By definition, a penny stock is a company that has a stock price of less than $5 per share. Instead of trading on a major stock exchange like the Toronto Stock Exchange, they are typically traded over the counter (OTC) on smaller exchanges.
Disclaimer: BEWARE, Investing in penny stocks is a risky affair so please do your research before trading in any of the below stocks.
Should You Invest in Penny Stocks?
If you want to buy Canadian penny stocks, you must be aware of the risks involved. Most penny stocks will not survive, meaning you could lose a substantial amount of your investment capital. You must understand that the low market price does not mean buying penny stocks is less risky than large-cap stocks.
The company’s market cap is the most important metric you should understand about stock investing. The market cap will show you what a company is truly worth; a low share price does not mean it is cheaper than a company with a large share price.
The Pros and Cons of Penny Stocks
The main reason many Canadian investors choose to buy penny stocks is to attempt to get rich quickly. While it is possible to get rich quickly, many penny stock investing carries a substantial amount of risk.
There is a lot of misleading information about stocks online, which can lure unsuspecting investors into investing in a low-quality company.
- High return potential
- Less capital is required to buy shares
- Substantial risk
- Additional fees on OTC exchanges since they are not available on the Toronto Stock Exchange
Investment Advice for Buying Penny Stocks
Trading penny stocks in Canada is risky, but it can pay off handsomely. Here are some tips to get you started finding the best penny stocks.
- Look for a strong balance sheet
Canadian securities with a strong balance sheet are more likely to survive harsh economic times. You should find penny stocks with more liabilities than assets and check their cash flow statements to see if they make enough money to function.
- Analyze the cash flow statement
The cash flow statement will show you crucial information, such as the operating cash flow. A positive operating cash flow means the company profits from its business activities. It will also show you how much cash the company has on hand.
- Check the total debt
A company’s total debt can be viewed on the balance sheet. Ideally, penny stocks will have more cash than the total debt.
- Look at recent news
Many penny stocks are news based, meaning they rely on a good news article to come out. Viewing these articles to keep up with the recent news about the company is crucial. Not all penny stocks will be highly news-based, but checking out the latest articles is always informative.
The Best Canadian Penny Stocks on the Stock Market Today
1- Kodiak Copper
- Ticker Symbol: KDKCF
- Market Capitalization: $39m
The Kodiak Copper Corp. is a Canadian penny stock exclusively engaged in the copper porphyry projects exploration business in both Canada and the United States. The company was formerly known as Dunnedin Ventures Inc. before changing its name to Kodiak Copper Corp. in early 2020.
While Kodiak Copper is not generating revenue yet, a strategic focus on copper porphyry is driven by the push for a commitment to ESG and the green revolution. Kodiak Copper also owns two copper porphyry projects in the advanced exploration stage with significant size potential.
2- HIVE Blockchain Technologies
- Ticker Symbol: HIVE
- Market Capitalization: $373m
HIVE Blockchain Technologies operates as a cryptocurrency miner in Canada, Sweden, and Iceland. The cryptocurrencies it mines include Bitcoin, Ethereum, and Ethereum Classic. The company is involved with both mining and selling these coins.
HIVE’s revenue is showing consistent growth, doubling from 2021-2022. The company generates a positive operating cash flow, demonstrating that it is making money. However, the company is aggressively investing in capital expenditures and repaying its debt.
3- American Lithium Corp.
- Ticker Symbol: LIACF
- Market Capitalization: $370m
The American Lithium Corp. is involved in identifying and developing resource properties in the United States. It is focused primarily on the Falchani Lithium project and the Macusani Uranium project located in Peru.
The company was known as Menika Mining Ltd. before changing its name in April 2016. The American Lithium Corp. is a Vancouver-based company that was incorporated in 1974.
The company is not generating any revenue but has a strong balance sheet. It also has minimal debt and much more cash than debt on hand. American Lithium is showing signs of great money management and can see major gains in the future.
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4- Drone Delivery Canada Corp.
- Ticker Symbol: FLT.V
- Market Capitalization: $91m
Drone Delivery Canada Corp. works with a commercial drone logistics program worldwide. The company is based around its logistics infrastructure solution that includes industrial-grade drones, automated battery management systems, and the proprietary FLYTE software that integrates all the moving parts into a solution.
Drone Delivery Canada is not profitable but has a strong balance sheet with about 15x more assets than liabilities. The company has much more debt than cash on hand, but this is not uncommon, especially when dealing with penny stocks. Additionally, the company exhibited its Condor drone in Vegas, and the viewers received it well.
5- Fobi AI Inc.
- Ticker Symbol: FOBI.V
- Market Capitalization: $67m
Fobi AI stock is a data intelligence company that operates worldwide and offers AI, automated marketing, and contactless solutions to brick-and-mortar stores.
It is one of the smaller tech companies in Canada, making it great for long-term investors. The company was formerly known as Loop Insights Inc. and is based in Vancouver, Canada.
The company has minimal debt and posted its first year of generating revenue in 2021. It seems that Fobi AI stock is investing in capital expenditures and paying off its debt with cash raised from the issuance of stock.
Additionally, the company doesn’t have much operating expenses, allowing it to survive with little to no revenue.
The Top Canadian Penny Stocks: Bottom Line
Penny stock traders must keep a close eye on their online brokerage accounts to ensure their active stocks are in good financial health. Many investors fail to safely invest in penny stocks on the stock market because they don’t research enough.
Penny stocks trade with high volatility, meaning you can make and lose a lot of money with penny stocks in Canada. We highly recommend investing with Interactive Brokers for a fast and secure experience.
- Lowest and most transparent commissions
- Large number of tradable security types
- Robust suite of research tools
- Low margin rates, from 0.75% to 1.59%
- Access to 40,000+ funds worldwide & 7,700+ funds with no transaction fees
If you want to trade penny stocks, you must build a lot of conviction with a company. Small companies may turn into short-term investments, meaning even the top penny stocks have a high risk.
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