10 Best Debt Free Penny Stocks To Buy Now
In this article we present the list of 10 Best Debt Free Penny Stocks To Buy Now. Click to skip our discussion of the pros and potential cons of debt-free stocks and go straight to the 5 Best Debt Free Penny Stocks To Buy Now.
Trilogy Metals Inc. (NYSE:TMQ), Forte Biosciences, Inc. (NASDAQ:FBRX), and AERWINS Technologies Inc. (NASDAQ:AWIN) are three intriguing debt-free penny stocks that have generated interest among some of the world’s most successful money managers.
Companies that operate debt-free are a rarity in today’s business climate that prioritizes rapid growth and blitzing any market opportunity for all it’s worth. The idea that it takes money to make money is certainly true for the most part, particularly if you’re talking about making money within a reasonable timeframe (i.e. not through many years or even decades of passive growth and careful reinvestment of a company’s earnings).
Given that reality, it’s unsurprising that the 22 Most Indebted Companies in the World in 2022 represent a who’s who of some of the biggest and most prominent companies on the planet. Realistically, the best debt free stocks will never be capable of reaching heights like that.
That said, not every company needs to have a trajectory that leads it towards being a global behemoth for it to be a good investment that can generate positive returns for shareholders. In an environment of rising rates and economic uncertainty, companies with no debt in 2023 are becoming increasingly more attractive.
Having a strong balance sheet is certainly a key component of weathering economic storms, as evidenced by the list of 10 Stocks Jim Cramer Thinks Can Weather a Debt Default.
How Is Being Debt Free Actually a Disadvantage?
While being debt free would appear to be far superior on the surface than carrying a costly debt load, there are in fact some disadvantages of being a debt-free company, some of which are present among the collection of best debt free stocks on this list.
For starters, refusing to take on debt could hinder a company’s growth, potentially ruling out aggressive expansion into new regions, acquisitions of other companies or assets, or expensive research and development projects that could prove costly in the near-term but deliver greater future rewards.
Very few companies can expertly straddle the line between having little-to-no debt while still growing at a rapid pace, with the following list of 10 High Growth Low Debt Stocks to Buy being some of the exceptions.
Companies focused on keeping debt off their balance sheet may also be less likely to return as much of their cash to shareholders in the form of dividends and share buybacks, preferring instead to earmark their cash towards the continued funding of their operations. The number of debt free companies that pay dividends is quite limited as a result. We compiled a list of the best of the bunch in our article 10 Best Debt Free Dividend Stocks to Buy.
Being debt free could also be a sign not of strength, but of weakness, in that the company’s fundamentals and outlook may be so muted that investment firms are simply unwilling to lend them money. That could be why many of the 12 Best Debt Free Stocks To Buy are relatively unknown companies among mainstream investors.
Don’t make the mistake of assuming that even the best debt free stocks are necessarily debt free by choice.
The Best Debt Free Stocks Generally Are Often Undervalued
That said, finding penny stocks or small-cap companies with no debt helps limit some of the investment risk inherent in betting on less established companies, which could be rapidly done in by poor execution if they’re operating on the razor’s edge of balancing a heavy debt load.
And given that the best debt free stocks are often slower-growing companies with less cachet among investors, undervalued debt free stocks are quite common.
So with that background of some of the pros and cons of debt free stocks out of the way, let’s dig into the best debt free penny stocks on the market today.
A side profile of a consumer within a store handing a credit card to a cashier, reflecting the debt collection services of the company.
Our Methodology
The Best Debt Free Stocks To Buy Now that sell for mere pennies are ranked based on hedge fund sentiment. We follow a select group of hedge funds because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
For our list of 11 Best Debt Free Stocks to Buy, we screened for stocks with zero debt to equity and zero long term debt to equity ratios according to Finviz.com.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q3 2023 reporting period.
10 Best Debt Free Penny Stocks To Buy Now
10. Quince Therapeutics, Inc. (NASDAQ:QNCX)
Number of Hedge Fund Shareholders: 4
Value of Hedge Funds’ QNCX Holdings: $4.13 million
AERWINS Technologies Inc. (NASDAQ:AWIN), Trilogy Metals Inc. (NYSE:TMQ), and Forte Biosciences, Inc. (NASDAQ:FBRX) are three of the best debt free stocks to buy now according to hedge funds. Another debt-free stock they like is Quince Therapeutics, Inc. (NASDAQ:QNCX), a biotech targeting rare diseases.
Being in penny stock territory is a humbling reality for Quince Therapeutics, Inc. (NASDAQ:QNCX), whose shares were valued at over $105 just a little over two years ago. Hedge funds weren’t very high on the stock even back then, but did begin buying into it in 2022 following the stock’s crash. Hedge funds have been steadily selling out of their positions over the past year however, while two of the remaining four long positions held by hedge funds as of June 30 were slashed by more than 50% during Q2.
Investment company Echo Lake Capital believes Quince Therapeutics, Inc. (NASDAQ:QNCX) has been at least partly done in by poor management, which has destroyed more than $400 million in shareholder value since the company’s IPO. Echo Lake believes Quince’s board has enriched its own members at the expense of shareholders while making multiple disastrous decisions, including its acquisition of Novosteo. Quince abandoned Novosteo’s assets just months after purchasing them.
Despite the glaring mismanagement, Echo Lake believes Quince Therapeutics is heavily undervalued and a potential turnaround play given the company’s solid balance sheet. It has made offers to purchase Quince itself, which have been rebuffed and which prompted the company to adopt a ‘poison pill’ plan in response back in April of this year.
9. Galiano Gold Inc. (NYSE:GAU)
Number of Hedge Fund Shareholders: 4
Value of Hedge Funds’ GAU Holdings: $13.2 million
Canadian gold mining company Galiano Gold Inc. (NYSE:GAU) is another one of the best debt free stocks held by four hedge funds as of September 30, unchanged from the previous quarter. Peter Franklin Palmedo’s Sun Valley Gold, which primarily invests in gold and other mining companies, held the largest GAU stake as of September 30, owning 22.1 million shares. Galiano Gold was the fund’s third-largest equity holding, with its 13F portfolio having 12.7% exposure to the stock.
Galiano Gold Inc. (NYSE:GAU) has gone on a run in recent weeks that has somewhat corrected the extreme valuation discount that was evident in its shares. As recently as early October, the company’s market cap was virtually equal to Galiano’s cash and liquidity (and naturally, given the theme of this article, the company has zero debt), meaning the company itself was essentially being valued at nothing.
Galiano Gold Inc. (NYSE:GAU) revised its 2023 gold production guidance upwards following the release of its Q2 financial results. The company anticipates production landing between 120,000 and 130,000 ounces this year, all of which comes from the Asanko Gold Mine in Ghana. That’s up from previous guidance of 100,000 to 120,000 ounces. Galiano’s gold production did fall by 32.7% year-over-year in Q2 to 33,673 ounces.
8. Atossa Therapeutics, Inc. (NASDAQ:ATOS)
Number of Hedge Fund Shareholders: 5
Value of Hedge Funds’ ATOS Holdings: $1.87 million
If you thought QNVX and FBRX were cautionary tales, you haven’t seen anything yet. Atossa Therapeutics, Inc. (NASDAQ:ATOS) shares traded for nearly $2,000 for a brief flicker of time in March 2013. Just four years later they had fallen under $10 for the first time and eventually hit penny stock territory last year.
Hedge funds began showing more interest in Atossa Therapeutics, Inc. (NASDAQ:ATOS) in 2021 as potentially one of the best debt free stocks trading for pennies, but that appears to have been short-lived, as there’s been a decline in smart money ownership of ATOS over four of the past five quarters. Benjamin A. Smith’s Laurion Capital Management holds the largest stake in Atossa as of September 30, amounting to 2.23 million shares.
While Atossa Therapeutics, Inc. (NASDAQ:ATOS) is in a strong financial position, including a cash runway that stretches ahead of it for several years, the biotech company likely has an equally long road ahead of it in terms of successfully developing its hormone therapy Endoxifen for the treatment of breast cancer. The therapy is an active metabolite of the selective estrogen receptor modulator Tamoxifen, which has struggled to hang on to market share as more effective treatments have surfaced in recent years. Needless to say, the market doesn’t think much of Endoxifen right now given the stock’s immense struggles.
7. NLS Pharmaceutics AG (NASDAQ:NLSP)
Number of Hedge Fund Shareholders: 5
Value of Hedge Funds’ NLSP Holdings: $4.05 million
Next up on the list of best debt free stocks in the penny cap space is Swiss-based biopharmaceutical company NLS Pharmaceutics AG (NASDAQ:NLSP). Hedge fund ownership of NLSP has remained steady for eight straight quarters, with Mark Lampert’s Biotechnology Value Fund holding the largest stake in the company over the last year. The fund owned 5.75 million NLSP shares on September 30.
NLS Pharmaceutics AG (NASDAQ:NLSP) shares tumbled by 40% in mid-November after the company announced that it would seek out a strategic partner to license its intellectual properties to, including its appetite suppressant drug Mazindol. NLS is aiming to complete the transaction by the first quarter of next year. Given its relatively short cash runway, NLS Pharmaceutics AG (NASDAQ:NLSP) is also instituting several cost reduction measures, including slashing the size of its workforce by 50%.
6. Vista Gold Corp. (NYSE:VGZ)
Number of Hedge Fund Shareholders: 5
Value of Hedge Funds’ VGZ Holdings: $10.1 million
Several hedge funds have added Vista Gold Corp. (NYSE:VGZ) to their 13F portfolios since Q3 of 2021, which isn’t surprising given the inflationary environment in the wake of the pandemic. The U.S. dollar is also facing pressure as the government’s debt continues to surge to record levels in the U.S., surpassing $33 trillion during the current fiscal year.
Peter Franklin Palmedo’s Sun Valley Gold is far and away the most bullish shareholder of Vista Gold Corp. (NYSE:VGZ) as of September 30, owning over 19.9 million VGZ shares. The position is the fund’s fifth largest, accounting for 8.47% of the value of its 13F portfolio.
Vista Gold Corp. (NYSE:VGZ)’s cash reserves have fallen to $4.8 million as of the end of the September, down from $8.1 million at the beginning of the year, but the company remains debt-free. Vista Gold has successfully reduced recurring costs by 7% this year as it continues to further its goal of maximizing shareholder value.
The company is in the process of developing its flagship asset, the Mt Todd gold project in Australia, which it has a full ownership stake in. The site could develop into one of Australia’s biggest gold projects, with 7.8 million ounces of measured and indicated gold resources.
Forte Biosciences, Inc. (NASDAQ:FBRX), AERWINS Technologies Inc. (NASDAQ:AWIN), and Trilogy Metals Inc. (NYSE:TMQ) are three of the best debt-free stocks according to hedge funds. See why by following the link below.
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Disclosure: None. 10 Best Debt Free Penny Stocks To Buy Now is originally published at Insider Monkey.