Although you can mask excessive speculation in the market with the labels of the best micro-cap stocks to buy, you may want to keep these thoughts to yourself. If you share them with your financial advisor, that person will probably lose his mind. Personally, I like to keep the number of angry emails in my inbox to a minimum.
That said, the best micro-cap stocks aren’t particularly focused on wild speculation. Certainly, this area presents extraordinary risks. However, when you filter out enterprises that enjoy Wall Street analyst support, you may find a diamond in the rough.
Combine this with possibly favorable dynamics in the options market – please see this article for a basic analysis of terminology and concepts – and you may have a winner on your hands. If you are strong-willed, below are the best micro-cap stocks to buy right now.
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Turtle Beach (Listen)
Image of a gamer with a headset in front of the screen
Source: Donna Lupgens / Shutterstock.com
A gaming accessories manufacturer, turtle Beach (NASDAQ:Listen) is perhaps best known for its gaming-focused headsets. One of the most popular ideas among the best micro-cap stocks, Turtle Beach suggests a scale of less than $179 million in terms of market capitalization. Since the beginning of the year, HEAR stock has gained more than 40% of its equity value. Shares closed at $10.34 on Thursday.
Turning to the options sector, HEAR’s volatility smile – or implied volatility measured at various strike prices – presents an interesting backdrop. At the $11 strike, IV is at a low of 0.48. Moving towards the far out-of-the-money (OTM) direction (i.e. to the right), IV rises to a high of $2.48 at the $22 strike. This framework suggests the identification of HEAR’s strong upside potential. On the other hand, IV at the $1 strike increased to 4.01. As pricing moves deeper into the money (itm), volatility generally increases, indicating reduced risk.
However, surprisingly, analysts rate HEAR a consensus Strong Buy with a $15.25 price target, suggesting an upside of more than 47%.
PHX Minerals (PHX)
Large tanker ship carrying natural gas in the port at evening
Source: Shutterstock.com/Wojciech Wrzesien
Located in Oklahoma City, Oklahoma, phx minerals (NYSE:phx) focuses on the acquisition, management and monetization of oil and natural gas mineral assets. According to its website, the company owns approximately 75,000 leased mineral acres located primarily in Oklahoma, Texas, Louisiana, North Dakota and Arkansas. Since the beginning of the year, PHX ended exactly at $3.72.
Although hardly an inspiring performance, PHX may be one of the best micro-cap stocks to buy. Looking at its volatility smile, the underlying IV sits at a low of 0.90 at a $5 strike price. Moving in the far OTM direction (right), IV comes in at $3.20 with a strike of $7.50. At the opposite end, IV rises to just 1.85 at $2.50.
To be fair, the limited derivatives market makes it difficult to assess trader sentiment. Still, it’s worth pointing out that IV may be tilted toward anticipation of a bigger bullish move. Adding fuel to the fire, analysts have given PHX a consensus Strong Buy rating. Their average price target is $5.50, which suggests an upside potential of about 48%.
A tablet displaying the word “verification”
Source: A Photo/Shutterstock
Headquartered in Jericho, New York, Intellicheck (NASDAQ:idn) provides identity authentication and verification solutions. In particular, Intellicheck differentiates itself through real-time authentication of documents such as driver’s licenses. According to its website, it includes several major enterprise-level customers. It’s no surprise that IDN is up a little over 21% since the beginning of January, recently closing at $2.53.
Despite the solid performance, IDN is still one of the best micro-cap stocks to buy. Turning to its volatility smile, IV sits near $2.53, off a low of 0.56 at the $2 strike price. Moving in the far OTM direction, IV reaches a price of $4.21 at a $5 strike. It is possible that traders anticipate optimism in the coming months.
Plus, the smart money is smart about it too. In the deeper ITM direction IV rises to 3.83 at the $1 strike. This background implies the identification of a tail risk (i.e. black swan event). Nevertheless, analysts also rate IDN as a unanimous Strong Buy. Their average price target has reached $4.67, indicating about an 85% upside potential.
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Read More: Penny Stocks – How to make profit without cheating
On date of publication, Josh Enomoto Had no positions (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication Guidelines,
Josh Enomoto, a former senior business analyst at Sony Electronics, has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has provided unique, valuable insight into the investment markets as well as various other industries including legal, construction management and health care.
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