Pre-Surge Penny Picks: 3 Stocks to Buy Before They Boom
Today’s backdrop of a predicted fall in interest rates, as well as the expectation that indices like the S&P 500 will surge higher, has some important considerations for penny stocks.
Penny stocks tend to do better when the downward pressures on their valuations subside. This is the same with other forms of comparatively riskier investments, like tech stocks. The reason is that we assess both types of assets on the present value of their discounted future cash flows.
Interest rates affect the discount rate of how much they discount their cash flows back to the present, with higher rates implying a higher discount and vice-versa.
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Choosing the right basket of penny stocks to take advantage of this systemic shit is also critical. So, in this article, I’ll pull the curtain on three different penny stocks that could surge in value in 2024 and beyond. I selected these companies because of their valuations and upside potential. Let’s get started.
Assertio Holdings (ASRT)
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Assertio Holdings (NASDAQ:ASRT) is a micro-cap pharmaceutical company specializing in neurology, rheumatology, and pain and inflammation treatments, with a diverse range of products like INDOCIN for rheumatoid arthritis.
One of the best things about ASRT is that, unlike other kinds of penny stocks, management could turn the ship around regarding its financial stability.
It used to have a balance sheet defined by its high levels of debt and limited assets, to a much more stable one today, with a net cash positive $38.02 million or $0.40 per share.
Two growth vectors for ASRT stock are its recent acquisition of Spectrum and the positive trajectory of Rolvedon, a medication that holds about 2% market share.
As one of those biotech penny stocks, ASRT has significant risks. But if one holds it along with some other less volatile and low-beta stocks, it might be one of those companies that could unlock substantial gains from your portfolio with.
Douglas Elliman (DOUG)
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Douglas Elliman (NYSE:DOUG) is a luxury real estate firm. I’m optimistic about DOUG next year due to lower mortgage rates globally. Specifically, mortgage rates hit a new four-month low earlier in December.
Aside from this bullish backdrop, which could ease the pressure off the underperforming real estate sector, there are other structural reasons I think DOUG could bounce back strongly as be move ahead into 2024.
Despite facing a challenging market with decreased revenues and increased losses compared to the previous year, DOUG reported a significant gross transaction value of approximately $26.5 billion and maintained a high average price per transaction of $1.60 million so far in 2023.
DOUG’s operating and net losses have significantly increased compared to last year, at $40.9 million and $27.7 million, respectively, leading to a decrease in valuation ratios. It trades at just 0.26 times sales while also maintaining strong liquidity ratios. Its quick ratio is an impressive 1.85.
The luxury market is sometimes the first market for real estate, the first market segment to decline during a downturn, but also the first to recover in an uptrend. I feel that this could be the case here with DOUG, thus making it one of those penny stocks to buy.
Pitney Bowes (PBI)
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Pitney Bowes (NYSE:PBI) is a provider of mailing and shipping products. PBI is one of my momentum picks on this list. I feel investors will continue to push the price of PBI up into next year and beyond, thanks to a key catalyst.
In October, PBI’s share surged 24% amid a leadership change. Namely, it replaced its former CEO with interim CEO Jason Dies, who is a board member and executive VP, and came after a long proxy battle with major stakeholder Hestia Capital Management.
The huge amount of optimism the market signals via this rally is a positive sign. And PBI’s momentum ratios suggest that this momentum will continue. Namely, all of its technical indicators suggest that it’s a “Strong buy.”
This includes the fact that it’s trading above the short and long-term moving averages and that its momentum ratios, like the Relative Strength Index, remain robust after nearly a month after the management change.
Despite the rally for its share, I feel it remains undervalued on a fundamental level. Its forward P/E ratio is just 18.42, which is below its five-year average. It’s also cash flow positive and $1.13B in cash on its balance sheet. These are unusual traits to see in a penny stock.
This then makes PBI one of those penny stocks every investor should keep on their watch lists.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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