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These are 15 Best Penny Stocks to Buy Now
Penny stock investing carries a high degree of risk, but when done properly, it can open up a wealth of opportunities and expose investors to potential multibaggers in the not-too-distant future. The upward trend of small- and large-cap stocks is extensively discussed by Jeremy Siegel in his book “Stocks for the Long Run.” Rolf Banz, a graduate student at the University of Chicago, did a study that is cited by the author in 1981. Using a database that was eventually made public by the Center for Research in Security Prices (CRSP), Banz looked into the returns of tiny and big-cap companies.
According to Siegel, Banz discovered that small-cap companies “systematically outperformed big-cap companies, even after accounting for risk determined within the context of the capital valuation model.” Siegel pointed out that even though small-capitalization stocks have performed better than large-cap stocks over the past 86 years, small-company returns have “waxed and waned” in that time.
Small stocks, as assessed by the bottom quintile of market capitalization, rapidly bounced back from the Great Depression’s pounding, but their performance was only competitive with large stocks from 1926 to 1960. Even at the end of 1974, the average monthly compound return on tiny stocks was only about 0.5 per cent higher than that on large companies, which was not nearly enough to make up for the added risk and trading expenses for the majority of investors. However, modest stocks exploded between 1975 and the end of 1983. The median cumulative annual return for tiny stocks during this period was 35,3%, more than double the average return for large stocks (15,7%). Over the course of these nine years, small stock returns have topped 1,400%.
It ultimately comes down to making the proper choice by adhering to tried-and-true investing rules and having a lengthy holding period, despite all the books, financial advice, and the “secrets” of stock market investing. In this regard, Siegel’s book refers to a fascinating study that highlights the significance of stock investment and the contribution holding periods make to stock return growth. According to Siegel, after the Great Crash, academics and the media held the opinion that stock market investing offers nothing in the way of returns.
Much academic research that demonstrated the significance and applicability of stock investing was done in reaction to these ideas. For instance, after World War II, research on the investment returns of regularly traded industrial enterprises was released by two University of Michigan professors, Frank P. Smith and Wilford J. Eiteman. They discovered that regular stock investors generated returns of 12.2% annually, greatly above those of fixed-income securities, when they invested in 92 specific equities regularly without taking the stock market cycle into account (a practice known as dollar cost averaging). But the research was not stopped at this point. They conducted a follow-up analysis using the same 92 equities after 12 years and discovered that returns had surpassed those seen in the initial analysis.
Siegel continues by mentioning a period that is quite similar to the current state of affairs. Due to growing inflation, high oil prices, and unfavourable real stock returns, the 1970s, in Siegel’s words, “were not ideal years for either stocks or the economy”. The market eventually returned to normal in 1982 and started a period of strength that would endure for several years as a result of the Federal Reserve beginning to raise interest rates to combat inflation, which it eventually succeeded in doing. The stock market generated excellent returns and consumers rejoiced in rising gains following the Fed’s successful battle against inflation.
According to Siegel, while many experts were optimistic about the potential longevity of the bull market that began in 1982, some analysts were pessimistic. Eventually, the bull market persisted longer than anticipated, and throughout that time, investors received enormous gains. Will the Federal Reserve succeed in containing inflation, and if so, will the stock market begin a bull run that may last a decade or longer? Time would only tell.
Using Insider Monkey’s database of 943 hedge funds, we searched for the 15 penny stocks (those selling for less than $5 as of July 8) with the biggest concentration of hedge fund capital for this article.
The Top Penny Stocks Right Now
- Altice USA, Inc. (NYSE: ATUS)
27 investors in hedge funds
Altice USA, Inc. (NYSE: ATUS), a provider of cable and telecommunications services, is ranked 15th on our list of the top penny stocks to buy, depending on hedge funds. The majority of shares in Altice USA, Inc. (NYSE: ATUS) are owned by Israeli billionaire Patrick Drahi. Altice USA, Inc. (NYSE: ATUS) reported an EPS of $0.06 during the first quarter, falling short of expectations by $0.07. The period’s revenue, which was $2.29 billion and above projections by $30 million, decreased by 5.4% from the prior year.
Cliff Asness’s AQR Capital, which has a $51 million holding in the firm, was the largest hedge fund shareholder of Altice USA, Inc. (NYSE: ATUS) at this time.
- Hanesbrands Inc. (NYSE: HBI)
27 investors in hedge funds
Hanesbrands Inc. (NYSE: HBI), a clothing manufacturer, released Q1 data in May. According to those findings, the business reported adjusted EPS of -$0.06, surpassing predictions by $0.01. To $1.39 billion, revenue in the quarter decreased by about 12% year over year, outpacing estimates by $30 million. 27 hedge funds had positions in Hanesbrands Inc. (NYSE: HBI), according to Insider Monkey’s database of 943 hedge funds. Andrew Wellington and Jeff Keswin’s Lyrical Asset Management, which has a $49 million holding in the firm, is the most noteworthy hedge fund investor in Hanesbrands Inc. (NYSE: HBI).
Observations of Chartwell Investment Partners regarding Hanesbrands Inc. (NYSE: HBI) in its investor letter for Q2 2022 are as follows:
Hanesbrands (NYSE: HBI, 1.1%), which has lost 30.1%, is one of the three companies in the Dividend Equities ETFs that have performed the worst. The hard environment comprises supply-chain challenges, greater expenditures on inputs, and some post-Covid inventory build-up, but Hanesbrands management is performing well in it.”
- Infinera Corp. (NASDAQ: INFN)
27 investors in the hedge funds
Infinera Corp. (NASDAQ: INFN), a provider of internet connectivity remedies, is ranked thirteenth on our list of the top penny stocks right now. As of the end of the first quarter, 27 funds had positions in Infinera Corp. (NASDAQ: INFN), according to Insider Monkey’s database of 943 hedge funds. Infinera Corp. (NASDAQ: INFN)’s most significant hedge fund investor was Howard Marks’ Oaktree Capital Management, which has a $195 million investment in the business.
- iHeartMedia, Inc. (NASDAQ: IHRT)
27 investors in hedge funds
As of July 8, shares of music publisher iHeartMedia, Inc. (NASDAQ: IHRT) had increased roughly 6% over the previous 30 days. iHeartMedia, Inc. (NASDAQ: IHRT) is one of the largest radio corporations in the US. As of the end of the first quarter, an aggregate of 27 hedge funds that Insider Monkey follows held shares in iHeartMedia, Inc. (NASDAQ: IHRT).
In the shareholder letter for the first quarter of 2023, Palm Harbour Capital stated what follows about iHeartMedia, Inc. (NASDAQ: IHRT):
The American radio and podcasting firm iHeartMedia, Inc. (NASDAQ: IHRT) (-37.5% -58 bps) was the second biggest detractor. Two self-inflicted injuries to the corporation will affect the first quarter. A shift in sales incentives was the first, which the business identified as being only temporary. The management thought it should have been increasing volumes of lower margin, not a switch, but it appears that they changed the behaviour of their sales team to offer lower margin commodities at the expense of higher margin commodities.
The second is their estimate of the cost of interest rates. Because it failed to hedge its variable term loan, the company is now seeing increasing interest rates, which is not what you want to see in a heavily leveraged business. Although their loan maturity dates are years away, refinancing will become more challenging with each quarter that has a low free cash flow. The organization has been successfully operating up until this point, and its podcasting business is expanding rapidly. The company’s management has also been purchasing shares, and if the Federal Trade Commission permits it, we think their largest shareholder may be interested in purchasing the company.
- Mersana Therapeutics, Inc. (NASDAQ: MRSN)
After the FDA put a partial clinical hold preventing enrollment in its UP-NEXT and UPGRADE-A studies for lead asset UpRi in platinum-sensitive cancers of the ovary, Mersana Therapeutics, Inc. (NASDAQ: MRSN) saw a significant decline in value in June.
28 hedge funds that Insider Monkey follows owned shares in Mersana Therapeutics, Inc. (NASDAQ: MRSN) as of the first quarter of 2023. OrbiMed Advisors, a corporation founded by Samuel Isaly, is the largest shareholder in Mersana Therapeutics, Inc. (NASDAQ: MRSN), holding a $37 million interest in the business.
- Nuvation Bio Inc. (NYSE: NUVB)
Holders of Hedge Funds: 29
Nuvation Bio Inc. (NYSE: NUVB), a California-based company, specializes in cancer therapies. According to the database of Insider Monkey, 29 hedge funds possess Nuvation Bio Inc. (NYSE: NUVB). These investment firms are best known for their ownership of 38 million stocks of Nuvation Bio Inc. (NYSE: NUVB) by David Abrams’ Abrams Capital.
- Marqeta, Inc. (NASDAQ: MQ)
Holders of Hedge Funds: 30
Marqeta, Inc. (NASDAQ: MQ), a provider of cards and payments, is now trading at about $4.99 as of July 8. Marqeta, Inc. (NASDAQ: MQ) released its Q1 results in May. The company’s GAAP EPS for the quarter came in at -$0.13, which was $0.03 below expectations. To $217.34 million, revenue for the period climbed by about 31% year over year, exceeding estimates by $5.55 million.
According to Insider Monkey’s database, Mick Hellman’s HMI Capital held a $91 million holding in Marqeta, Inc. (NASDAQ: MQ) as of the conclusion of the first quarter of 2023.
- Sabre Corporation (NASDAQ: SABR)
Holders of Hedge Funds: 30
The value of Texas-based Sabre Corporation (NASDAQ: SABR), a provider of travel technology, has decreased by nearly 50% in the last year. As of the conclusion of the first quarter, 30 hedge funds that Insider Monkey tracks were optimistic about this penny stock, indicating that the stock is still receiving favourable sentiment from the hedge fund community.
Techsembly, a provider of hospitality e-commerce based in the UK, will be acquired by Sabre Corporation (NASDAQ: SABR).
After the first period, Terry Smith’s Fundsmith LLP, which has a $97 million investment in the firm, was the largest hedge fund shareholder of Sabre Corporation (NASDAQ: SABR).
- Brookdale Senior Living, Inc. (NYSE: BKD)
Holders of Hedge Funds:30
In May, Brookdale Senior Living, Inc. (NYSE: BKD), a provider of senior communities situated in Tennessee, released solid Q1 earnings. GAAP EPS for the period were negative $0.20, exceeding expectations by $0.09. Over the previous year, revenue increased 11.1% in the quarter.
- Lumen Technologies, Inc. (NYSE: LUMN)
Holders of Hedge Funds:31
Lumen Technologies, Inc. (NYSE: LUMN), a provider of information technology and communication products and services, is ranked sixth on our list of the top penny stocks to buy right now by hedge funds. As of the final day of the first quarter of 2023, 31 funds had positions in Lumen Technologies, Inc. As of July 8, Lumen Technologies, Inc. (NYSE: LUMN) is trading at $2.19.
In their investor letter for Q1 2023, Longleaf Partners Fund stated the following on Lumen Technologies, Inc. (NYSE: LUMN):
“NYSE: LUMN – Lumen Technologies, Inc. Due to disappointing instruction, global fibre provider Lumen was the most critical in the quarter. Revenues continued low, and the company stunned investors by lowering guidance for the quarter by an additional $500 million. The new CEO, Kate Johnson, repeated the potential for significant enterprise sales increase. However, this will require additional selling, general, and administrative (SG&A) expenditures. The business is also investing to hasten the computerization of its middle market operation and to run off its failing legacy business. Although the present financial crisis certainly lengthens that timescale, we still believe that a judicious sale or split of the consumer company is the key to closing the price-to-value gap. Lumen successfully reduced more than $600 million in debt by exchanging new senior debt for old unsecured debt. We decreased our Lumen holdings during the quarter while continuing to have regular communication with managerial and board members.”
- BGC Partners, Inc. (NASDAQ: BGCP)
Holders of Hedge Funds:31
With a 12% year-to-date gain, BGC Partners, Inc. (NASDAQ: BGCP), a provider of banking services, has shown to be a rewarding stock for investors. Rubric Capital Management, run by David Rosen, has the largest interest in BGC Partners, Inc. (NASDAQ: BGCP) among the 31 hedge funds with investments in the firm, holding a $104 million position.
- Clear Channel Outdoor Holdings, Inc. (NYSE: CCO)
Holders of Hedge Funds:31
Over the previous six months, shares of marketing company Clear Channel Outdoor Holdings, Inc. (NYSE: CCO) have increased by nearly 28%. It was announced in May by Clear Channel Outdoor Holdings, Inc. (NYSE: CCO) that it will sell its operations in Spain and Italy to divisions of the French outdoor marketing company JCDecaux for a total of around 75.1 million euros. The action was taken after activist hedge fund Legion Partners allegedly pressured Clear Channel Outdoor Holdings, Inc. (NYSE: CCO) to consider a corporate sale.
- Opendoor Technologies Inc. (NASDAQ: OPEN)
Holders of Hedge Funds:32
The most recent data indicate rising property prices and demand, which is good news for companies like Opendoor Technologies Inc. (NASDAQ: OPEN). 32 hedge funds disclosed having shares of Opendoor Technologies Inc. (NASDAQ: OPEN) as of the final day of the first quarter of 2023 in Insider Monkey’s dataset. Daniel Patrick Gibson’s Sylebra Capital Management, which has a $59 million interest in the firm, is the largest hedge fund shareholder of Opendoor Technologies Inc. (NASDAQ: OPEN).
- Vimeo Inc. (NASDAQ: VMEO)
Holders of Hedge Funds:32
Vimeo, Inc. (NASDAQ: VMEO), a provider of video platforms, outperformed forecasts by $0.14 in the first quarter, earning $0.00 on a GAAP basis. The period’s sales of $103.6 million exceeded projections by $1.5 million. After the first quarter, an aggregate of 32 hedge funds in Inside Monkey’s database of hedge funds held shares in Vimeo, Inc. (NASDAQ: VMEO). Mason Hawkins’ Southeastern Asset Management was the most famous hedge fund investor in Vimeo, Inc. (NASDAQ: VMEO), holding a $24 million position in the business. In its Q4 2022 investor letter, Longleaf Partners Small-Cap Fund stated the following regarding Vimeo, Inc. (NASDAQ: VMEO):
“Oscar Health and Vimeo, Inc. (NASDAQ: VMEO) were unfairly penalized this year along with the majority of tech-related enterprises. Oscar Health is a US health insurance provider and software platform. We arrived too early at both businesses and despite our expectations, our partners have not yet taken offence to the same extent. Vimeo expanded too little compared to Oscar’s excessive growth. Both still possess important differentiating characteristics and the capacity to shape their futures, but we have been reluctant to restore them to their original places because our original thesis has not yet been proven. To encourage proactive efforts to address the value gap, we are working with the leadership teams at both organizations.”
- Payoneer Global Inc. (NASDAQ: PAYO)
Holders of Hedge Funds:37
Hedge funds consider Payoneer Global Inc. (NASDAQ: PAYO) to be among the top penny stocks to purchase. The provider of payment solutions released Q1 results in May. GAAP EPS for the period was $0.02, falling short of expectations by $0.01. The quarter’s revenue increased by 40.2% compared to last year’s period to $192.01 million, exceeding expectations by $6.4 million. In addition, Payoneer Global Inc. (NASDAQ: PAYO) increased its revenue forecast for 2023 from a consensus projection of $803.79 million to a range of $810 million to $820 million. As of the conclusion of the first quarter of 2023, 37 of the hedge funds that Insider Monkey tracks were holding shares of Payoneer Global Inc. (NASDAQ: PAYO).
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