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Penny Stocks to Watch for February 2022

Penny stocks have a well-deserved reputation for low quality, high risk, and intense volatility. However, by practicing due diligence, you can discover some hidden treasures in the most unexpected places.

Below, you’ll find updates on previously discussed penny stocks from this column, followed by a few new intriguing and inexpensive trade ideas that are still flying under most investors’ radar.

Some of the setups described 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. Leeds 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

Amyris, Inc. (AMRS)

After Amyris, Inc. (AMRS) was first included as a penny stock to watch in 2020, the stock’s value soared all the way to $20 and beyond, remaining high above the “penny stock zone” (composed of stocks valued at under $5 per share) for almost the entirety of 2021.

However, shipping delays and manufacturing issues in China are taking a big bite out of earnings for Amyris. Potential dilution is also a concern for shareholders, and the company’s quick and current ratios of 0.40 and 0.60, respectively, are low enough to be worrisome. Consequently, the share price was back down to $4.07 as of this writing.

However, there are some reasons to believe that the sell-off is overdone. Consider the fact, after all, that the company is bringing two factories (in Brazil and Nevada) online soon, which should offset many of those earlier shipping issues. Meanwhile, Amyris still has excellent double-digit earnings per share (EPS) and revenue growth rates, as well as a gross margin of 66.40% and a spectacular return on equity (ROE) of 337.40%.

Given all these positives, the stock has the potential to rise back to the $10 level in the medium term once the negative news is digested and shipping issues are resolved.

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BRF S.A. (BRFS) 

BRF S.A. (BRFS) failed to transcend its $5.20 resistance level at the beginning of October 2021, dashing hopes of a breakout for the share price. Since then, the stock price has seen continued losses as food producers faced immense cost pressures from inflation.

It’s possible that the tide is turning for this Brazilian meatpacking firm, however. BRF stock is up 5.47% over the past month after the company proposed a $1.17 billion capital increase, which in turn sparked rumors that minority shareholder Marfrig will acquire a controlling stake in the company.

So why is that (potentially) good news? The rumored deal—if it does in fact come to pass—could be a transformative one for BRF. And given the ensuing spike in the share price, investors are indicating they think that’s just what this beleaguered company needs. 

Even if Marfrig doesn’t end up adding to its stake, the future looks brighter for BRF over 2022. China and Russia are once again allowing meat imports, and forecasts call for EPS skyrocketing a stunning 733% next year.

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Some New Ones

Snipp Interactive Inc. (SNIPF)

Snipp Interactive Inc. (SNIPF) is a Canadian loyalty and promotions technology company that, in its own words, “provides mobile marketing, rebates, and loyalty solutions in the United States, Canada, Ireland, and internationally.” Trading at only $0.16, Snipp is a far better stock than it has any right to be. It has an incredible roster of clients that includes such household names as PepsiCo, Inc. (PEP), The Estée Lauder Companies Inc. (EL), L’Oréal S.A. (LRLCY), Starbucks Corporation (SBUX), and Nestle S.A. (NSRGY).

One big negative, however, is that cost of goods sold (COGS) is way too high—far higher than revenue every year for the past five years. However, on an annual basis, COGS has also been decreasing every year, dropping to $12.39 million as of year-end 2020 from $19.87 million in 2017. This is reassuring, suggesting that the group is successfully reducing costs and increasing effectivity.

In addition, Snipp’s 49% growth in bookings as of Dec. 31, 2020 (compared with end-2019) to $6.7 million suggests that the company is successfully clawing its way to profitability. Meanwhile, the bookings backlog as of Dec. 31, 2021, is at a very healthy $10,000,000, the highest backlog in the company’s history.

For all these reasons (including Snipp’s unique technologies and stellar client roster), it could make an excellent acquisition target. Snipp stock accordingly deserves to trade at a much higher price than it’s currently seeing, and it may return to the $0.25 level and beyond not too long from now as its turnaround comes to fruition.

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Taseko Mines Limited (TGB)

Taseko Mines Limited (TGB) is a developer and explorer in the copper space. Copper is looking especially interesting right now because, despite some recent weakness, prices are up strongly so far in 2022 (to a $4.45 average versus $2.80 in 2020) on the back of the weaker U.S. dollar and tighter global supply. Copper is also used in the electric vehicles (EVs) and infrastructure spaces, both of which are set to grow substantially over the next decade.
 
Finally, the recent election of a new leader for Chile—based partly on his promise to halt a large copper mining project in the country (the world’s largest copper producer)—suggests that companies will soon be looking elsewhere for their copper.

Taseko Mines operates in Canada and the U.S., meaning it’s unlikely to deal with some of the problems Chilean copper players are currently facing. Most promisingly, Taseko finally had the draft EPA permit come through on its Florence Copper mine, with the final permit expected to come through in 2022 and operations to begin in 2023-2024. According to some estimates, Florence could ultimately boost the company’s positive cash flow to $280 million if copper is priced at $4 per pound. (Note that copper is going for $4.31 at the moment.)

The life of mine for Florence, moreover, is a generous 21 years, and a further 18 years at its already-operating site, Gibraltar, where the company recently signed a labor agreement with its unionized workers in force until 2024.

Taseko also has some excellent financial ratios pointing to strong value at its current price, like a forward P/E of 10.82, P/C of 2.82, P/FCF of 5.74, and healthy quick and current ratios.

As a long-term hold, copper companies are well placed to benefit from economic growth in China and the EV revolution. Their gains may not happen overnight, though—and that’s why stocks like Taseko Mines are still trading at penny stock prices. Still, readers with patience and an appetite for risk may find a lot to like about this stock.

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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.

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