Retail investors in search of exponential, market-beating returns can venture further along the risk spectrum into the universe of penny stocks.
Contrary to their name, it is generally accepted that penny stocks can trade up to C$5 per share, with their low share prices often indicating nascent, start-up-style businesses that have yet to prove themselves in the marketplace through growth and/or profitability.
The value proposition behind investing in these stocks occupies two sides of the same coin:
- On one side, life-changing returns are to be had by identifying the next leader in an industry before mainstream investors pile in and inflate the share price
- On the other, your investment thesis might prove incorrect, saddling you with a stock that tracks an underperforming business, or even worse, an operation that cannot even support itself as a going concern
The high probability of a penny stock either severely overshooting or undershooting expected market returns is why investors in the space opt for diversification, often owning a dozen or more names to ensure satisfactory returns, even if a business or two goes belly up.
The constituents of this diversified penny stock portfolio are, of course, contingent on each investor, but should arguably be composed of companies that stand a chance of disrupting their industries and becoming an eventual 10, 50, or even 100-bagger. Settling for anything less would make it hard to argue for playing in the space compared with owning broad market index funds.
With the intention of shining a light on brands with the potential of being household names, while giving our readers a leg up in terms of prospective targets, here are three penny socks we believe to have everything it takes to level up and make a lasting impact in their addressable markets.
Rivalry releases new original game, ‘Cash & Dash’
Rivalry (TSXV:RVLY) is a sports betting, casino and media company tailored to Millennial and Gen Z consumers. It offers a proprietary interactive gaming platform called Casino.exe, as well as original casino games, such as Rushlane, a first in the category of Massively Multiplayer Online Gambling Games, and Cash & Dash, a 3D game where players must infiltrate a high-security bank.
Disruption thesis: Rivalry commands the world’s most engaged brand in esports betting (slide 12), giving it a differentiated advantage in an emerging, multi-billion dollar market segment.
Valuation: As of July 2023, the company had posted a trailing two year average of more than 13 per cent month-over-month revenue growth, while holding no debt and growing gross profit by almost 250 per cent. Despite the company’s current unprofitability, a slate of new product releases, as well as entries into new markets, promises to elevate it to positive net income by the first half of 2024.
Rivalry stock (TSXV:RVLY) is up by 81.82 per cent YoY, but down by 46.13 per cent over the past five years, suggesting that there is still ample room to run as accretive news hits the wire.
Click here to read Rivalry’s latest investor presentation.
Odd Burger reports record Q3 revenue
Odd Burger (TSXV:ODD) is a plant-based food company that manages a chain of fast-food restaurants and manufactures and distributes its Preposterous line of plant-based protein and dairy alternatives. The company counts nine restaurants in operation, with a pipeline of more than 100 in Canada and the United States, and more than 150 more in India and Singapore.
Disruption thesis: Odd Burger is spearheading a new market in fast-food that eliminates the guilt associated with unhealthy eating and meat’s unsustainability, while offering delicious dishes that nevertheless satisfy the craving for something decadent. It’s having your cake and eating it too.
Valuation: Given restaurants’ more than C$500,000 in average revenue per year, their compact nature at less than 1,000 square feet to build, and Odd Burger’s positioning to benefit from an attractive tailwind in the global vegan food market through 2028, it’s no surprise the company reported record Q3 revenue of C$860,000 in August, with its lowest quarterly loss in two years, demonstrating clear progress towards its gross profit margin (currently 27.7 per cent of sales) turning into net income. We believe Odd Burger stock (TSXV:ODD) looks cheap at a 17.86 per cent loss since inception.
Co-founder and CEO James McInnes joined our Coreena Robertson to shed light on Q3 results.
Click here to read Odd Burger’s latest investor presentation.
ARway.ai completes first build of the ARway platform on Apple’s Vision Pro hardware and announces platform and SDK updates
ARway.ai (CSE:ARWY) is an AI-powered spatial computing platform specializing in augmented reality (AR) experiences for indoor spaces. The company’s no-code, no-beacon software allows anyone to create these experiences for the purpose of navigation, tours, information sharing, notifications, advertising and gamification, while benefitting from mobile optimization, including iOS and Android, as well as AR glasses integration, including Apple’s Vision Pro, Magic Leap and Microsoft’s HoloLens.
Chief Product Officer Shadnam Khan spoke with Brieanna McCutcheon about version 2.6 of ARway’s SDK – which features multi-map and multi-floor navigation capabilities, a comprehensive location directory and improved onboarding experience – as well as the company’s first build of its platform as part of Apple’s Vision Pro Developer Labs at Apple Park in Cupertino, California.
Disruption thesis: ARway’s simple tools to enhance physical spaces are allowing it to capitalize on the needs of creators, brands and companies keen on minimizing the large capital expenditures and improving the suboptimal user experiences commonly associated with legacy indoor navigation providers. Beacon technology can cost upwards of US$100,000, while ARway’s hardware costs are $0, a no-brainer proposition that has led it to attract high-profile clients such as Verizon, Philip Morris International and the Government of Canada and capture an increasing slice of the potentially US$182 billion global indoor navigation market.
Valuation: With active platform users up by 1,182 per cent and pilots and trials up by 1,950 per cent year to date, and management and insiders owning 20 per cent of the company in alignment with shareholders, we feel it’s prudent to suppose that ARway stock’s 69.80 per cent loss since inception offers a robust margin of safety for long-term, high-conviction investors.
Click here to read ARway’s latest investor presentation.
Join the discussion: Find out what everybody’s saying about these Canadian penny stocks on the Rivalry, Odd Burger and ARway.ai Bullboards, and check out Stockhouse’s stock forums and message boards.
This is sponsored content issued on behalf of Rivalry, Odd Burger and ARway.ai, please see full disclaimer here.
