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With market volatility picking up ahead of the fall election, penny stocks are quietly turning into one of the most potent investments on the market.
But unlike other stocks, you can't just buy any stock or ETF and hold it for years. It's only worth it if you can find the best penny stocks and know when to buy them. Today, I'm going to show you just that.
You see, penny stocks have reputation. Many big institutions are now allowed to own them. Brokers at some firms are not allowed to sell them to clients. There is an air of fear around the phrase "penny stocks" for some investors.
There's good reason behind that too. Many penny stocks are broken companies on the road to nowhere and are only traded because of hype.
All these sad stories are true.
But too many investors overlook that if we take away the dead and the dying companies and sweep away the garbage, the top penny stocks with sound fundamentals can often deliver market-crushing returns for aggressive investors.
We have tools available to us to isolate just those low-priced stocks that are real businesses with strong balance sheets and excellent long-term prospects.
These are the penny stocks that can help make our financial dreams come true.
Here's how I find the best penny stocks.
Don't Miss: We're now in the midst of a generational buying opportunity, and these three stocks are "screaming buys." Click here...
I look for stocks trading under $5 a share with high Piotroski F-Scores, then I dig into their balance sheets to make sure their management is making sound decisions.
The Piotroski F Score is one of the more powerful financial tools we have available is. This 9-point model, developed by Professor Joseph Piotroski while at the University of Chicago, measures a given company's financial strength and prospects. The higher the score, the more sound the company.
And I've found three of the best penny stocks that fit my criteria...
The Best Energy Penny Stock
Clean Energy Fuels Corp. (NASDAQ: CLNE) is a green vehicle company. It provides natural gas as an alternative fuel for vehicle fleets.
While electric vehicle stocks like Tesla Inc. (NASDAQ: TSLA) and Nikola Corp. (NASDAQ: NKLA) get all the headlines, natural gas is a much cleaner-burning alternative to gasoline. Clean Energy sells primarily to the transportation industry and heavy vehicle market. These larger trucks, buses, and utility vehicles produce about 50% of U.S. emissions, and natural gas can dramatically reduce pollutants' output.
Clean Energy Fuels sells compressed natural gas (CNG), liquefied natural gas (LNG), and its renewable natural gas product, Redeem. Redeem is the world's first renewable fuel made entirely from organic waste for commercial vehicles. It is gaining wide acceptance with companies and government agencies signing up to use organic fuel to lower emissions.
Even New York City has gotten on the Redeem bandwagon. The city recently announced a contract to use the natural fuel product for its Mass Transit Agency. Using the natural fuel is expected to reduce greenhouse gas emissions annually by 25,351 metric tons, the equivalent of removing 5,477 gasoline cars from the road, planting 419,184 trees, and recycling 8,623 tons of landfill waste.
Clean Energy Fuels has a Piotroski F-score of an almost perfect eight, so the finances are solid, and the long prospects of this company are fantastic. As more people begin to recognize the value of renewable energy, this stock could easily be a ten-bagger.
We all know the electrical grid needs to be rebuilt. We have seen blackouts and failures pretty consistently over the past few years. In addition, National Security experts have repeatedly told us that our electrical system is a serious risk and exposed to attacks. These attacks could be both physical and cyber in nature. A successful attack on the electrical grid could cripple our economy.
The Top Penny Stock for Infrastructure Spending
Goldfield Corp. (NYSE: GV) is in the electrical infrastructure construction services business. Its customers are electric utilities and industrial customers in Southeast and mid-Atlantic regions of the United States and Texas. Goldfield also offers electrical contracting services, including the construction of transmission lines, distribution systems, substations, and other electrical services.
Over the years, it also got into the homebuilding business. Goldfield is currently developing properties of residential properties on the east coast of Florida.
Hundreds of billions of dollars will eventually be spent to repair, replace, and harden the electrical grid. The government will pay a lot of that money will be paid to Goldcorp. That will help drive the stock price to several times the current price.
Goldfield has an F-score of 8, so the business is financially solid and prospects are outstanding.
The Best Penny Stock to Buy Now
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Orion Group Holdings Inc. (NYSE: ORN) is another company that will see a boost in business from long-overdue infrastructure spending.
It provides marine construction services in the United States, Alaska, Canada, and the Caribbean Basin. Orion also has a commercial concrete business that provides turnkey concrete construction services, including pour and finish, dirt work, layout, forming rebar, and mesh.
It does it all when it comes to marine construction. Orion dredges for marine construction projects and to create wildlife conservation areas. It builds ports, wharves, and cruise ship terminals. It constructs underwater pipelines.
All of these will be high growth businesses as money is spent by stated federal agencies to rebuild infrastructure in this country.
Orion also has an F-score of 8.
Patient investors could easily see five times or more the amount of the investment in gains as the global economy improves. That could mean a 600% gain for patient investors.
Money Morning's First-Ever Stock-Picking Lightning Round
Money Morning is launching its first-ever stock-picking lightning round event.
Our chief investment strategist will be flying through stocks - more than 50 - telling you which to consider buying NOW and which to drop like a ton of bricks.
These picks will be coming fast and furious.
Make no mistake: This event will be rapid-fire - you will want to take notes.
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.