brazil.

Source: casa.da.photo / Shutterstock.com

Steel stocks have whipsawed in 2022, and Gerdau (NYSE:GGB) is no exception. Shares of the Brazil-based steel products company rallied earlier this year as supply shocks stemming from Russia’s invasion of Ukraine led to a run-up in commodity prices.

More recently, GGB stock has performed poorly, as steel demand has been affected by China’s economic slowdown. The prospect of a global recession has dampened sentiment too. Yet, with a heavily discounted valuation of less than 3x trailing earnings and less than 6x forward earnings, macro challenges may already be priced in.

The fact that the company is based in Brazil, whose economy faces severe headwinds, may scare off some investors. But Gerdau is geographically diversified. As ratings agency Fitch has argued, this helps it hedge against country-specific economic challenges.

There’s much to suggest this low-cost steel producer can ride out a downturn. Once steel demand comes back, its shares could make a comeback as well. This makes it one of the penny stocks to buy before the bull market returns.

Nokia (NOK)

a backdrop featuring the Nokia logo with a mobile phone featuring the Nokia logo on its screen in the foreground
a backdrop featuring the Nokia logo with a mobile phone featuring the Nokia logo on its screen in the foreground

Source: rafapress / Shutterstock.com

At writing, Nokia (NYSE:NOK) is barely in the penny stocks category. Yet, even if it gets back above $5 per share, it’s a low-priced stock worth considering if you’re looking for opportunities with high upside potential.

Shares of the Finland-based telecom equipment maker have delivered mixed performance in recent years. If you traded the stock during the meme stock mania of 2021, you may have found it profitable. Yet, shares are down around 20% year to date.

So, what signals that NOK stock can have a liftoff moment outside of another “meme wave?” The answer, I’ve long argued, is success with its turnaround.

The 5G rollout continues. Combined with its efforts to reduce operating costs, Nokia could steadily improve its profitability in the coming years. Achieving this could result in the market rewarding shares with a higher valuation than they sport today, which is just 11.1x forward earnings.

Qurate Retail (QRTEA)

A laptop is open to a marketplace and there is a small cart with boxes on the keyboard. online shopping.
A laptop is open to a marketplace and there is a small cart with boxes on the keyboard. online shopping.

Source: Natee Photo / Shutterstock

Qurate Retail (NASDAQ:QRTEA) is the parent company of QVC and HSN. In an effort to keep up with the times, the legacy home shopping company has pivoted to e-commerce and streaming. Yet, while management seems to have a game plan to ride out the decline of linear TV, and ride out an economic downturn, investors don’t appear too confident.

QRTEA stock has fallen 70% over the past year. It now trades at a heavily discounted valuation of 3.7x estimated 2022 earnings. If you have a high tolerance for risk, though, you may want to buy it. As a Seeking Alpha commentator argued earlier this month, the company could end up delivering future results well ahead of the analyst community’s low expectations.

The market may be overestimating Qurate Retail’s risk of ultimately going into bankruptcy. If it can ride out a possible recession and modernize its business, shares could make a triple-digit recovery.

Rush Street Interactive (RSI)

A person wearing a suit and tie holds a handful of dollar bills in the middle of a brightly lit sports stadium; representative of sports betting
A person wearing a suit and tie holds a handful of dollar bills in the middle of a brightly lit sports stadium; representative of sports betting

Source: sutadimages / Shutterstock

Rush Street Interactive (NYSE:RSI) has tanked this year alongside other sports betting stocks as investors soured on this industry. Even with heavy spending to attract bettors, most of the major names in the space have yet to become profitable. That’s the case for Rush Street Interactive, which operates the BetRivers sports betting platform.

But as shares flirt with penny stock territory, RSI stock may be worthy of a buy. On a sequential basis, operating losses narrowed last quarter. This suggests the company is pulling back on aggressive marketing spend. Now, with a steady customer base, it may be ready to shift its focus from revenue growth no matter the cost to achieving profitability.

Rush Street Interactive may also be a takeover target. As a Benzinga commentator recently noted, larger operators looking to gain market share may be interested in buying it.

Uranium Energy (UEC)

A photo of a uranium mine
A photo of a uranium mine

Source: John Carnemolla / Shutterstock.com

Uranium Energy (NYSEAMERICAN:UEC) is a stock valued mainly on its future potential, not its current results, which means continued volatility in the near term. Shares are up 12% for the year but well off their highs from the spring when uranium prices got a big boost from the Russia/Ukraine conflict.

However, an even larger jump for uranium plays like UEC stock may lie ahead. As InvestorPlace’s Samuel O’Brient reported last month, both the International Energy Agency and Elon Musk have made positive statements about nuclear power’s merits as an energy source.

If governments around the world follow Japan’s lead and decide that nuclear power is the right choice to both save the planet and reduce dependency on oil-rich nations like Russia, uranium demand could soar. And that could dramatically increase the value of Uranium Energy’s collection of uranium assets and its share price.

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, Thomas Niel did not have (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.

Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.

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