Penny Stocks: 3 Top Penny Stocks for 2016

Penny StocksBig Returns in Penny Stocks

If you’re combing for cheap stocks, maybe you should try searching through the market’s discount bin: penny stocks.

With stock market indices approaching all-time highs, there aren’t very many bargains out there. That’s why investors have to start searching in new places for financial bargains.

Penny stocks are a great place to start. After all, most mutual funds are banned from owning any stock trading under $5.00 per share. If you’re willing to shift through a lot of mediocre businesses, some of these names are outright bargains.

For those who don’t mind shopping through the bargain rack, here are three of my favorite penny stock bargains right now:

1. Bombardier, Inc.

Massive losses, delivery delays, and order cancellations—it has been a disastrous year for Bombardier, Inc. (TSE:BBD.B). For this reason investors have bailed on the stock. Over the past five years, shares have plunged more than 90%.

The worst, though, may be behind it.

Bombardier has fired most of the executives responsible for its recent troubles. Issues surrounding the delivery of the “C Series” aircraft are also starting to be resolved. And a multibillion-dollar order from Delta Air Lines shows there’s still interest in the product.

Bombardier is a classic “horrible-to-less-horrible” situation. Investors have completely given up on the company, pushing shares down to bargain-basement levels. Even a bit of good news, no matter how small, could send shares soaring.

However, Bombardier has used the summer doldrums to revamp itself into a significantly different company. Gone are the firm’s two top aerospace executives with more departures expected soon. Bombardier is now putting more emphasis on what was once a marginal business: the design, manufacturing, and distribution of aircraft components.

2. Sandstorm Gold Ltd

Sandstorm Gold Ltd (NYSEMKT:SAND) is like the loan sharks of the mining industry…and that’s why it’s one of my favorite ways to put money to work in the mining business.

Sandstorm is unique because it doesn’t actually operate any mines itself. Rather, this company fronts miners with the cash they need to build a new project. In exchange, Sandstorm collects a lucrative stream of royalties as long as the mine is in operation.

This model is called a streaming contract and it has proven to be far more profitable than running a traditional mining operation. During the previous resource boom, established streamers like Silver Wheaton and Royal Gold crushed the broader resource sector. In the next bull market, new players like Sandstorm will be the likely leaders.

3. Kinross Gold Corporation

Gold stocks are crushing the market right now.

As we have been writing here on Profit Confidential for months now, precious metals could be on the verge of a major bull market. Every investor should dedicate some percentage of their portfolio to gold and gold stocks.

A top-tier producer like Kinross Gold Corporation (USA) (NYSE:KGC) is a great way to play such a rally. Because of the leverage inherent in its business, profits can rise much faster than gold prices. Even a small bump in commodity prices could send shares soaring.