I cannot stress enough how risky OTC stocks or securities traded over the counter really are. For one thing, just the name OTC should ring some alarm bells. This designation means that these securities don’t trade on exchanges like the New York Stock Exchange or the Nasdaq. Instead, they trade via broker-dealer networks. And not all stock platforms support what’s otherwise known as the pink sheets.
Second, many investors are shocked to discover the administrative costs tied to OTC stocks. Yes, many of these securities are “cheap,” trading hands at unit prices well below a buck. However, that doesn’t mean that it’s cheap to you. Wide bid-ask spreads may mean that your holdings may have to rise significantly higher to be net profitable. Also, even if you are profitable, low trading volume could mean a long time to find a buyer.
At the same time, OTC stocks or otherwise highly speculative shares can fly higher. Some examples include the following:
- Monster Beverage (NASDAQ:MNST): In 1997, you could have had MNST for just two cents.
- Apple (NASDAQ:AAPL): On a split-adjusted basis, you could have bought AAPL for 10 cents in December 1980.
- Advanced Micro Devices (NASDAQ:AMD): Back in June 2015, AMD traded for below $2.
Of course, there are way more failures than successes. But if you want to go for gold, below are the OTC stocks to consider.
A Chinese multinational technology conglomerate, Tencent (OTCMKTS:TCEHY) has had a rough outing in 2023. Mainly, that’s due to the challenging circumstances surrounding the Chinese economy. And if a CNN report proves correct, 2024 could be an even rougher outing. Still, Tencent’s expansionary ambitions reach beyond its home nation. With eyes on Japan, South Korea, Southeast Asia, and several other international regions, Tencent could be interesting for speculators.
To be sure, with a market capitalization of around $337.5 billion, TCEHY doesn’t exactly rate as one of the typical OTC stocks. However, it’s a great confidence booster because it’s in some ways the best of both worlds: offering tremendous upside potential while also being a technology stalwart in its home nation.
Analysts rate shares a consensus moderate buy with a $49.56 average price target. That implies an upside potential of over 40%. What’s more, the high-side target hits $61.13, possibly delivering growth of over 73%. If that wasn’t enough to whet your appetite, shares trade at only 13.06X forward earnings, below the interactive media sector’s median value of 21.19X.
Moving on to another Chinese company, BYD (OTCMKTS:BYDDF) presents a unique proposition. First, it’s a major automotive enterprise specializing in electric vehicles, yet it technically ranks among the OTC stocks. Second, Warren Buffett – who is best known for investing in reliable blue chips – owns BYD via Berkshire Hathaway (NYSE:BRK-B). To be fair, Buffett has been reducing his exposure but he still owns a sizable amount.
Despite the seemingly contradictory tone, investors may want to consider adding BYDDF to their portfolio. Yeah, it’s one of the OTC stocks and yes, the Chinese economy looks rather putrid if I’m being honest. However, with EVs becoming increasingly commoditized, guess who’s going to win that battle? There’s just no way that western nations can compete with their higher labor costs.
Also, investors should consider another element: demand. European politicians may want to reduce the flood of Chinese EVs. But their constituents? They love ‘em. So do analysts, who rate BYDDF a consensus strong buy with a $36.03 price target. That implies 63% upside potential.
Yet one more Chinese company to discuss and then we’ll get into the really wild OTC stocks. A designer and manufacturer of consumer electronics and related software, Xiaomi (OTCMKTS:XIACF) is a cynical play. For example, beyond its consumer electronics business, it’s also involved in the EV space. Recently, the company launched its first electric-powered vehicle, which might have caught the eyes of some lawyers.
I’m joking there, but seriously, the Xiaomi SU7 looks like it ripped off the design of a particular German brand. But if the consumers who love BYD offer any clues, the SU7 should be a hit. Apparently, it has the performance (up to 664 horsepower) and the longevity to better the top players in the ecosystem. And even if you didn’t like the EV pivot, Xiaomi should win in consumer electronics.
Frankly, with smart devices becoming so commoditized, people may start looking to price more often than brand. If so, XIACF has a clear pathway to robust shareholder profits. Analysts agree, rating the stock a unanimous strong buy with a $2.66 average price target.
Quisitive Technology Solutions (QUISF)
Okay, let’s buckle up for some serious OTC stocks and by that, I mean high risk, high reward. First, Quisitive Technology Solutions (OTCMKTS:QUISF) bills itself as a premier global Microsoft (NASDAQ:MSFT) partner that harnesses its cloud platforms and complete technologies to generate transformational impact for midsize and enterprise-level customers. It’s an intriguing idea because, at one point, shares closed at $1.54 on a weekly average basis.
Currently, QUISF trades hands at only 22 cents. And you should note that over the past 52 weeks, it lost more than 53% of its equity value. Further, according to the security’s point-and-figure (P&F) chart, it prints a double bottom breakdown. According to StockCharts.com’s educational section, this pattern is a bearish signal. That said, the pattern should also be viewed in a broader context due to possible whipsaw effects.
And what is that context? Basically, the broader cloud computing market could be worth $2.43 trillion by 2030. Quisitive just needs to take a bite out of this market to potentially drive higher. Analysts seem to be on the same page, pegging the average price target at 49 cents.
Peninsula Energy (PENMF)
As a fan of the uranium energy space, I perked up when I came across this opportunity hidden among OTC stocks. As a uranium extraction specialist, Peninsula Energy (OTCMKTS:PENMF) addresses a critical supply shortage that recently sprouted. According to The Wall Street Journal, last month, uranium prices jumped to a 16-year high after one of the world’s largest producers – Kazakhstan’s state-owned company Kazatomprom – warned of production target shortfalls.
With uranium supplies uncertain for the next two years, several uranium players have skyrocketed. One of the exceptions is PENMF. In the trailing one-year period, the security declined by 8%. That said, it is up 15% on a year-to-date basis but that’s a modest performance compared to exchange-listed uranium specialists.
Still, as far as OTC stocks are concerned, Peninsula could be intriguing because of geopolitical considerations. Basically, it features 100% ownership of the Lance Project, which is one of the largest uranium projects in the U.S.
Better yet, analysts expect great things, pegging shares a moderate buy with a 17-cent target. That implies almost 85% upside potential, with the high-side target landing at 22 cents.
Saturn Oil & Gas (OILSF)
Based in Calgary, Alberta, Canada, Saturn Oil & Gas (OTCMKTS:OILSF) is a resource company engaged in the business of acquisition, exploration and development of petroleum and natural gas resource despoits in Western Canada. Further, the company’s current focus is to advance the exploration and development of its oil and gas properties in Alberta and Saskatchewan.
As an upstream player in the hydrocarbon space, Saturn might not seem particularly relevant. Late last year, many oil-producing nations agreed to cut production in a bid to bolster prices. However, that effort did not succeed. Also, Reuters recently reported that rising U.S. oil production has frustrated the aforementioned oil producers. So, it seems OILSF could be one of the losing OTC stocks.
However, the blowout January jobs report suggests that we shouldn’t quite give up on black gold just yet. More people with jobs should translate to more resource consumption. And to be blunt, renewable energy just won’t be enough to feed the growing demand profile. Notably, Echelon Wealth Partners believes OILSF could hit $4.22 per share or 137% up.
Before discussing radiation oncology medical device firm Vivos (OTCMKTS:RDGL), it’s important to disclose that I own RDGL stock. Please make a decision based on your own due diligence and a sober reflection of your risk tolerance. This is a security that has already lost almost 28% YTD and is likely subject to severe market turbulence.
With the caveats out of the way, Vivos is engaged in the development of its yttrium-90-based brachytherapy device, RadioGel, for the treatment of non-resectable tumors. According to Johns Hopkins Medicine, brachytherapy is a radiation treatment that is given directly into the patient’s body. Typically, the radiation is deployed using tiny devices such as wires, seeds, or rods filled with radioactive materials.
Where Vivos distinguishes itself is that RadioGel utilizes an injectable particle-gel, which delivers a very high local radiation dose. More broadly, RDGL entices speculators because the underlying industry is still in its early innings, worth $907.76 million in 2022.
As for a price target, it’s difficult to say as no analyst currently covers RDGL. However, based on my personal research, I believe around 5 cents is the bottom.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Josh Enomoto held a LONG position in RDGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.