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Forget Penny Stocks -- Here Are 2 Better Stocks to Buy in August

By Will Ebiefung – Updated Aug 5, 2020 at 1:37PM

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Are you hungry for multibagger returns but don't want the risk of penny stocks? Buy these stocks instead.

Investors love penny stocks because of their low prices and seeming potential for explosive growth. But these companies are often extremely risky, with unproven business models and questionable management. Instead of speculating on penny stocks, investors should consider rapidly growing small-cap stocks that can deliver multi-bagger results over the long term without as much risk.

The two I'll focus on today are Celsius Holdings (CELH -1.53%), a fast-growing fitness drink company with a massive expansion into Europe; and Jumia Technologies (JMIA -2.75%), a promising e-commerce platform focused on the largely untapped African market. Both stocks will make great buys in August. 

Upward pointing arrow and stock chart with world map

Image source: Getty Images.

Celsius Holdings 

Celsius Holdings is a fast-growing small-cap company that sells fitness drinks that help consumers lose weight. The company has a market cap of $989 million through Tuesday's close and has seen its share price almost triple this year due to its breakneck revenue growth.

Celsius reported first-quarter earnings on May 12, and the results were a slam dunk. Total revenue grew by 94% to $28.2 million due to strong sales of its energy drink and expansion into Europe through the acquisition of Func Foods, a Nordic wellness company purchased for $15.1 million late last year. Management plans to drive continued long-term growth by integrating Func Foods into the company's existing European distribution network, and expanding its North American product lineup with new flavors like Jackfruit and Grapefruit Melon Green Tea. 

Unlike the average penny stock, Celsius Holdings has a relatively strong balance sheet -- despite the recent acquisition. The company reports a cash position of $19 million and bonds payable of $8.59 million. Celsius generated a profit of $546,000 in the first quarter, which is great news for investors who are looking for a proven business model. 

Jumia Technologies 

E-commerce is the future of retail, and investors leery of Amazon and its $1.5 trillion market cap are looking for the next undiscovered stock that can deliver multi-bagger returns over the long term. Jumia Technologies looks poised to live up to its potential.

The self-styled "Amazon of Africa," Jumia is an online marketplace targeting the continent's rapidly growing middle class. With a market cap of just $1.3 billion at Tuesday's close, Jumia is still in the early stages of its growth. And shares have already risen by more than 140% year to date amid marketwide optimism about internet retail.

Jumia is poised for continued growth as internet penetration increases in its core markets like Nigeria, Egypt, and South Africa.

Internet penetration is a key driver of e-commerce adoption. And American tech companies are making massive investments to bring more Africans online. These include Google's Equiano cable and Facebook's 2Africa cable. Both projects are expected to go live in the early 2020s and could potentially jump-start Jumia's growth by boosting internet speeds and driving down bandwidth costs on the continent.

Jumia reported marketplace growth of 22% to 19.1 million euros in the first quarter, while transactions on its payment processor JumiaPay grew 77% to 2.3 million.

Small but mighty

Penny stocks are volatile enough to give investors outsized returns on relatively small investments. But they come with massive risks because of unproven business models and murky financials. Instead of buying penny stocks, investors should consider rapidly growing small-cap companies like Celsius and Jumia, which combine massive opportunities with less risky businesses.

CORRECTION: The original version of this report misstated the size of Celsius' first-quarter profit. It is $546,000. We're sorry for the error. 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Facebook and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Celsius Holdings, Inc. Stock Quote
Celsius Holdings, Inc.
$88.52 (-1.53%) $-1.38
Jumia Technologies Stock Quote
Jumia Technologies
$6.00 (-2.75%) $0.17
Alphabet Inc. Stock Quote
Alphabet Inc.
$98.74 (-1.40%) $-1.40, Inc. Stock Quote, Inc.
$113.78 (-3.01%) $-3.53
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
$140.41 (-1.69%) $-2.41
Alphabet Inc. Stock Quote
Alphabet Inc.
$99.17 (-1.39%) $-1.40

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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