According to a report by the Government of Canada, released on December 16, the country’s economic outlook has been revised upward, as private-sector economists forecast moderate growth of around 2% in the second half of 2025. The report highlights the average of private sector forecasts are used as the basis for economic and fiscal planning in Canada to ensure objectivity and transparency. The Department of Finance surveyed a group of 11 private sector economists in September 2024, who expect the Canadian economy to benefit from robust growth in the US, driven by rising equity markets and increasing confidence among US households and businesses. The economists forecast that the unemployment rate will also stabilize to 6.6% by the end of 2025 compared to 6.9% in the fourth quarter of 2024. The report also states that the government is reducing the federal debt-to-GDP ratio over the medium term. The federal debt-to-GDP ratio in 2023-24 was 42.1% and is forecasted to decline to 41.9% in 2024-25.

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In an interview with BNN Bloomberg on January 3, Gavin Graham, Chief Investment Officer and Portfolio Manager at Spire Wealth Management, discussed the investment landscape for 2025, particularly focusing on Canadian stocks. Graham acknowledged that Canada has been a market leader in cutting interest rates which provides them a much better position than their U.S. counterparts, specifically in sectors such as pipelines, utilities, REITs, telecom, and financials, which are interest-rate sensitive industries.

In the energy sector, Graham expressed a preference for natural gas companies which have performed well due to low cost structure and the potential for increased demand due to the anticipation of colder weather in the US. Despite the local weather-related volatility in North America, he sees a positive outlook for the sector due to the impact of geopolitical events, such as Ukraine ending its gas imports from Russia, which could further influence natural gas prices.

Graham also recommended that investors allocate 5 to 10% of their portfolios to gold, citing the robust performance of gold miners. He noted that while gold itself was up 27% last year, gold miners have underperformed relative to the metal and suggests that major gold miners have the potential to outperform. Gold mining stocks, being a leveraged play on the price of gold, could see significant gains if the gold price continues to rise and can offer attractive dividend yields and a hedge against economic uncertainty.

Canada’s economic outlook for 2025 appears optimistic, with moderate growth expectations, a stabilizing unemployment rate, and a declining interest rate along with the favourable federal debt-to-GDP ratio. Investors seeking diversification and high-growth potential should look at opportunities in undervalued sectors within the Canadian market. With that in context, let’s take a look at the 12 best Canadian penny stocks to buy according to analysts.

Our Methodology

For this article, we used Finviz and Yahoo stock screeners to find the 30 largest Canadian companies trading under $5 as of January 5. We then sourced the analysts’ average price targets and picked the 12 stocks that had the highest upside potential. We also included their hedge fund sentiment, which was taken from Insider Monkey’s Hedge Fund database of 900 elite hedge funds as of Q3 of 2024. The list is sorted in ascending order of analysts’ average upside potential as of January 5.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

12 Best Canadian Penny Stocks to Buy According to Analysts

12. Denison Mines Corp. (NYSEAMERICAN:DNN)  

Upside Potential: 104.76%  

Stock Price as of January 5: $2.10  

Number of Hedge Fund Holders: 23  

Denison Mines Corp. (NYSEAMERICAN:DNN) is a uranium exploration and development company focused on projects in Canada’s Athabasca Basin. The company’s flagship Wheeler River Uranium Project is among the most promising undeveloped uranium assets globally.

Denison Mines Corp. (NYSEAMERICAN:DNN) is focusing on advancing the Phoenix deposit, located in the Wheeler River Uranium Project towards production. The company estimates that the initial capital costs to bring the deposit into production will be one of the lowest capital intensities in the industry. The company plans to use an in-situ recovery method which is expected to result in all-in production costs per pound of $16. This low-cost production profile, combined with the deposit’s proximity to existing infrastructure, makes the Phoenix deposit an attractive asset with robust economics.

Denison Mines Corp. (NYSEAMERICAN:DNN) is also exploring opportunities to increase the mine life and production potential of the Gryphon deposit, which is also part of the Wheeler River Project and is expected to be mined using conventional underground operations. The project is anticipated to add 49.7 million pounds of proven U3O8 to the project’s reserves.

11. Standard Lithium Ltd. (NYSEAMERICAN:SLI)  

Upside Potential: 118.13%  

Stock Price as of January 5: $1.60  

Number of Hedge Fund Holders: 3  

Standard Lithium Ltd. (NYSEAMERICAN:SLI) is a Canadian lithium exploration and development company advancing sustainable lithium extraction technologies. The company’s flagship projects including the Lanxess and the South West Project, both located in Arkansas, utilize innovative direct lithium extraction (DLE) technology. This approach allows for faster and more efficient lithium production to address the growing demand from the electric vehicle market and energy storage solutions.

Standard Lithium Ltd. (NYSEAMERICAN:SLI) is focusing on the advancement of its South West Arkansas project, which has received significant validation through a $225 million conditional grant from the US Department of Energy. The company is working closely with its partner, Equinor, to complete the Front-End Engineering Design (FEED) studies and move the project towards a final investment decision. To support this effort, Standard Lithium Ltd. (NYSEAMERICAN:SLI) is prioritizing the derisking of its business in an agreement with Koch Technology Solutions to use LSS technology and Direct Lithium Extraction (DLE) process to ensure lithium recoveries of at least 95%.

As Standard Lithium Ltd. (NYSEAMERICAN:SLI) moves forward with its South West Arkansas project, it is also exploring financing options to support the next phase of growth. The company is pursuing a range of funding sources, including offtake and customer financing, low-cost project debt, and parent company-level equity financing. The company is also committed to minimizing its cost of capital to deliver value to shareholders.