Up until the beginning of the second quarter of 2019, most investors were expecting the U.S.and China trade war to end smoothly and even – dare I say it? – amicably. Some commentators went so far as to posit an end date of May 10, 2019, as a near-term event that stockholders on all sides of the political spectrum could look forward to.
I know what you're thinking: Given penny stocks' often well-deserved reputation as some of the riskiest gambles around, is a cautious investing strategy for low-priced equities even possible?
I believe it can be. Using exhaustive research and analysis, Peter Leeds and his sought out the penny stocks that they feel are being unfairly valued and which typically have the fundamentals to back our opinions up. Below, you'll find updates on a few of our past picks and some of our most interesting stock ideas right now.
Disclosure: Many of the stocks mentioned below were also profiled, traded or otherwise discussed in the Peter Leeds Newsletter. As well, Peter may own shares in some of the investments mentioned, in which case that fact will be clearly indicated. See below for an additional important disclaimer regarding penny stocks.>
Trade Wars and Markets
However, the impasse continues – and the markets have suffered accordingly.
Now granted, even at these levels, their performance was nowhere near as bad as it could have been. (Remember, after all, that all the indices I mentioned are up between approximately 9% and 15% year to date.) According to Peter Leeds, he and his team are still expecting a severe market correction in the coming months of 2019. He warns readers to be cautious about their investments amid the threat of a potential extended recession.
Hi-Crush Partners LP – HCLP
In last month's write-up, we described Hi-Crush Partners LP (HCLP) as an incredible opportunity for the long term. Since then, shares have tested investors' patience and resolve (and nerve) with a precipitous 36% decline throughout the month of May.
Here's what happened: on May 7, the company reported disappointing first-quarter results, with revenue dropping 27% on a quarterly basis. This was the last straw for some investors, who have watched the price of the shares tumble a heartbreaking 83% over the past year.
Crushed? Don't be. The tide may be turning for Hi-Crush Partners. In the last week of May, shares started up a rebound to 8% as of the time we were writing this report. However, even if this bounce is short-lived (and it very well may be, considering the challenging conditions in the fracking sand market right now), I'm continuing to love Hi-Crush Partners as a long-term hold for the patient investor.
Look beyond that quarterly revenue drop and consider the group's average sales growth rate of 36% over the past five years. Factor in a price-to-earnings ratio (P/E) of 3.02, a forward P/E of 8.28, and a relative strength index (RSI) of 31.56, and this is looking like one very oversold stock.
Rekor Systems, Inc. – REKR
Some stock plays – like Hi-Crush Partners, as I discuss above – take a long time to really get rolling. And then there's Rekor Systems, Inc. (REKR), which I first wrote about last month under its former name of Novume Solutions (NVMM).
Since Rekor Systems was added to my Hot List, shares have climbed 62% to a high of $1.12, demonstrating that sometimes a name change can provide more than just a cosmetic facelift to the stock – it can also reawaken lagging investor interest and give fresh life to a company like Rekor.
While shares have returned some of those gains over the past 24 hours (as of the time we were writing this report, Rekor was trading back at $0.86), we still believe that the stock has a lot of upsides ahead of it.
It's a no-brainer, in our opinion: an intriguing AI-driven product offering, new strategic focus on tech, fresh blood in senior management, the launch of its new cloud-based software NUMERUS, and a very recent deal with the Department of Defense all point to a sunnier future for Rekor shares.
Inseego Corp. – INSG
As I'd expected, Inseego Corp. (INSG) saw some big moves over the past month, finally shedding its penny-stock status and climbing above the all-important $5 level to a peak of approximately $5.75 in the last week of May.
The good news doesn't end there. In our view, if Inseego can break $6 in the near term, we could see it summit even greater price levels over the month of June.
After all, Inseego, which designs and develops mobile, Internet of Things (IoT), and cloud solutions, also specializes in helping other firms to save money on employee and telecom costs. That's just about the best way a company weather a recession and perhaps even profit from it in the long run.
As I explained last month, however, investors with a long-term interest in Inseego shares should keep an eye trained on the group's very shaky balance sheet. There's no doubt about it: the company needs to cut costs and improve its assets/liabilities mix – and soon. But if it is able to do so, we would expect great things from Inseego.
CVR Partners, LP – UAN
The month of May was a pretty good one for CVR Partners, LP (UAN), with a decent 7% ascent over the past few weeks since we first profiled it and with rating firm Moody's changing the company's outlook from Negative to Stable.
I'm expecting the good times to continue to roll for CVR Partners over June, as the nitrogen fertilizer business rebuilds investors' trust and the stock lures new investors over with its relatively high dividend of 5%. Indeed, CVR Partners has shown that it may be well on the path to recovery, with 28% share growth over the past year alone.
Two cautionary notes here: the debt-to-equity ratio at 1.31 is looking a little dire, and trading volume are intensely low. The former concern is self-explanatory, and the latter suggests that CVR Partners stock may have a lot of volatility ahead of it until it can attract more market interest.
Brand New Penny Stock Ideas
Penny stocks are notoriously volatile.
Nuvecrta Corporation – NVTR
Full disclosure: I wasn't entirely sure I wanted to include Nuvecrta Corporation (NVTR) on the list today because of its massive ongoing losses. We're talking five consecutive years of substantial net income deficits, ranging from $21.44 million in 2014 and gradually increasing to $47.15 million as of 2018.
It's difficult to believe that, only a little under a year ago, financial analysts were giving Nuvecrta a price target of as high as $27. What a fall from grace for this neurostimulation medical device company. Needless to say, risk-averse investors may want to steer very clear of Nuvecrta. So why am I mentioning it after advocating caution in the months ahead?
Simply because the upside potential here is truly tremendous. Sales over the past five years have shown stunning average growth of 74%. And while quarterly revenue took a beating in the most recent results, dropping 23% from the quarter before it, the company's high gross margin of around 51%, high quick and current ratios of 6.10 and 6.60, respectively, and the RSI of 11.62 make me convinced that Nuvecrta is absurdly oversold and undervalued at the moment.
STRATA Skin Sciences, Inc. – SSKN
My team selected dermatological medical device firm STRATA Skin Sciences, Inc. (SSKN) for inclusion in our newsletter's Hot List back in the summer of 2018, when this micro-cap stock was trading at a mere $1.87. Fairly soon afterward, it became one of our greatest success stories of the year, reaching a peak of $3.87 in the fall of 2018 for an overall gain to our subscribers of 107%.
Now that STRATA Skin Sciences is back at its erstwhile bargain-basement price of $2.08, I'm finding myself highly intrigued by the stock once again. There's certainly a lot to like here: average revenue growth of 124% over the past five years, a solid balance sheet, a gross margin of 52.60%, and RSI of 19.92, all of which suggest that this one is due for another upswing.
But first, STRATA Skin Sciences will have to resolve investors' fears over its Notice of Filing Delinquency from Nasdaq. The company says it's late to providing its past two sets of quarterly results because it changed its accounting firm back in mid-May.
STRATA's SEC listing on the matter says, "This notice from Nasdaq has no immediate effect on the listing of the Company's common stock on the Nasdaq Capital Market. The Company has until June 3, 2019, to either cure the deficiency or to submit a plan to Nasdaq showing how it intends to regain compliance. As previously disclosed in its Current Report on Form 8-K filed with the Commission on May 14, 2019, the Company intends to submit a compliance plan by such date. If Nasdaq accepts the plan submitted by the Company, Nasdaq can grant an extension of the grace period for shares of the Company's common stock to remain listed for up to 180 calendar days from the 10-K's due date, or until Sept. 30, 2019, to regain compliance."
A red flag, to be sure – and we might see STRATA Skin Sciences' next set of results carrying a negative surprise. All of this is more than factored into the share price, however, and based on the firm's solid fundamentals and track record, I believe that the stock could be a good medium- to long-term hold.
Blink Charging Co. – BLNK
In the company's own words, "Blink Charging Co. (BLNK) owns, operates, and provides electric vehicle (EV) charging equipment and networked EV charging services. The company offers residential and commercial EV charging equipment that enable EV drivers to recharge at various location types. It also provides Blink Network, cloud-based software that operates, maintains, and tracks various Blink EV charging stations and associated charging data, as well as provides property owners, managers, and parking companies with cloud-based services that enable the remote monitoring and management of EV charging stations and payment processing. In addition, the company provides EV charging hardware, site recommendations, and maintenance services."
Whew. In short, if you want a one-stop shop for all things electric vehicle-related, Blink Charging is where you want to go. Currently trading at $2.54, the stock is dirt-cheap compared to its peer group in the EV space.
Despite a tough trading quarter for Blink Charging, with shares losing 32% over the period, my team and I believe that the group has actually been undergoing a slow and gradual, but still very exciting, transition to progress and profitability.
Consider the 47% growth in the shares' performance year to date or the quarterly earnings per share (EPS) growth of 97%. Consider as well all the deals Blink has lined up over the past year or so, whether with high-profile groups like Whole Foods and Four Seasons hotel chain, or the smaller clients with which the company has myriad partnerships.
If electronic vehicles are the future of the automotive industry, then Blink Charging is most certainly poised to benefit, in our opinion. And you'll be hard pressed to find an EV-charging company that is this inexpensive, with zero debt-to-equity ratios and a healthy balance sheet to boot.
Daseke, Inc. – DSKE
Texas-based trucking company Daseke, Inc. (DSKE) has had a rough year, recording a staggering 55% drop in its share price over the past year. To hear some of the commentators on the message boards talking about it, you'd be justified in thinking Daseke was the worst stock to ever appear on the Nasdaq.
Here's the thing: I think they're wrong. Or, in any case, they haven't received the memo that the company is in the midst of a full-fledged turnaround.
Case in point: Daseke is now recording terrific growth, pulling in a 32% increase in sales in the first quarter of 2019 and a 56% gross margin. Furthermore, on the most recent conference call, management guided for healthy revenue growth of 15% in 2019 on a year-over-year basis. Add to that three new board members, a new chief of operations, and significantly increased activity in investor relations, and Daseke is looking increasingly oversold.
It's difficult to say when the markets will finally take notice of these positive changes. Until then, investors will likely have to be patient. I believe that this patience just might be rewarded if Daseke management is able to keep up the turnaround and reduce debt.
The Bottom Line
I've been watching the markets closely for over two decades, and frankly, I've never seen a market as topsy-turvy (and due for a crash) as this one. Stocks are soaring for all the wrong reasons … and I don't see this ending well for many top investors.
But don't get me wrong: I'm not at all pessimistic. As I've shown in the paragraphs above, I believe that there are still a number of fantastic opportunities out there for investors who know where to look and how to do their due diligence. The upcoming market correction could be just that – a correction redistributing the outsized gains of the past decade's bull market to a new group of winning stakeholders.
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 —PeterLeedsPennyStock.