It’s fair to say that many investors are searching for a hidden bull market currently. For most, this search may take hold among mega-cap, low-beta blue-chip stocks. For others, this could mean finding specific penny stocks to buy with incredible upside, given their beaten-up valuations.

In any case, it’s a search for diamonds in the rough. Thus far, 2022 hasn’t been great for investors embarking on this search.

Broad indices including the S&P 500 have faltered. This critical index is already down 21% year-to-date through Sept. 21, and has dropped even further in recent days. Much of this has to do with the Federal Reserve’s decision to implement a third-consecutive 75 basis point (0.75%) interest rate increase. The tech-heavy Nasdaq has fared far worse, declining over 31%. 

In recent days, most major indices have dropped below their yearly lows set in mid-June. Accordingly, rather than relying on the broader market to turn positive, many investors are instead seeking out hidden gems. Thus, for those taking a look at small-cap stocks, or those that have fallen below $5 per share, here are three such penny stocks to buy right now.

Denison Mines (DNN)

Denison Mines (NYSEMKT:DNN) is one penny stock with plenty of potential upside. This upside is based on a relatively simple notion — that uranium demand will continue to increase over time. If that is the case, then Denison Mines, with its sole focus on developing uranium resources, has very bullish upside potential. 

The price of uranium behaves differently than other commodities, in that it doesn’t trade on an open market. Instead, buyers and sellers negotiate contracted prices privately. Firms calculate average prices after the fact, based on published prices that are released later. 

Current data shows that prices are in an overall upward trend. Those prices were most recently calculated to be near $51.25. That’s up substantially from $34.25 the same time last year.

That is a very bullish sign for Denison Mines for a few reasons. Accordingly, one bullish analyst believes the price of uranium is headed to $200 per pound. Given the fact that Denison Mines owns the rights to the Cigar Lake Mine, located in Saskatchewan, as the market price of uranium increases, so does the valuation of its deposits. 

The company hasn’t performed particularly well. This execution risk appears to be the key reason why this penny stock is as cheap as it is. However, if the company does successfully develop its uranium resources, and prices cooperate as nuclear power demand rises, DNN stock could move rapidly to the upside. 

Nokia (NOK)

Nokia (NYSE:NOK) stock is in the midst of a turnaround. That is why investors should pick up its shares currently. 

The Finnish telecom giant changed its strategy a few years ago after a prolonged period of disappointing results. It was on Aug. 1, 2020 that Pekka Lundmark was appointed as CEO. 

Since this announcement, NOK stock has dropped below the $5 level, positioning this company as one of the penny stocks to buy on my list. That said, it’s been clear that Lundmark’s goal from day one has been to position Nokia as a trusted partner for critical networks across the globe. A lot of that positioning has related to the U.S. market where Huawei is banned after being targeted as a potential threat to national security. 

That ban has given both Nokia and Swedish rival Ericsson (NASDAQ:ERIC) a massive opportunity stateside. This opportunity, and the realigned strategy under new leadership, have paid dividends. 

Nokia’s recent earnings reflect that truth. Revenues increased 11%, reaching $6 billion in the quarter. Profits increased 31% to 460 million euros. In essence, investors in NOK stock are getting a chance to purchase equity in a heavily-favored firm that will continue to be central to the buildout of 5G in the U.S. What’s even better is that NOK shares are temporarily cheaper following the most recent market downturn. 

Party City (PRTY)

It’s the time of year to consider purchasing Party City (NYSE:PRTY) stock. Indeed, with PRTY stock trading sub-$5 per share for most of this year, it’s been among the penny stocks to buy for some time. That said, Halloween is approaching and Thanksgiving and Christmas aren’t far behind. As most know, the holidays are an important time for this company. 

There are reasons for this company’s decline. Party City doesn’t appear particularly strong if we consider its most recent earnings report. Sales declined 1.5% and net income fell to $11.5 million from $34.1 million a year earlier. That resulted in earnings per share dropping from 29 cents to 10 cents on a year-over-year basis. Accordingly, a falling share price has followed. And that decline has been made worse following the most recent news from the Fed. 

But there’s positive news ahead: Halloween spending is expected to reach an all-time high this year. Expectations are that Americans will spend $3.6 billion on costumes and $3.4 billion on decorations this year. 

PRTY stock is very cheap right now. Given its relatively inexpensive price, it’s easy to understand that share prices could rise very quickly, once more data regarding a strong Halloween season begins to roll in. 

On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.

Read More: Penny Stocks — How to Profit Without Getting Scammed

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.