Canadian Penny Stocks – 5 Dirt Cheap Stocks Today

If you’re looking for some of the hottest Canadian penny stocks on the market today, you’ve come to the right place. We’ve got 5 of the best penny stocks to be looking at in 2020. Continue reading to find out what they are!

What is the definition of a penny stock?

The definition of a penny stock is quite broad. You’ll get varying answers from different investors, but the general consensus is that a penny stock is a stock that trades below $5.

However, it’s important to note that a lot of popular stocks, ones that don’t have the volatility or market capitalization of a penny stock trade below $5. So here is a few more guidelines to help you narrow down your search:

  • Penny stocks are typically smaller companies, and their shares are often illiquid (not easy to buy and sell)
  • They have a small following, and typically are not covered by major analysts
  • They usually trade OTC (over-the-counter, more on this later) or through pink sheets.

Canadians often confuse the term small-cap stock with penny stock. Unlike numerous small-cap stocks, you won’t find penny stocks trading on the TSX.

This is often because they are too small to meet the requirements needed to list on major exchanges, and don’t file the proper paperwork needed.

How do I buy penny stocks in Canada?

The first box you need to check off if you want to invest in penny stocks is the ability to handle significant volatility. If you don’t think you can stomach the risk, simply head to our how to buy stocks page to get started investing in the major exchanges.

What I like to tell investors looking to start trading the pink sheets, is to set aside an amount you would be completely comfortable losing. I wouldn’t recommend anyone invest their whole portfolio into penny stocks. But a designated amount, say 10% of your total portfolio, is completely reasonable.

Once you’ve allocated some capital towards what I like to call “fun investing”, you’ll need a brokerage account.

If you already have one, you’re ahead of the game. If not, feel free to check out our Questrade review. In my opinion, they are the best brokerage to start with if you’re looking to invest in penny stocks.

Take advantage of our exclusive offer for $50 in free trades with Questrade today. Or if you’re looking for other brokerage options, trading pedia has reviewed a few smaller ones.

Keep in mind, most brokerages charge more than their standard commission rates to buy penny stocks.

This is simply due to the fact that the stocks are traded over-the-counter, which is a little bit different than processing a transaction on a normal exchange.

Can you buy penny stocks on Wealthsimple?

Unfortunately with a brokerage like Wealthsimple Trade, you won’t be able to buy Canadian Penny stocks. Why?

Well, when companies aren’t listed on a normal exchange like the NYSE,NASDAQ or TSX, they are traded via a broker-dealer network. Transactions take place via a bulletin board (the OTCBB) and Pink Sheet listing services.

These broker-dealer networks communicate with each other and act as market makers. They will locate shares available for purchase or sale, along with negotiate a price for a fee.

Although most of the stocks trading over-the-counter cannot make it on the major exchanges due to regulations, they still need to meet requirements to trade OTC.

It’s not only penny stocks that trade over-the-counter either. For example, companies may also issue bonds over-the-counter.

If you want to find a brokerage that will let you trade Canadian penny stocks, you’ll need to stick to one that deals with OTC transitions like Questrade.

Tips when buying penny stocks

Before you get started, I’m going to drop you a few quick pointers you will need to be successful with buying penny stocks here in Canada. This is by no means a complete list, however I feel they are some of the most, if not the most important things you need to know so you don’t lose your money.

  • When buying penny stocks, be aware that smaller sized entities may not be required to file documents with the Securities and Exchange Commission (SEC), something that bigger companies are required to do. This makes determining the financial health of a company nearly impossible, which is often why purchasing penny stocks is often thought of as nothing more than a gamble.
  • In order to reduce your risk, try investing in companies listed on the OTCQX or OTCQB exchanges. These are essentially the top and middle tiers in terms of penny stocks, and companies listed on these exchanges will more than likely have accurate financial information, and will file it in a timely manner.
  • If you’re looking for some of the highest returns, albeit highest risk, the OTC Pink is the lowest tier of penny stocks in terms of financial information provided. These stocks are the most volatile, so they bring with them highest potential profitability. Keep in mind though, the higher the reward, the higher the risk.
  • There are a ton of penny stocks out there, and I would highly suggest using a screener to identify and narrow down your potential list of suitable companies.
  • Knowledge in technical analysis is absolutely crucial when trading penny stocks. Because limited or inaccurate financial information is available to most investors, fundamental analysis almost plays no part in picking stocks.
  • Analyze the management team. More than anything, they will be responsible for the inevitable failure or success of the company. With startups in particular, there will be a lot of key decisions made by the management team that can make or break an over-the-counter company.

What penny stocks are hot in Canada right now?

5. Namesilo Technologies (CSE:URL)

Top Canadian Penny stocks - Namesilo

 

Namesilo Technologies (CSE:URL) is an internet services company in Canada that registers domain names, provides hosting, offers email services, and provides various other needs for the owners of websites.

In 2020, having your own website is imperative. Customers don’t bother picking up the phone if they have a question or concern; they’re just going to go straight to your website. If you don’t have a digital advertising strategy, good luck.

Namesilo is delivering blistering growth of late, more than doubling its top line on a year-over-year basis during 2019. Net income before taxes, meanwhile, grew more than 1,000% compared to the same period last year. Profit margins expanded as well, and the company reported strong customer retention rates.

The question is whether Namesilo can continue its blistering growth. It should benefit from new businesses (and individuals) becoming serious about building an online presence, as well as taking customers from competitors. Its focus on giving great deals and providing excellent service is a winning combination.

And at just $0.24 per share, Namesilo certainly qualifies as a penny stock. The stock only has a market cap of just under $5 million, so big-time investors might struggle with its lack of liquidity.

4. FP Newspapers (TSXV:FP)

Hot Penny Stocks On The TSX - FP Newspapers

Speaking of terrible liquidity, you’ll want to be careful trading Canadian penny stock FP Newspapers (TSXV:FP) shares. This $0.22 stock sometimes goes a whole day without trading and has average daily trading volume of just a few thousand shares.

I’m the first to admit a company that owns 49% of the distributable cash of several newspapers in Manitoba – most notably The Winnipeg Free Press – doesn’t sound like a very exciting penny stock opportunity in 2020. But this stock is insanely cheap, and it seems to be turning a corner.

It earned approximately $0.15 per share in 2019, while shares trade for just 1.5x that much. It’ll get a nice journalism tax break from the Canadian government in 2020, too.

It also could sell its headquarters in Winnipeg for a nice gain as well. Shares could see another boost when an important loan gets extended.

The stock could also pay a substantial dividend in a year or two once it starts to earn a little more money and it gets its balance sheet more under control. If this happens, you’ll be very happy you got in today.

3. Athabasca Oil (TSX:ATH)

Canadian Penny Stocks - Athabasca Oil

 

Athabasca Oil (TSX:ATH) is a classic penny stock conundrum. It has huge upside potential, but there’s also a real possibility the company could go bankrupt. It’s almost like flipping a coin, except if you win, you’ll likely do far better than just doubling your money.

The company has light oil production in both the Motney and Duvernay fields in Alberta Canada, as well as heavy oil production near Fort McMurray. The heavy oil assets have a long reserve life, but the company isn’t making much from any of its production because of low oil prices.

Athabasca projects it’ll start earning free cash flow in the next couple of years, but in the meantime, it’s forced to spend approximately $125 million each year on sustaining capital. It has cash on the balance sheet, but it must also contend with refinancing some US$450 million worth of debt coming due in 2022.

You could make a lot of money if oil recovers and Athabasca Oil shares shoot higher. But this $0.18 stock is cheap for a reason. You’re taking some significant risk buying today, especially with the demand in oil plummeting due to COVID-19.

2. Score Media and Gaming (TSXV:SCR)

Best Penny Stocks On The TSX - The Score

If you’re old, like me, you might know the Canadian sports channel The Score, the upstart competitor that couldn’t afford the rights for any major sports. So, it showed a lot of poker, wrestling, and highlight shows.

When the channel was sold to Bell Media, the company retained its digital assets. What was once just a website has been transformed into one of the top sports apps in North America. Approximately four million people regularly check scores, read stories, and, thanks to a shift in business model, can now potentially gamble on the app.

Score’s management team is extremely excited about the opportunity online gambling represents. It has licences to operate in Colorado and New Jersey, and it has secured a partnership with the NBA to use the league’s property on its sports betting app. That’s just the beginning.

The company still isn’t profitable on a regular basis, but it’s flush with cash after a $40 million investment from a wealthy backer. As long as its gambling revenue keeps growing, losses won’t matter.

1. Redishred (TSXV:KUT)

Top Canadian Penny Stocks - Redishred

My favorite Canadian penny stock is Redishred Capital (TSXV:KUT), which owns and operates the Proshred brand.

Proshred has two separate business models – it both owns mobile paper shredding trucks and it franchises out locations to interested franchisees. The company has either corporate or franchised operations in 40 different U.S. cities.

The mobile paper shredding model has a few interesting advantages. It allows Redishred to easily acquire competitors and then rebrand them. It’s more secure – and convenient — than bringing documents to a central location. And the multi-city business model allows brand recognition in an industry that’s currently very fragmented.

It’s well poised to keep growing, thanks to its clean balance sheet with almost zero debt. Top managers are major shareholders with an ownership stake of more than 40% of the company.

And unlike many penny stocks, this company generates plenty of cash flow. Remember, this company has a share price of $0.51 and a market cap of just over $40 million. It doesn’t take much to really move the bottom line.

Redishred is our top penny stock pick in Canada because it’s in a good business with great growth potential. It’s the kind of stock you’ll want to stick in your portfolio and own for a very long time.

19 thoughts on “Canadian Penny Stocks – 5 Dirt Cheap Stocks Today”

  1. Hello, I would like to know where which broker can I trade the following three stocks:
    TWMJF /OTC
    ACBFF /OTC
    MRPHF
    I am loosing my way on the information dumping on the internet, can’t find the right link on the Google.
    Thank you,

    Reply
    • Hey Judith thanks for the comment. You can definitely buy these stocks through Questrade. Let me know if you have any other questions.

      Reply
  2. I need help on trading l need to start am new to trading so l need some one who knw nd walk with me the whole process. I need this am aged 34 yrs so am here to make money.not to play

    Reply
    • Hey John, thanks for commenting. The best way to learn how to trade is simply education through books,articles, websites such as us etc and a practice account. Head to any broker, most all of them offer paper trading accounts and start to learn there.

      Reply
  3. I apologize this is not a comment but more a less a question. I am a UK resident and wish to join your trading platform especial interest eing the penny stocks . Kindly advise me if there are any restrictions for us British to join a Canadian Company.

    Reply
    • Good question Jonathan, and we don’t really know the answer to it. The best advice we can give you is to ask your brokers you have available in the UK how to go about trading international/Canadian securities. Sorry we couldn’t be of help, but that type of question is something we have no experience with. I am sure brokers there have some sort of process for purchasing international stocks though.

      Reply
  4. This article is amazing! You guys provided all the information necessary for trading penny stocks, and on top of that presented it very well. I don’t know how many people read or follow Stocktrades but without a doubt you now have a new fan. Wishing you guys all the best, and I’m glad I found this website.

    Reply
  5. Great article! I was wondering if I could get your opinion on these two profitable penny stock plays: CAF.V(Canaf Group Inc) and TNA.V(Evergreen Gaming Corporation).

    Thanks!

    Jon

    Reply
    • Hey John! Thank you for reading Stocktrades and we are glad you enjoyed the article. Unfortunately, I understand the fundamentals about how to trade penny stocks, but I have never actually done so. For this reason I have never really monitored a penny stock, and can’t give you any reliable information about you ones you are asking about.

      One thing I will tell you, is penny stocks in general are extremely volatile, and you’ve got to make sure you are comfortable losing the money you have in your account.

      Reply
    • Hey Neil! Thanks for commenting. I think you will struggle to find a brokerage that allows you to trade OTC stocks in a TFSA. It is not the brokerages, but the government that doesn’t allow it.

      Reply
    • Hi Neil,

      My broker is RBC, and I was able to purchase stocks listed on the TSXV (Venture exchange) within my TFSA trading account.

      Reply
      • Hey Mathias. There is nothing that will stop you from buying them in any TFSA. But, as far as I know, OTC stocks are NOT allowed in a TFSA and are subject to tax. Now, don’t quote me on this as I have never wanted to do it so I haven’t done much research on it.

        But, like you said, you can buy them, just maybe be prepared to pay tax on OTC gains. As far as the TSX Venture goes, I’m not sure if they are legal.

        Like the old saying goes, everything’s legal as long as you don’t get caught.

        Reply
        • American OTC stock purchases were blocked by my broker. You are right, after looking it up real quick everything points to the fact that Canadian OTC stocks are taxable within the TFSA. Time for me to call my broker to close the case.

          Reply
  6. i am trading now-tsc etc but i want to buy a marijuana penny stock but i am told i can’t trade an american penny stock in my non registered acct i wanted a small one that makes rolling papers,pipes etc

    Reply

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