Penny stocks evoke mixed feelings from investors.
Notorious for their extreme volatility and driven by speculation, they’re recognized as a way for investors to get access to emerging industries in their infancy.
Take the cannabis market as an example. Many of today’s largest cannabis stocks began as mere penny stocks.
But what set them apart – eventually launching them into the big leagues of major exchanges and billion-dollar-plus valuations – was their potential for revenue growth.
So let’s take a look at some of today’s most promising penny pot stocks.
According to the Securities and Exchange Commission, a penny stock is technically any stock trading below $5. But that definition alone would carelessly include a slew of bigger companies, like Office Depot (Nasdaq: ODP) and LendingClub (NYSE: LC). To differentiate, we’ll set a limit on the market cap of the companies we consider to be penny stocks.
Small caps generally range between $300 million and $2 billion. Below that valuation, we’re looking at two segments of the penny stock market: microcaps and nanocaps.
Microcaps have a market cap ranging from $50 million to $300 million, while the market cap of nanocaps is even lower.
First, let’s look at microcap cannabis stocks…
At the top of our list of promising microcap penny pot stocks is the pure play Isodiol International (OTC: ISOLF) – one of Canada’s fastest-growing sellers of hemp-based CBD products.
(To hear the latest on the fast-growing CBD market, click here to watch Matthew Carr’s recent interview with Dr. Jordan Tishler, president of the Association of Cannabis Specialists.)
Though it trades below $2, this is a company worth keeping an eye on.
It’s one of the biggest moneymakers in the microcap cannabis space – generating about $29 million in revenue over the past 12 months – and has seen some terrific triple-digit revenue growth in its last two quarters.
Also on this list is EnWave Corp. (OTC: NWVCF) – a Canadian technology company that develops dehydration methods for products in both the food and pharmaceutical industries.
The company made its official plunge into the cannabis space last year. It collects royalties from cannabis producers that use its REV dehydration technology. Major cannabis player Tilray (Nasdaq: TLRY) is its biggest client to date.
1933 Industries (OTC: TGIFF) also makes hemp-based CBD products for both medical and recreational cannabis uses, in addition to offering advisory services for clients in security, intelligence and due diligence.
It has operations in both Canada and the U.S., and has seen significant revenue growth in recent quarters.
Next, we have our list of promising nanocap cannabis stocks…
Here’s where things get real fuzzy…
The biggest revenue stream comes from Grow Solutions Holdings (OTC: GRSO), which is trading below $0.01 – the quintessential penny stock.
While its market cap is below $400,000, the company has managed to rake in nearly $7 million in the past 12 months. Revenue grew 72% in its second-to-last quarter and 48% last quarter, compared with the same quarters last year.
It’s promising… at first glance. But like many textbook penny stocks, there’s very little information available about the company’s operations.
In fact, the last SEC filing available online is from fiscal year 2017 – a major red flag!
Perhaps the most credible company on this list is GB Sciences (OTC: GBLX).
Based in Las Vegas, the company focuses on developing cannabis-based treatments for conditions such as cardiac hypertrophy, neuropathic pain, Parkinson’s disease and others.
It has completed preclinical trials for treatments of cardiac hypertrophy and neuropathic pain. It has also filed five patent applications and has two licensed patents.
One advantage GB Sciences boasts is it’s a licensed cannabis grower, able to grow and sell cannabis legally in the state in addition to growing cannabis for research purposes.
But as most of these nanocaps reveal, extremely low market cap stocks are the Wild West of the market.
Penny stocks are some of the most volatile and speculative trades you’ll ever make.
In fact, any nanocap worth its salt will graduate to a microcap. So you’ll want to focus on that slightly higher market cap range.
Otherwise, you might lose your shirt.
Source: Energy & Resources Digest