Top 3 Penny Stocks to Watch in April 2015

Top penny Stocks to watchBelow I have identified the top three penny stocks to watch in April 2015 that are great examples of the kinds of companies that have the potential to provide massive returns to investors in the second quarter, especially as markets continue to show some resilience.

Best Penny Stocks to Watch This Month

To identify these top three penny stocks to watch in April 2015, I looked at companies that have a share price of less then $10.00 and a total market capitalization of less than $2.0 billion. My focus here is to identify companies that actually make money. I am also looking for companies with decent management and products that will be in demand. I considered cash on hand as well, which is mainly a measure that influences their potential to survive during tough times.

Penny Stock #1: Quantum Corporation (NYSE/QTM)

Quantum Corporation, with a market capitalization of $460 million, is a data management technology company with headquarters in San Jose, California and more than 1,900 employees worldwide. (Source: Quantum Corporation web site, last accessed April 10, 2015.) The company released strong fourth-quarter earnings on April 10, beating revenue expectations by 12%.

Quantum’s data management services allow companies to scale-out large amounts of data, integrate and process workflows, archive and retain long-term data, and simplify data backup and restoration. These are the modern-day big-data needs many types of companies require. Current customers include Digic Pictures (an animation studio behind many video game trailers), global gold miner Agnico Eagle Mines (NYSE/AEM), and even NASA. (Source: Quantum Corporation web site, last accessed April 10, 2015.)

On May 6, 2015, Quantum will announce the final results of its fiscal fourth quarter in which it expects total revenues to come in at $145 million, up from $128 million in the prior year. With a cash balance of $70.0 million, Quantum is poised to continue building on its momentum. (Source: Quantum Corporation, April 9, 2015.)

Penny Stock #2: Renewable Energy Group, Inc. (NASDAQ/REGI)

Renewable Energy Group, Inc. is a North American biofuels and renewable chemicals producer with a market capitalization of $405 million. During 2014, Renewable Energy Group generated $1.2 billion in revenue, earned $81.0 million in net income, and finished with a cash balance of $63.0 million. (Source: Renewable Energy Group, Inc., March 6, 2015.)

Renewable Energy Group primarily produces and markets biodiesel and heating oils, but is also in the business of commercializing novel feedstock into fuels and enables other producers in upgrading their facilities. The industry is currently facing some regulatory headwinds as the Advanced Biofuels Association is pushing for congressional reforms. The current statutes lend uncertainty to the industry’s smaller players regarding the amount of renewable fuels that must be processed by refiners and importers of gasoline and diesel fuel. (Source: E&E TV web site, April 2, 2015.) This determines the demand for renewable resources.

Such pressure has forced the stock of Renewable Energy Group down by 22% since September 2014, but not for long.

Renewable Energy Group is an established industry player with 10 biorefineries across the U.S. As a result, this company is less affected by near-term industry uncertainty. Moreover, while the prices for biodiesel and heating oils have been headed lower along with oil prices, there is a long-term catalyst for prices. The use of renewable fuels is set to rise from 16.55 billion gallons in 2013 to more than 36 billion gallons in 2022. But, renewables are also here today, with 10% of motor gasoline sold being corn-based ethanol. (Source: U.S. Energy Information Administration, June 3, 2013.)

Renewable Energy Group saw compounded earnings at 20% over the past five years and near-term macro headwinds warrant a second look at the alternative fuel producer.

Penny Stock #3: Rayonier Advanced Materials Inc. (NYSE/RYAM)

Rayonier Advanced Materials Inc., with a market capitalization of $666 million, is the largest producer of cellulose specialties used in several consumer-oriented products, such as cigarette filters, liquid crystal displays, impact-resistant plastics, and cosmetics. (Source: Rayonier Advanced Materials Inc., February 27, 2015.) For 2014, Rayonier generated $224 million in revenue and $32.0 million in net income, while finishing with a cash balance of $66.0 million.

Roughly 90% of the company’s revenue is derived from cellulose specialties, with the remainder of its sales coming from commodity products. Rayonier’s top product is found in cigarette filters and accounts for a majority of revenues. However, sales are diversified across geographies, with 44% derived from the U.S. and another 51% coming from China, Japan, and Europe combined.

The reason for taking a second look at Rayonier is that shares are down by more than 50% since September 2014. However, in 2015, cellulose specialty prices are forecast by management to be only seven to eight percent lower and operating earnings are expected to stay positive, likely coming in at $200–$220 million. (Source: Ibid.) As supply/demand fundamentals improve, throughout 2015, Rayonier is a stock worth keeping on you radar.

A Final Note About Penny Stocks…

Before making any decision, investors have to bear in mind that penny stocks can be risky and are certainly not for everyone. If you are a risk-averse investor, it’s best to stay away from penny stocks. If you are a risk-taker, know that what I have just said is very limited information, so doing your own due diligence is necessary.