3 Top Penny Stocks to Watch in August

We're bringing our readers the top penny stocks in August with real growth potential…

Investors turn to penny stocks because of their potential to rake in 100% returns without breaking the bank, but too many penny stocks are speculative or scams.

To find the penny stocks with the best profit potential, we use the Money Morning Stock VQScore™ system. Our VQScore system only identifies profitable companies and ranks them on their growth potential.

We used the VQScore to find the best stocks for under $5 – the U.S. Securities and Exchange Commission's definition of a penny stock.

Today, we've identified three penny stocks with serious growth potential. In fact, our top penny stock to buy could jump over 70% in the next 12 months…

Top Penny Stocks to Watch in August, No. 3: Turquoise Hill Resources

British Columbia–based Turquoise Hill Resources Ltd. (NYSE: TRQ) is one of Canada's largest mineral-development and exploration companies.

TRQ targets development of large Pacific Rim mines. It operates, for example, in Mongolia, where some of the biggest global gold porphyry and copper deposits can be found.

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On average, Turquoise Hill has beat earnings in the past year by a whopping 225%. The company has also significantly invested in the worldwide expansion of its mining operations.

As a result, TRQ has forecast aggressive production schedules for this year: 280,000 tons for gold and as much as 155,000 tons for copper.

The stock currently trades at $2.59. Short term, though, analysts forecast that it could rise to $4.00. That's a soaring 54% climb over the next few months.

Top Penny Stocks to Watch in August, No. 2: Lloyds Banking Group

A major British financial institution, Lloyds Banking Group Plc. (NYSE: LYG) has offered banking services in Europe for nearly 300 years.

Lloyds employs roughly 68,000 people across the world as part of an international financial network that's valued around $60 billion.

Lloyds focuses on providing traditional banking staples such as commercial banking, pensions and insurance, and international wealth management.

After completing a complex merger in 2009, Lloyds delivered a significant turnaround for its shareholders, growing earnings by 20% over the last two years.

And these returns show no sign of slowing down. Lloyds boosted its earnings growth to 29% in just the last year.

Judging by the company's financials, these returns are going directly to investors. The bank currently has a dividend yield of 4.7% and a price/earnings ratio of only 13 – that's 30% lower than the industry average of 18.6.

Trading for only $3.03, Lloyds is a steal in this economy's robust financial sector. However, the bank's steady returns are nothing compared to our next favorite penny stock to buy in August.

It's an energy company that's taking advantage of the fast-evolving biotech industry – and making a killing in the process.

In fact, our favorite penny stock to buy for August is promising gains of over  100%…