I believe that easy monetary policies from the U.S. Federal Reserve, combined with stimulus cash, are putting the American economy – and your investments – into uncharted territory. Make no mistake: it's going to be a strange and scary time for most people. My goal is to help us all navigate these storms with our finances intact – and maybe even make a profit out of the whole deal.
One way you can do that is to check out some of the best opportunities among the market's most undervalued equities. Below, you'll find some stocks I'm keeping my eyes on from a medium- to long-term investment perspective.
Some of the set-ups I describe below may no longer be relevant or intact as of the time you read this article. Please conduct your own due diligence. Many stocks mentioned here were also discussed in the Peter Leeds Newsletter. Peter may own shares in some of the investments mentioned, in which case that fact will be clearly indicated. Please note that penny stocks are notoriously volatile.
First, Some Updates
Fortuna Silver Mines Inc. (FSM)
It's been a wild month for Fortuna Silver Mines Inc. (FSM) shareholders, who saw the stock climb to around $8 per share before toppling down to $5.98 on the news of its acquisition of Roxgold, another small Canadian precious metals miner. The deal is set to increase Fortuna's gold production by 50% to 450,000 equivalent ounces, but management has been quick to assert that its primary focus will remain on silver.
Frankly, the huge sell-off seems borderline inexplicable to me. In the long term, I believe that the deal will be a good one, at least once the irrational investor hysteria wears off. In the meantime, this is an excellent entry point into a high-quality miner, in my opinion.
Solitario Zinc Corp. (XPL)
I featured Solitario Zinc Corp. (XPL) in the March edition of this column, when it was trading at approximately $1.00 per share. The month of April hasn't been kind to Solitario Zinc stock, however, and it's now trading around the $0.70 level.
So what gives? The stock's relative strength index (RSI) had grown incredibly high, so I had expected some short-term pain in the shape of selling pressure after that sharp climb. This, in my view, is a key reason behind the stock's downward trend of late. Because the problem is certainly not zinc prices, which have risen since we first profiled Solitario stock. You can thank reduced supply due to COVID-related mine closures for that. In fact, prices have almost doubled from a year ago.
I believe that the stock is still a keeper, however. While Solitario's newfound gold exposure may also have contributed to lower prices right now, ultimately I think shareholders will benefit once gold begins soaring again. I also think zinc prices should keep rising until mines are able to reopen – which in places like Peru, one of the world's major producers of zinc, may take a long time. (The current vaccination rate there is only 2%.)
AbraSilver Resource Corp. (ABBRF)
Since I spoke about AbraSilver Resource Corp. (ABBRF) here last month, this OTC-listed exploration company has climbed from the $0.40 levels to $0.64 for a theoretical gain of 60%. Congratulations to everyone who took a chance on this one!
After as rapid and precipitous a climb as this, it isn't uncommon to see some sell-side pressure. And if the firm isn't able to produce more positive press releases about new silver and gold discoveries (as was the case in April), we could see shares move back toward the $0.50 level or even below.
Nonetheless, I think AbraSilver is a good (and still very cheap) long-term hold for those readers who have a lot of patience, risk tolerance, and time to spare. My view remains strong that precious metals (especially silver) will see a strong recovery and climb to new heights. Companies like AbraSilver should therefore make a great hedge in these uncertain economic times.
Some New Ones
Williams Industrial Service Group Inc. (WLMS)
Given the White House’s plans to renew and rebuild American infrastructure, Williams Industrial Service Group Inc. (WLMS) is poised to benefit from the improvements now busily being arranged all over the country. No wonder the stock price is up 115% over the past year, with a recent gap up in the charts suggesting even higher prices ahead.
As I emailed one of my subscribers, "The things to watch with a company like WLMS are order backlog and efficiency converting backlog to revenues. The company is doing both things impressively, and has plenty of possible HUGE contracts they hope to land (about $500 million worth)." Naturally, the key word here is "hope." There's no guarantee that Williams Industrial Service Group will actually get those deals. But there's also abundant evidence right now (as shown in the latest set of results) that management will be a strong contender in those battles for new contracts, in my view.
The market seems to agree, sending the stock up 60% over the past month. (Note that the stock price now slightly exceeds the $5 level – meaning it's no longer, technically, a penny stock.) We might accordingly see Williams Industrial Service Group stock take a little break as the investor frenzy calms down. Still, over the longer term, I believe that the price could easily climb at least a dollar more for a tidy little profit, even at these relatively elevated levels.
One Stop Systems, Inc. (OSS)
Artificial intelligence (AI) and computing technology manufacturer One Stop Systems, Inc. (OSS) is a great company, and it has operational momentum – and consequently financial results – which have been steadily getting stronger. In my opinion, the price slide from over $9 seems to be stopping, making the shares very attractive at the current price of $5.43 (in my opinion, and as a long-term investment).
Indeed, the market seems to be rediscovering One Stop Systems lately, with the price ascending almost 25% over the past week alone. The market appears especially intrigued (as am I) by the company's new focus on "AI Transportables," i.e., cutting-edge technology enabling applications like autonomous trucking. Management says that this segment of the AI market should grow from "hundreds of millions in 2021 to multiple billions by 2025."
Granted, the company is trying to sell itself here, but if management is even just halfway correct, then I'm here for it. I should mention that One Stop Systems' most recent quarterly earnings missed estimates, with revenue tumbling around 25% during the fourth quarter of 2020. But, while the company is still losing money, it's getting closer and closer to breakeven.
In the meantime, its balance sheet is strong enough that dilution may not be a near-term threat. I think One Stop Systems is finding its footing again, and I have an eye on the stock hitting the $9 levels over the longer term.
Best Brokers for Penny Stocks
Interactive Brokers' very low per-share trading commission of $.005 ($1 minimum per trade) and up-to-the-split-second real-time margin calculations are ideal for penny stock traders. IBKR Lite clients can trade penny stocks for $0.
Low commissions, maximum 1% of trade value for IBKR Pro, $0 for IBKR Lite
Streaming real-time data, including account information
IBot, IB’s AI-powered online assistant, can help find features
Data streams on only one device at a time
Traders Workstation a steep learning curve
IBKR Pro customers charged fees to trade, though they are low
Schwab's research pages point out the exchange on which a stock trades, which will keep you informed of the inherent risk. There are a variety of platforms available; the StreetSmart platforms have customizable charting and streaming real-time quotes. Schwab does not charge trading commissions on all stocks (including penny stocks) and ETFs.
Excellent screeners available on StreetSmart Edge
Free access to a wide array of news feeds
Strong customization and personalization options on StreetSmart Edge
The sheer number of features and reports available sometimes overwhelming
Transaction history for just 24 months online
Uninvested cash not swept into a money market fund
Penny stocks are volatile and can generate catastrophic losses. Price levels in this article are hypothetical and do not represent buy recommendations or investment advice. Keep in mind that it's your responsibility to make trading decisions through your own skilled analysis and risk management.
Peter Leeds is the author of several books, including the international bestseller, "Penny Stocks for Dummies." He and his team also issue a newsletter devoted exclusively to penny stock picks and analysis, as well as a popular YouTube channel PeterLeedsPennyStocks.