Value investors like to buy penny stocks in anticipation of a price increase once a catalyst has occurred, such as introducing a new product or completing a merger with a larger company.
Investors frequently seek out cheap stocks with future growth potential. These may be low-priced stocks or those with low price-to-earnings ratios.
Let's investigate some of these cheap stocks listed on the Toronto Stock Exchange (TSX).
A second myth concerning penny stocks and their relationship to the major Canadian stock market (TSX) that some retail investors may have is that there are no stocks listed on the TSX that cost less than $1. Or that TSX stocks trading below $1 are removed from this market and transferred to junior exchanges, such as TSX venture capital stock. But that is not the case.
There are numerous significant corporations whose share prices occasionally fall below $1, but they are not expelled from TSX.
Nonetheless, compared to the TSXV and NEO exchanges, the TSX has considerably fewer stocks under $1 (still over 100) than TSXV and NEO.
Can You Buy Penny Stocks on The TSX?
Yes, the bulk of stocks traded on the TSX is considered penny stocks.
The majority of actual penny stocks trade on other exchanges, such as the Canadian Venture Exchange. However, there are low-cost stocks on all Canadian exchanges.
If you are searching for a bit more security, TSX stocks are likely to be more regulated than those on any other exchange.
CloudMD
CloudMD is a formidable competitor in the telehealthcare market, and it just opened for business in the USA this year. One of Canada's leading health management organizations, Oncidium, was acquired by the corporation. Oncidium serves more than 500 corporate and public sector clients. Employer spending is projected to increase by 130% by 2025, making it the fastest-growing segment of healthcare expenditures. Annualized, Oncidium's current 4-month revenue run rate exceeds $40 million.
CloudMD is now trading at $2.01, and analysts have assigned a price objective of $4.18, representing an upside potential of about 108%. The pandemic's consequences will persist, and it seems unlikely that people will once again swarm to doctors' offices. Telehealth is economical and secure. While Well Health and CloudMD compete with many larger companies in North America, the healthcare market is wide enough to accommodate everyone. CloudMD may be one of these stocks that unexpectedly surge in value.
Baytex Energy
Baytex dispels some misunderstandings regarding penny stocks held by investors. It is a mid-cap stock traded on the TSX. One of the primary reasons it is classified as a penny stock is because its 2011 (glory-days valuation) has plummeted, and it no longer trades for a fraction of that price.
Currently, it's quite undervalued. Energy is making a strong comeback, and Baytex stock has increased by about 690 percent over the past year. It focuses on oil and natural gas, so it may not be wholly out of place in a sustainable future.
BTB REIT
Let's include a REIT or Real Estate Investment Trust to increase diversification. These are attractive because REITs offer investors stock-based exposure to real estate ventures.
REITs get rental money and provide dividends to owners, making them outstanding cash-generating investments.
BTB REIT was established in 2005 and currently owns and manages over 71 properties throughout Canada.
It concentrates on industrial and retail properties with a total asset value above $1 billion. This REIT pays a good dividend yield of 7.39 percent, which is distributed monthly.
Well Health Tech
Well Health Technologies is a rapidly expanding telehealth startup. In addition to providing electronic medical record (EMR) software services, it owns and manages primary healthcare facilities in Canada and the United States. As of March 29, 2021, it served 2,200 medical practices in Canada with electronic medical record services and ran 27 physical clinics.
When the company completes the acquisitions of CRH Medical and Intrahealth Systems in 2021, it will have a $300 million annual revenue run rate. It attained profitability for the first time in the fourth quarter of 2020, as its adjusted EBITDA (profits before interest, taxes, depreciation, and amortization) totaled $0.77 million. WELL's total income in 2020 exceeded $50 million.
The company's quarterly earnings didn't inspire investors. However, in Q1 2021, Well Health expects an improvement in both profitability and cash flow over Q4 2020. The stock is presently trading at $7.35, and analysts have set a price target of $11.88, representing a gain of more than 61%.
Toronto Dominion Bank (TSX: TD)
The Toronto Dominion Bank is one of the leading financial institutions in Canada, offering its customers a variety of banking services. Its stock closed at C$ 83.7 per share on August 5, around six percent below its 52-week high of C$ 89.12 per share (May 27, 2021).
The price of TD stock increased by 39% over the course of the past year and by 16% year-to-date (YTD).
On July 31, 2021, the bank paid quarterly dividends of $0.79 per share. TD's EPS was $7.78, its price-to-book (P/B) ratio was 1.70, and its ROE was over 16%.
Xebec Adsorption
Xebec Adsorption is a provider of clean technology solutions. It supplies mostly industrial clients with systems and solutions for on-site hydrogen/nitrogen generation and gas purification. It has been in operation since 1967 and has implemented its systems in numerous nations worldwide.
Until its post-pandemic high, it was a very constant growth stock. Since then, it has declined, but it is ready for recovery and another growth spurt. The company will have greater growth potential as the world rapidly transitions to sustainable energy and industrial processes. It has a global presence and a wide variety of products.
Hive Blockchain Technologies (TSX: HIVE)
Currently, there may be no industry as fashionable as blockchain technology. Hive is a company that directly engages in the crypto mining market and is the first Canadian mining company to go public. These qualities make Hive one of the best Canadian penny stocks.
Hive, headquartered in Vancouver, British Columbia, has operations throughout North America and in Scandinavian nations such as Sweden and Iceland.
Iceland, in particular, has a cheap and widely available green energy infrastructure, making it a desirable site for cryptocurrency mining.
Temperatures in the Nordic region are inherently cooler, making it easier to keep mining rigs and data centers at a lower temperature.
Hive mines just Bitcoin, Ethereum, and Ethereum Classic, the three cryptocurrencies that serve as benchmarks. As of September 2021, Hive had mined and held 656 Bitcoin, a number whose worth will continue to rise.
Hive has also acquired substantial holdings in DeFi Technologies and Network Media Group, the latter of which is a prominent NFT brand.
Hive has the potential for a relatively high floor among Canadian penny stocks if it invests its crypto reserves in additional revenue streams. Keep in mind that Hive's stock price follows the prices of Bitcoin and Ethereum.
B2Gold
Another mid-cap stock on our list of penny stocks is B2Gold. It is a "leading international low-cost gold producer." Three of its worldwide mines (in Asia and Africa) are already producing gold, while the other two are under construction. Additionally, the corporation has several exploration initiatives in place.
Gold is an excellent portfolio diversifier and hedge against inflation and market swings. Additionally, the corporation pays dividends (current yield: 3.5%). In contrast to many other gold mining companies, B2Gold has also seen respectable growth during favorable market conditions.
OrganiGram Holdings (TSX:OGI)
The well-known OrganiGram Inc. brand is owned by OrganiGram Holdings, the company's parent.
This company has the proper permits to cultivate cannabis and make related goods. After the federal government of Canada legalized cannabis in 2018, OrganiGram branched out into the recreational cannabis industry, which it had originally been formed to serve.
If you haven't heard of OrganiGram before, you may have heard of The Edison Cannabis Company, Indi, Bag O' Buds, SHRED, or Trailblazer.
In early 2021, the stock's price peaked at more than $5.00 per share, which is an all-time high. Since then, it has declined significantly.
Because of its strong financial position and lack of debt, OrganiGram is well positioned to take advantage of the ongoing consolidation in Canada's cannabis industry by acquiring competing businesses. OGI is included on this list of penny stocks to watch due to possible near-term catalysts.
Exro Technologies (TSX:EXRO)
Exro is at the forefront of renewable energy technology and battery research due to the emergence of electric vehicles.
The company specializes in enhancing technology for products such as electric scooters and has integrated energy storage technology by repurposing electric vehicle battery cells.
Its Coil Driver platform is a patent-protected innovation for electric vehicles that employ motor intelligence to optimize driving energy consumption.
If you are optimistic about the electric car industry, Exro should be on your list of penny stocks to monitor.
Corus Entertainment
Corus Entertainment is a television-focused media and entertainment stock. The pandemic had little impact on the industry, as revenues for the second quarter of fiscal 2021 were 5% lower at $358.8 million compared to $375.9 million for the same quarter in 2020. Corus exhibited its resilience by emerging unhurt from the stock.
Now, the corporation is making significant strides in the streaming industry. Corus reported having over 500,000 paying customers to its STACKTV, Nick+, and other streaming platforms as of April 9, 2021, up from over 400,000 paying members as of January 2021.
The Corus Studios subsidiary will sell more than 200 episodes across various genres due to the agreement it reached with the streaming provider Hulu.
In 2021, Corus's stock had already increased by over 46%. The stock is currently trading at $6.27; analysts predict it can rise to $7.83, a gain of over 25%.
Suncor Energy
Canadian energy behemoth Suncor Energy (TSX: SU) (NYSE: SU) is very favorable from a pricing perspective. Suncor stock is down almost 56% this year because of an uncertain demand forecast, which impedes recovery. The reopening of the economy is driving a gradual improvement in its financial performance, notwithstanding the persistence of obstacles.
Suncor's operational deficit decreased sequentially, although its funds from operations grew significantly quarter-over-quarter. While Suncor's operating performance is showing indications of improvement, its integrated business strategy, a shift in product mix, and emphasis on cost-cutting measures assist in navigating the current economic crisis.
Suncor is currently selling at a forward EV/Sales ratio of 1.6, which is a 30% discount from its historical average. In addition, Suncor stock has a respectable dividend yield of 4.7%.
Hexo
In 2021, Hexo, one of the largest licensed firms in Canada, has fallen on hard times. The stock price has fallen from $10.17 in the middle of February to its present level of $6.9. Hexo is focusing on its cooperation with Molson Coors under the Truss brand, whereas Organigram is pursuing an edibles strategy.
Truss is a brand of cannabis-infused beverages, and Hexo just launched six new varieties in April to extend its portfolio by 50 percent. The Canadian market for adult beverages is about $6 billion, and Hexo intends to take a significant piece of this market.
It has also announced the launch of a bargain brand called "Bake Sale," which it claims will have "one of the lowest prices per gram in the country" and would be able to undercut its competitors by at least 20% in terms of price. Bake Sale will focus on volume. Analysts have set a price target for Hexo at $9.59, representing an almost 40% increase from current levels.
AGF Management
The financial firm AGF Management administers mutual funds. Gross mutual fund sales for the first quarter of 2021, which concluded on February 28, 2021, reached $1 billion, an increase of 85 percent year over year. Quarterly net sales came in at $385 million. As of February 29, 2020, assets under management (AUM) increased by 6% to $39.8 billion from $37.4 billion.
The momentum continued past February. The quarter ending in March 2021 was the company's strongest in a decade. AGF reported $211 million in net mutual fund sales as of March 29, 2021, compared to $73 million in net redemptions at the same time in 2020. AGF also achieved one year of purely virtual operations in March.
The price of AGF stock has increased by nearly 23% in 2021 and is currently $7.49. Analysts have assigned the stock a price target of $8.29.
What Should You Know Before Purchasing The Top TSX Stocks?
There is no single successful technique for identifying what experts may term the top-performing Canadian stocks on the TSX, as your particular objectives and circumstances are the most significant factors. It is not personalized financial advice, and your unique financial goals and circumstances have not been considered. When in doubt, conduct your own research and consult an investment specialist.
Knowing if a stock is performing well, producing a profit, paying dividends, or deteriorating is crucial, whether your focus is on short-term capital gains or long-term dividend growth. You should always bear in mind that you can't extrapolate from your current achievement to predict your future success. The value of investments can increase and fall.
How Can Investment Risk Be Minimized?
When stock markets change as quickly as they do, it's difficult to judge corporate valuations. Analyst reports can help you determine whether a company is cheap and, thus, projected to perform better in the future. Or, a stock may be assessed as extremely overvalued, having had a significant run-up during the current crisis that may soon level down.
Consider the performance of businesses prior to the COVID-19 epidemic. Were their profits substantial, and were they in a position to pay dividends? If a corporation had solid fundamentals prior to the crisis, it might emerge from the pandemic in a stronger position.
Spreading your investment out over time is one way to reduce risk. Do you wish to invest all your assets in the market during this turbulent time? Or do you simply wish to test the waters for the time being? Dollar-cost averaging could be the solution, and this involves investing a fixed sum of money in the market over time.
For example, suppose that you wish to invest $24,000 in the market. If you invest $2,000 per month for a year, you will only lose a portion of your $24,000 investment at any given moment during the following year if the stock market experiences a decline. In addition, your investment has the potential for recovery beyond the one-year period.
Final Thoughts
Investors should always conduct cheap research before making investment-related decisions, regardless of the price of the stocks that pique their attention.
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