15 Best Penny Stocks in Canada 2023

In this WealthRocket article, we’ll explore the best penny stocks in Canada, with additional information covering everything beginners need to know before they delve into trading penny stocks.

Penny stocks are stocks typically traded at less than $1 each, although many investors consider stocks that trade for less than $5 apiece to be penny stocks.

Most companies whose shares trade at less than $5 each aren’t usually well known. They’re often small companies in terms of market capitalization and don’t have a lot of trade volume. However, there are some exceptions to the rule.

In Canada, penny stocks trade on the Toronto Stock Exchange (TSX), TSX Venture Exchange, Canadian Securities Exchange, and NEO Exchange.

In the U.S., they trade on the New York Stock Exchange (NYSE), Nasdaq, the Over-The-Counter Bulletin Board (OTCBB), and Pink Sheets.

While penny stocks do trade on larger exchanges like the TSX and NYSE, they’re usually associated with smaller and lesser-known exchanges.

When a Canadian publicly traded company grows large enough, it typically graduates by moving to the TSX from the TSX Venture Exchange. The TSX Venture Exchange was previously known as the Canadian Venture Exchange (CVE) and the exchange will be listed by it’s short form CVE in stock searches.

A company will move to the TSX to increase liquidity, to improve the chances of receiving analyst coverage, and to raise its profile among small and large investors.

Penny stocks usually trade below $5 each, while regular stocks trade for $5 or more. Regular stocks also tend to trade on larger exchanges such as the TSX, NYSE, and Nasdaq. They rarely trade on small exchanges.

Penny stocks may have higher volume than regular stocks. For instance, it’s common to see penny stocks among the top 10 most active stocks on the TSX on any given day.

However, some of the less popular penny stocks don’t have a large trading volume or may have no volume for many days in a row.

Depending on what exchange a stock trades, the listing requirements vary. For instance, the disclosure requirements and corporate governance requirements for TSX-listed companies are stricter than those listed on the TSX Venture Exchange.

Companies listed on the NYSE and Nasdaq also face a lot more regulation than they would if they traded on other exchanges. Even firms that trade on the OTCBB have to file financial statements with the Securities and Exchange Commission (SEC ). However, companies listed on the Pink Sheets don’t have to make SEC filings.

Like other traders, those that trade penny stocks may be in it for the short-term or long-term investors. Because penny stocks can be a lot more volatile, there’s the opportunity to make large sums of money in a shorter period of time. There’s also the potential to lose a lot of money very quickly, too.

Like other traders, those that trade penny stocks may be in it as a short-term or long-term investment. Because penny stocks can be much more volatile than regular stocks, there is the opportunity to make large sums of money in a shorter period of time. There is also the potential to lose a lot of money very quickly, too. Which investment is right for you – penny or regular stocks – depends on several factors including pricing, volatility, risk and research.

It is easier to get into investing with penny stocks as they are often far less expensive than regular stocks. You can get started with just a few hundred dollars. However, penny stocks are usually priced low for a reason. The company selling them may be facing financial, legal or repuatational issues. But it could also be a new company looking to finance growth potential or an established company that has had some troubles and has a potential to rebound. The trick is to find out which applies to the company you want to invest in.

Because of their volatility penny stocks are considered a far riskier investment than regular stocks. Because most penny stocks are highly speculative, even a minor piece of news can quickly impact the stock price. This usually doesn’t happen with regular stocks. Before you decide whether to invest in penny stocks or regular stocks, know your appetite for volatility and your ability to absorb a loss.

As with any stock purchase you will want to do your due diligence with a penny stock and find out what you can about the company before you buy a piece of it. However, penny stocks can be more challenging to research than regular stocks. These are of stocks usually associated with smaller companies so there may not be a website and if they are new – and many are – there may not be historical data you can use. If penny stocks are traded on the main stock exchanges such as the TSE, they do have to follow exchange rules and will provide minimal information.

Nano or micro-cap stocks are forms of penny stocks that are differentiated by the size of their market capitalization, often referred to as market cap. Market cap is the total worth of a company and is calculated by multiplying the outstanding shares by the current price of those shares. It generally corresponds to where a company is in terms of growth. Larger cap stocks are generally less risky but may also offer less return.

Nano-cap stocks usually have a market cap of less than $50 million but that number can vary slightly depending on the analyst discussing it. Micro-cap stocks have a slightly larger and generally have a market cap of between $50 million and $300 million.

Finding good investments of any kind takes time and effort. However, finding good penny stocks can be even more difficult. Be wary of salespeople or stock promoters who try to sell you the next greatest penny stock. They often exaggerate or overstate the company’s potential and may also attempt to push you into buying quickly before you have enough time to assess the purchase. Similarly, you should avoid buying a stock because your friend, co-worker or relative heard that it would be an amazing buy.

That said, there are a few methods you can use to find penny stocks. Penny stocks are promoted via various investor and market sites as well as on sites such as Reddit and news sites. Even financial magazines often make it a point to do periodic articles listing available penny stocks they consider to be good investments.

Start by researching penny stock lists and the companies on those lists. The more information you can gather, the higher the probability that you will make a good investment. And remember that wherever you choose to start, be sure the site is legitimate and confirm the information you get with another equally reputable source. Finally, you can also find penny stocks by searching through the TSE lists for stocks trading at less than $5 per share.

Yes and No. Penny stocks are often considered high risk, meaning that there is a chance you may lose your investments. First, they’re often quite volatile and can rise or fall in value by a large percentage in a single day. A $1 decrease for a $100 stock is a 1% loss, while a $1 decrease for a $2 stock is a 50% loss.

Second, some companies may be dependent on a few customers or one product. That can leave them susceptible to a drop in business if one of those customers leaves or a competitor releases a better product.

Third, penny stocks are easy to manipulate by other investors or employees.

Some may be promoting stocks in newsletters and on social media, passing it off as investment advice and hoping others will buy.

As the stock rises, the promoters get out before the stock drops. In other cases, fraud isn’t off the table, and investors may hold on until it’s too late. That’s what happened to Bre-X investors in 1997.

To safely invest in penny stocks in Canada, you will first have to figure out your investment goals. Are you in it for the short run or the long run?

For long-term investors, it is best to look for penny stocks that offer consistent growth over many years and are less volatile. You could also create a balanced portfolio of penny stocks from several different industries rather than sticking to one or two. The best penny stocks in Canada are those that perform well over longer periods of 3-5 years. So be sure to check their historical performance before making an investment.

For short-term investors, it is best to look for which industries or sectors are trending at the moment and invest accordingly. Keep in mind that short-term investments are riskier and therefore using disposable capital (not your hard-earned savings) is recommended.

It is always wise to speak to your trusted financial advisor or service before making any decisions.

Penny stocks aren’t for the faint of heart. They can be both risky and volatile. Before buying any stock, you have to do some in-depth research. If you’re a new investor, penny stocks probably aren’t for you.

As a Canadian, there are many other instruments you can invest in including mutual funds, commodities, ETFs, GICs, and more whichmay be more suited to your needs.