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To make millions from the markets, investors should allocate funds toward high-risk stocks. Blue-chip stocks provide steady returns and capital protection. However, big wealth creation comes from growth stocks. This includes penny stocks with a robust growth outlook and this column discusses three penny stocks with 20-bagger potential.
My view on portfolio construction for young investors is as follows. Initially, it makes sense to remain overweight on growth and high-risk penny stocks. As the portfolio swells, allocate profits toward blue-chip stocks. Therefore, the beginning is associated with higher risk, which supports building capital.
Note that penny stocks do not imply poor fundamentals. There are penny stocks that represent companies with good fundamentals and an attractive business model. These names can make it big over the long term.
Let’s discuss the reasons that make these penny stocks possible wealth creators.
Bitfarms (BITF)
Source: PHOTOCREO Michal Bednarek / Shutterstock.com
Cathie Wood believes the Bitcoin (BTC-USD) price is likely to touch $1.5 million by 2030. This implies more than 20x returns. Given the limited supply and rising adoption of crypto assets, achieving this target would not be a surprise. A small part of the portfolio needs to be allocated to cryptocurrencies and crypto stocks. Bitfarms (NASDAQ:BITF) is an undervalued Bitcoin miner poised for multibagger returns.
It’s worth noting that Bitfarms is solely focusing on Bitcoin mining. However, I strongly believe that the company will diversify in the coming years. Blockchain technology has promising growth potential and as financial flexibility increases, Bitcoin miners would look to go beyond just mining. This is speculative but likely.
Bitfarms has a strong liquidity buffer of $118 million as of December 2023. With a zero-debt balance sheet, financial flexibility is high. Therefore, the company is pursuing aggressive hash rate capacity expansion. From current levels of 6.5EH/s, capacity is expected to increase to 21EH/s by the end of 2024. This will translate into robust revenue growth and cash flow upside.
Tilray Brands (TLRY)
Source: Lori Butcher / Shutterstock.com
After Joe Biden’s presidential election, there were hopes of quick reforms on cannabis legalization. Tilray (NASDAQ:TLRY) stock had skyrocketed from under $10 to $65 in the blink of an eye. This is an indication of the potential the stock holds on one or two big news.
TLRY stock has remained depressed for an extended period and currently trades at $1.6. It’s among the cannabis names that will survive and grow in the coming years. Multibagger returns from current levels seem likely.
In 2023, Tilray focused on diversification and the company established itself as the fifth-largest craft beer brewer in the United States. I believe Tilray is focusing on accelerating cannabis segment growth in upcoming quarters. It’s worth noting that for Q2 2024, the company reported 55% year-on-year growth in international cannabis net revenue. The medicinal cannabis segment drove this.
Tilray expects positive adjusted free cash flow for the financial year. With a diversified business, a big addressable market and healthy growth in the cannabis segment, the outlook is positive for Tilray.
Yatra Online (YTRA)
Source: John Brueske / Shutterstock.com
Several countries are facing sluggish economic growth. However, India continues to be a bright spot in the global economy. Moody’s recently upgraded India’s 2024 GDP forecast to 6.4%.
With favorable demographics and significant investment impending in infrastructure, India is a long-term growth story with potential. Among multiple opportunities, the travel and tourism sector holds promise and is likely to witness healthy growth. Yatra Online (NASDAQ:YTRA) stock is a deeply undervalued name likely to surge higher.
As an overview, Yatra is among the leading online travel and tourism companies in India. Yatra is a leading B2B travel provider with more than 13,000 corporate customers. To put things into perspective, the company has an addressable employee base of seven million in the B2B business. At the same time, Yatra is expanding its business-to-customer opportunities.
For Q3 2024, Yatra reported revenue and adjusted EBITDA growth of 23% and 24% respectively on a year-on-year basis. I expect growth to accelerate significantly with a strong economic outlook and corporate client wins.
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, Faisal Humayun 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.comPublishing Guidelines.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.
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