Just about everyone who's paid to weigh in on the stock market will focus almost exclusively on the positives: all the gains you stand to make, how a given stock’s potential rewards outweigh the risks, and so on. In some ways, however, the potential negatives—i.e., your failures in the investing realm —will be even more important than your successes.

A big investment loss can understandably be horribly painful. But as I myself discovered at a young age (when I lost every cent I had on a single penny stock!), there can be no better teacher than failure when you're a novice trader. The trick is to learn from your mistakes and not give up hope.

Of course, I'd like for all of my penny stock picks below to bring you nothing but success. Nonetheless, everyone makes mistakes and miscalculates an investment's timing. If that happens to you, don't lose heart and beat yourself up; instead, re-assess your goals and bring those lessons to bear on your future trades. I hope some of the stock ideas below will help inspire you in your investing journey.

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

ToughBuilt Industries, Inc. (TBLT)

I featured ToughBuilt Industries, Inc. (TBLT) in this column back in February 2021, soon after which it soared around 30%. Since then, it's been a rocky path for this tools manufacturer, which has seen incredible revenue growth but is having trouble translating that into consistently higher stock prices.

Over the past month, it was looking as if shares had started to claw their way back up again. But then ToughBuilt dropped its disappointing second-quarter 2021 results on us. Now the stock is sitting at only $0.55.

Needless, to say, I'm disappointed. The net loss attributable to common stockholders was $7.4 million, way up from the net loss of $2.5 million in the second quarter of 2020, and operating costs also increased substantially during that time. Management is losing its credibility with shareholders and will have to work doubly hard to regain it in the future.

I do note, however, that there are still some good financials here, and the stock is incredibly cheap at its current price. Additionally, future opportunities in Latin America and Europe sound intriguing. I'm pretty confident that the company can continue to show solid sales growth given its pipeline of new products and expanding global reach.

On the other hand, management now more than ever needs to turn its top-line growth into some solid profitability that investors can believe in—and with the whole industry suffering from supply chain issues, the possibility that ToughBuilt can do that soon seems to be receding.

Chart showing the share price performance of ToughBuilt Industries, Inc. (TBLT)

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Great Panther Mining Limited (GPL)

We're heading way back to September 2019 for this update. That's when I first included Great Panther Mining Limited (GPL) in this column and discussed my bullish outlook for the junior gold and silver miners. Now, Great Panther stock has done very well since then, climbing all the way to the $1.20 levels twice over the past few years.

But at the moment, the stock is in the toilet, tanking 55% over the past six months. This comes on the back of a weak second quarter for 2021, in which safety issues with a pit wall led to a mine closure and, consequently, much lower-than-anticipated production and therefore revenue. Ongoing issues with obtaining permits in Mexico for further mine exploration are also wreaking havoc on GPL's price. And finally, costs related to addressing and resolving those safety issues made capex shoot way up over the past few months.

Probably the most troubling thing about Great Panther Mining right now is the lack of a response to its permit requests. If these are ultimately rejected, we could obviously see the price move even lower than it is currently (and it's only 3% higher right now than its 52-week low). I do think that GPL is by and large a good-quality company, with a good five-year track record of revenue growth and a strong forward P/E of 2.24, but it's also one that has been dogged by bad luck and red tape.

This makes it an even more speculative play than your average mining penny stock. So, whether you decide to investigate this one further comes down to your confidence in the precious metals rising as much as I believe they will, as well as on your risk tolerance and patience levels.

Chart showing the share price performance of Great Panther Mining Limited (GPL)

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Ceragon Networks Ltd. (CRNT) 

Ceragon Networks Ltd. (CRNT) was a July 2021 "Penny Stock to Watch" that has risen 22% over the past quarter. I'm glad this one is finally seeing some movement! Considering its earnings per share (EPS) are expected to gain 833% next year (according to FinViz data), investing in this undervalued stock is a no-brainer, in my view.

With a great set of second-quarter results under its belt, combined with a lot of good press lately as well as rumors surrounding a possible partnership with a big telecom, we may see CRNT keep climbing over the month ahead. I'm definitely feeling bullish on this 5G play.

Chart showing the share price performance of Ceragon Networks Ltd. (CRNT)

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Some New Ones

BRF S.A. (BRFS)

One of the key precepts underpinning the Peter Leeds team's investing strategy goes like this: the smartest and savviest investors are those who are able to weather a stock's shorter-term volatility and focus instead on its long-term growth potential. As I've said many times before, I've seen patience be amply rewarded again and again among my subscribers.

The Brazil-based food firm BRF S.A. (BRFS) will require these strategies in its investors, in my opinion. The near-term pressures across the entire industry are intense, with input costs growing among all of the food producers and red tape in Saudi Arabia making it more difficult for foreign poultry companies to operate there.

Although a number of BRF's peers with similar capitalization levels are facing the identical issues, they're priced many, many times higher than BRF stock—sometimes in the triple digits. BRF, meanwhile, is priced at merely $4.49 per share right now.

Shareholders are probably being scared off by the company's extremely high debt levels (with the debt/equity ratio at 3.20 and long-term debt at $23 billion as of year-end 2020). That's a very reasonable concern, of course. However, it's important to read the fine print. The maturity date on almost all of the debt is for a decade from now, and the short-term debt at around $1 billion looks manageable.

Because of that high debt load and 0.90 quick ratio, BRF stock does not meet all of my usual stringent Leeds Analysis criteria. But its growth story is compelling enough that I believe it could be worth a closer look. Management has set in place what it calls its "Vision 2030" plan, with plans to reduce that debt, improve margins, and increase product diversification, targeting in particular the addition of more value-added foods to its portfolio. The financial ratios are healthy too, with a P/E ratio of 13.62, P/S of 0.49, P/C of 2.24, and P/FCF of 9.29. It's rare to see such good numbers in a penny stock.
 
Finally, I can't think of a much better hedge against economic catastrophe than a food company, especially one that sells meat. BRF itself says that there's more meat demand coming from Asia than it knows what to do with, and short of some truly epic natural disaster taking place, it's hard to see meat ever not being a staple in most people's diet.

Chart showing the share price performance of BRF S.A. (BRFS)

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Sigma Labs, Inc. (SGLB)

At one point not too long ago, 3D printing was hailed as the solution to … well, everything. World hunger, war, orphans? Just throw a 3D printer at it and everything will be okay, was how the thinking went. Except that wasn't quite how it worked out. And once the dust (and hype) cleared, investors were left with a great deal of overvalued 3D printing stocks, many of which promptly crashed … leaving behind a lot of broke people and a general feeling of cynicism about the industry.

Sigma Labs, Inc. (SGLB) is not your average 3D printing company, however. Its particular niche is providing quality assurance to the metal 3D printing industry, helping well-known and well-heeled clients like Lockheed Martin Corporation (LMT) and Mitsubishi Heavy Industries, Ltd. (MHVYF) to cut costs and improve efficiencies.

Since Sigma Labs reported its second-quarter results on July 22, prices have taken a nosedive on the back of some very disappointing revenue results. According to management's comments on the conference call, the near-70% drop in sales was due to the ongoing fall-out from COVID-19 in Europe as well as some unpreventable one-offs, including the timing of a purchase order.

One analyst on the most recent conference call humorously described Sigma's latest set of earnings as "the ultimate dog-ate-my-homework quarter." For certain, it would be great to see more accountability from the management team here.

That said, over the past week, the stock's been recovering (to the tune of around 7%), with the market finally beginning to digest the bad news and new investors taking positions in SGLB. If management can be believed, the engineering team can hardly keep up with the volume of new orders—so it's highly plausible that the company could see some substantial growth over the next few quarters and beyond.

As is the case with all penny stocks, SGLB is a highly speculative trade, and the second half of 2021 will show whether the group can deliver on all its promises. For now, I believe it just may be an intriguing and inexpensive play on the continued rise of 3D printing, with reportedly 80% of major manufacturers intending to increase their usage of those technologies, and with a potential boost from the U.S. infrastructure bill.

Chart showing the share price performance of Sigma Labs, Inc. (SGLB)

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Best Brokers for Penny Stocks

Interactive Brokers

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.

Pros
  • 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

Cons
  • 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

Charles Schwab

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.

Pros
  • Excellent screeners available on StreetSmart Edge

  • Free access to a wide array of news feeds

  • Strong customization and personalization options on StreetSmart Edge

Cons
  • 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.