In this article, we discuss the top 10 multibagger penny stocks to buy in 2022.
Since the start of 2022, the Dow Composite Index, the S&P 500 Index, and the NASDAQ Composite have lost 14.7%, 19.9%, and 28%, respectively. The volatility in the stock markets has been due to concerns related to rising inflation, interest rates, uncertainty surrounding commodity prices since the start of the Russia-Ukraine conflict in late February, and fear of a recession looming due to a weak economic outlook. In this environment, while many investors are fleeing growth stocks, some believe now is the time to invest in unsung companies working on projects that have bear fruits in the long term. That’s why penny stocks have been tempting risk-taking investors.
In 2021, trading in over-the-counter stocks crossed the $552 billion level, significantly higher than the overall volume in 2020.
An increase in retail investing due to the pandemic boredom could be credited as the reason for an increase in penny stock trading during the last two years. Around 10% of Russell 3000’s trading volume came from retail investors during the first half of 2021. The contribution peaked in September at 15%. According to research by Morgan Stanley, stocks that had strong retail participation reported better performances in comparison to stocks with low retail participation between July 2016 to June 2021.
Exponential Returns
Previously, penny stocks have generated historic gains, as was the case with AMC Entertainment Holdings, Inc. (NYSE:AMC). Trading in the penny stock range for a while, AMC Entertainment Holdings, Inc. (NYSE:AMC) gained the status of a meme stock through social media platforms in 2021. AMC Entertainment Holdings, Inc. (NYSE:AMC) stock went on to record a 12-month gain of 590% in 2021. Just like AMC, Cassava Sciences, Inc. (NASDAQ:SAVA) posted a 12-month gain of 3043% last year.
However, such activity also makes these stocks susceptible to actions from the regulatory authorities. SpectraScience Inc shares doubled in price on Jan 27, 2021, after the company recorded trade of over 900 million shares. The stock price recorded an increase of around 500% before crashing shortly. Stating “potentially manipulative trading,” the SEC suspended SpectraScience Inc trading until further notice. By February 2021, around 24 such stocks were sidelined by SEC for unusual trading activity.
While big-cap firms like Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Meta Platforms, Inc. (NASDAQ:META) appear to be safer investment options, penny stocks offer an opportunity to earn exponential returns during times of high inflation.
Pixabay/Public Domain
Our Methodology
Considering the demand for cheap stocks with high earnings generation capacity, we have curated a list of the top 10 multibagger penny stocks to buy in 2022. We have included stocks that offer potential returns of over 100%. The companies’ growth catalysts, business fundamentals, and analyst ratings have been analyzed. Most of the stocks discussed have received target prices offering a potential upside of over 100% by analysts.
Top 10 Multibagger Penny Stocks to Buy in 2022
10. Wrap Technologies, Inc. (NASDAQ:WRAP)
Number of Hedge Fund Holders: 2
Wrap Technologies, Inc. (NASDAQ:WRAP) is a Tempe, Arizona-based provider of public safety technologies and services to law enforcement agencies and security personnel.
Wrap Technologies, Inc. has developed a patented hand-held remote restraint device known as BolaWrap. The device has received endorsement from the National De-escalation Training Center (NDTC). Wrap Technologies, Inc. also has a virtual reality-based training solution for law enforcement agencies through the Wrap Reality division.
On July 6, the company sold a reentry and rehabilitation software solution to a correction agency in Ohio. Wrap Technologies, Inc. generated a revenue of $1.59 million in Q1 2022 with a gross profit margin of over 41%. To boost sales, the company has brought on ex-IBM and GoPro veteran Carlos Casas as Vice President of Sales and Marketing.
In a research note issued to investors on March 11, Jon Hickman at Ladenburg Thalmann gave Wrap Technologies, Inc. stock a target price of $5.25 with a Buy rating, reflecting a potential upside of over 150%.
As of Q1 2022, 2 hedge funds held a stake in Wrap Technologies, Inc..
9. Selecta Biosciences, Inc. (NASDAQ:SELB)
Number of Hedge Fund Holders: 10
Selecta Biosciences, Inc. (NASDAQ:SELB) is a Watertown, Massachusetts-based clinical-stage biotech company focused on treating diseases by developing therapies using its proprietary immune tolerance (ImmTOR) platform.
On June 21, Raghuram Selvaraju at H.C Wainwright gave Selecta Biosciences, Inc. stock a target price of $4 with a Buy rating, reflecting a potential upside of over 120%. The analyst shared that he welcomed the company’s partnership with Sarepta Therapeutics, Inc. (NASDAQ:SRPT) to commercialize the ImmTOR platform for use in multiple muscle dystrophy ailments. Selecta Biosciences, Inc. will receive a payment of $2 million due to this partnership. Furthermore, the company will be eligible to receive another payment of $4 million if it achieves certain preclinical milestones set by Sarepta. The partnership is positive for Selecta Biosciences, Inc., as Sarepta is focused on developing genetic medicines and has prior experience in developing and commercializing products in this segment.
Overall, 10 hedge funds reported owning a stake in Selecta Biosciences, Inc. as of Q1 2022. The cumulative value of the stake was over $13 million.
8. Smith Micro Software, Inc. (NASDAQ:SMSI)
Number of Hedge Fund Holders: 4
Smith Micro Software, Inc. (NASDAQ:SMSI) is a Pittsburgh, Pennsylvania-based provider of white-labeled solutions for device OEMs and chipset manufacturers.
The software offered by Smith Micro Software, Inc. works on smartphones and Internet of Things (IoT) devices and aids in protecting the digital lifestyle of individuals. The company has acquired assets from software giants like Avast. Smith Micro Software, Inc. has a strong connection with network operators. As a result, it has over 100 million devices globally that are using its applications. Smith Micro Software, Inc. stock is a play on the IoT sector, which is expected to compound annually by 15.9% to surpass the $204 billion level by 2027.
Eric Martinuzzi at Lake Street reiterated a Buy rating on Smith Micro Software, Inc. stock with a price target of $6 in a note issued on March 11. The target price provides a potential upside of over 146% from the closing price as of July 13. Martinuzzi has a positive outlook on the growth potential of Smith Micro Software, Inc. and anticipates a ramp-up in revenue.
Renaissance Technologies had a stake worth $2.1 million in Smith Micro Software, Inc. as of Q1 2022.
7. Red Cat Holdings, Inc. (NASDAQ:RCAT)
Number of Hedge Fund Holders: 2
Red Cat Holdings, Inc. (NASDAQ:RCAT) is a San Juan, Puerto Rico-based provider of products, services, and solutions to the drone industry. The company went public in April 2021. It provides First Person View (FPV) goggles to the drone industry and the retail consumer through a marketplace.
Red Cat Holdings, Inc. is in the middle of developing a software-as-a-service (SaaS) platform that aims to provide drone flight data analytics and storage. One of the company’s subsidiaries, Teal Drones, has been able to secure an order for 15 Golden Eagle drone units along with associated training and services by a member country of the North Atlantic Treaty Organization (NATO). The member country intends to deploy these units in Ukraine. The conflict between Russia and Ukraine has provided Red Cat Holdings, Inc. with an opportunity to scale operations as countries are looking for reconnaissance and surveillance equipment for the front line.
During the first quarter of 2022, Citadel Investment Group increased its investment in Red Cat Holdings, Inc. by 69%.
6. Exela Technologies, Inc. (NASDAQ:XELA)
Number of Hedge Fund Holders: 7
Exela Technologies, Inc. (NASDAQ:XELA) is an Irving, Texas-based business process automation (BPA) corporation that provides industry-specific and multi-industry enterprise software and solutions.
The company has 4,000 customers spread across 50 countries and employs more than 17,500 employees across 23 countries. On June 28, Exela Technologies, Inc. announced a contract with the French National Insurance Fund, L’Assurance Maladie Caisse Nationale (Cnam). The current value of the four-year contract stands at $2.5 million; however, it has the potential to rise to $4.5 million during this period. Exela Technologies, Inc. has a diversified market exposure. During FY21, solutions provided to the banking sector contributed 27% to the total revenue, followed by the healthcare and insurance sector at 23% and 10%, respectively.
In a research note issued on May 12, Zach Cummins at B. Riley gave Exela Technologies, Inc. stock a target price of 35 cents and a Neutral rating. The analyst sees the company’s revenue stabilizing and an improved renewal rate. Furthermore, the stellar contracting activity reflects that Exela Technologies, Inc. is on a strong growth path.
While Exela Technologies, Inc. is not as popular amongst the hedge funds as firms like Microsoft Corporation, Alphabet Inc., and Meta Platforms, Inc., the stock was still held by 7 hedge funds as of Q1 2022.
5. Diebold Nixdorf, Incorporated (NYSE:DBD)
Number of Hedge Fund Holders: 16
Diebold Nixdorf, Incorporated (NYSE:DBD) is a North Canton, Ohio-based provider of banking solutions and retail technology to the financial sector. The company has installed more than two million point-of-sale (POS) software and automated teller machines (ATMs) as of 2022.
Diebold Nixdorf, Incorporated has more than 3,000 patents under its ownership. On July 8, Matt Bryson at Wedbush upgraded Diebold Nixdorf, Incorporated stock from a Neutral to an Outperform rating with a price target of $5. The analyst thinks that despite the economic uncertainty, Diebold Nixdorf, Incorporated is in a position to see its revenue and earnings improve in 2022 and 2023. Bryson backed this claim up by highlighting the company’s record level of backlog compared to the expected sales. Bryson also added that Diebold Nixdorf, Incorporated is in the process of ramping up its new ATMs. Diebold Nixdorf’s offerings could result in potential cost savings for customers at a time when wages are constantly rising, and suitable resources are challenging to find.
Of the 912 hedge funds in Insider Monkey’s database, Diebold Nixdorf, Incorporated was held by 16 hedge funds as of Q1 2022.
4. BIT Mining Limited (NYSE:BTCM)
Number of Hedge Fund Holders: 5
BIT Mining Limited (NYSE:BTCM) is a Hong Kong-based publicly listed cryptocurrency mining company that serves more than two million customers globally. The company operates a 150 megawatts cryptocurrency mining data center in Ohio. The domain name and cryptocurrency wallet of BTC.com also come under the ownership of BIT Mining Limited.
BIT Mining Limited’s ability to achieve healthy revenue and profitability relies upon its ability to mine large volumes of cryptocurrencies and the strong price levels. BIT Mining is betting on Ethereum, and the current dip in the prices of cryptocurrencies provides an attractive opportunity for potential investors to take a position in the stock. A major benefit of getting involved in the Ethereum blockchain technology is that it not only performs the role of a cryptocurrency but also has an integral role in decentralized finance or DeFi. BIT Mining Limited is working on enhancing its focus on the US. To direct its resources to the North American region, the company divested 51% of its stake in an unaffiliated third party for $9.98 million on July 12.
As of Q1 2022, 5 hedge funds held a cumulative stake worth over $2 million in BIT Mining Limited.
3. Nano Dimension Ltd. (NASDAQ:NNDM)
Number of Hedge Fund Holders: 10
Nano Dimension Ltd. (NASDAQ:NNDM) is a Waltham, Massachusetts-based company involved in the 3D printing of electronics and additively manufactured electronics (AME).
Nano Dimension Ltd. has a share repurchase program of up to $100 million in place. Nano Dimension’s hardware printers have the highest contribution to the company’s overall sales as of Q1 2022. The company recorded a revenue of $10.43 million during the first quarter, reflecting a YoY increase of 1186.07%. Furthermore, Nano Dimension Ltd.’s net profit margin rose by 72.37% YoY during Q1.
Cathy Wood’s Ark Investment Management is the biggest hedge fund holder of Nano Dimension Ltd. stock, with over 16.32 million shares. Nano Dimension Ltd. stock has been a part of the hedge fund’s portfolio since Q3 2019. The total holding as of Q1 2022 is at the fifth highest level in the history of the hedge fund.
2. CleanSpark, Inc. (NASDAQ:CLSK)
Number of Hedge Fund Holders: 4
CleanSpark, Inc. (NASDAQ:CLSK) is a Henderson, Nevada-based sustainable bitcoin mining company. It also provides smart power systems for residential users and software solutions that aid IoT products in efficiently managing peak load.
In an investor note issued on June 3, Gregory Lewis at BTIG maintained a Buy rating on CleanSpark, Inc. stock with a target price of $10. The analyst highlighted that the mining stocks have given back their gains despite the gross margins on mining still hovering around the 47.5% level.
CleanSpark, Inc. is on a strong growth trajectory, as reflected by some of the company’s initiatives. In June, the management announced that it had acquired a purchase contract for 1,800 Antminer S19 XP units to achieve its goal of infrastructure expansion. CleanSpark, Inc. saw its revenue quadruple to $41.6 million in Q1, up from $8.1 in the first quarter of 2020. The company’s strong growth plans provide an opportunity to investors to earn healthy returns in the future.
CleanSpark, Inc. was held by 4 hedge funds at the end of Q1 2022.
1. Sunworks, Inc. (NASDAQ:SUNW)
Number of Hedge Fund Holders: 7
Sunworks, Inc. (NASDAQ:SUNW) is a Provo, Utah-based provider of solar power solutions.
In April, Donovan Schafer at Northland gave Sunworks, Inc. an Outperform rating with a price target of $4.50. The analyst thinks that the company is the only publicly listed operator in the solar industry with a keen focus on controlling the installation, logistics, and procurement processes and making it their key competitive advantage. Schaffer highlighted Sunworks, Inc.’s “differentiated” installation-focused business model for residential customers. He sees an attractive entry position for the investors at the current price levels.
Israel Englander’s Millennium Management is the biggest hedge fund holder of Sunworks, Inc. stock, with ownership of over 603,519 shares or 1.83% of the total shares outstanding as of Q1 2022.
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This article is originally published at Insider Monkey.
