15 Best Penny Stocks To Buy Now
In this article, we will take a look at the 15 best penny stocks to buy now. To see more such companies, go directly to 5 Best Penny Stocks To Buy Now.
Investing in penny stocks is risky but if executed correctly gives investors huge opportunities and exposure to multi-baggers of the future. In his book “Stocks for the Long Run,” Jeremy Siegel talks in detail about the performance of small and large-cap stocks. He quotes a study conducted in 1981 by Rolf Banz, a graduate student at the University of Chicago. Banz investigated the returns of small and large-cap stocks using a database that was later published by the Center for Research in Security Prices (CRSP). According to the Siegel, Banz found the small-cap stocks “systematically outperformed large stocks, even after adjusting for risk as defined within the framework of the capital asset pricing model.”
However, Siegel noted that while small-cap stocks have outperformed large-cap stocks, the returns of small companies have “waxed and waned” over the past 86 years.
“Small stocks, measured by the bottom quintile of market capitalization, recovered smartly from their beating during the Great Depression, but their performance only matched large stocks from 1926 to 1960. Even by the end of 1974, the average annual compound return on small stocks exceeded that of large stocks by only about 0.5 percent per year, not nearly enough to compensate most investors for their extra risk and trading costs. But between 1975 and the end of 1983, small stocks exploded. During these years, small stocks averaged a 35.3 percent compound annual return, more than double the 15.7 percent return on large stocks. Cumulative returns in small stocks during these nine years exceeded 1,400 percent.”
All the books and investment advice and so-called "secrets" of investing in the stock market eventually boil down to making the right selection by sticking to time-tested investing principles and having a long holding period. In this regarding Siegel’s book mentioned an interesting study that shows the importance of stock investing and the role holding periods play in increasing stock returns. Siegel says that following the Great Crash media and analysts were of the view that there’s no significant benefit in investing in the stock market. In response to these notions several academic studies were conducted that proved the importance and relevance of stock investing. For example, following the conclusion of World War II, two professors from the University of Michigan, Wilford J. Eiteman and Frank P. Smith, published a study of the investment returns of actively traded industrial companies. They found that regularly investing in select 92 stocks “without any regard to the stock market cycle (a strategy called dollar cost averaging), stock investors earned returns of 12.2 percent per year, far exceeding those in fixed-income investments.” But they did not stop the study here. After 12 years they repeated the study using the same 92 stocks and found that the returns had exceeded those recorded in the previous study.
Siegel then mentions an era which has a striking resemblance to the events of today. The 1970s, according to Siegel, “were not good years for either stocks or the economy” due to rising inflation, high oil prices and negative real stock returns. However, as the Federal Reserve started to raise interest rates to fight inflation and eventually won its battle against rising prices, market began to get back to normal and eventually entered the bull market in 1982 that would last for several years to come. After the Fed’s successful fight against inflation, the stock market posted sterling returns and investors rejoiced increasing gains.
Siegel says that some analysts were skeptical that the bull market that started in 1982 would last long, but many were hopeful. Eventually the bull market stayed for longer than expected and investors enjoyed huge returns in that period.
Will the Federal Reserve win its current battle against inflation and would the stock market enter the bull market that could last for a decade or more? Only time would tell.
Photo by Kaleidico on Unsplash
Our Methodology
For this article, we scanned Insider Monkey’s database of 943 hedge funds and picked 15 penny stocks (those trading under $5 as of July 8) with the highest number of hedge fund investors.
Best Penny Stocks To Buy Now
15. Altice USA, Inc. (NYSE:ATUS)
Number of Hedge Fund Holders: 27
Telecom and cable company Altice USA, Inc. (NYSE:ATUS) ranks 15th in our list of the best penny stocks to buy according to hedge funds. Israeli billionaire Patrick Drahi owns a majority stake in Altice USA, Inc. (NYSE:ATUS). During the first quarter, Altice USA, Inc. (NYSE:ATUS) posted an EPS of $0.06 missing estimates by $0.07. Revenue in the period fell 5.4% year over year to $2.29 billion, surpassing estimates by $30 million.
The biggest hedge fund stakeholder of Altice USA, Inc. (NYSE:ATUS) during this period was Cliff Asness’s AQR Capital which owns a $51 million stake in the company,
14. Hanesbrands Inc. (NYSE:HBI)
Number of Hedge Fund Holders: 27
Clothing company Hanesbrands Inc. (NYSE:HBI) in May posted Q1 results according to which the company posted adjusted EPS of -$0.06 beating estimates by $0.01. Revenue in the quarter fell about 12% year over year to $1.39 billion, surpassing estimates by $30 million. Insider Monkey’s database of 943 hedge funds shows that 27 funds had stakes in Hanesbrands Inc. (NYSE:HBI). The most notable hedge fund stakeholder of Hanesbrands Inc. (NYSE:HBI) was Andrew Wellington and Jeff Keswin’s Lyrical Asset Management which owns a $49 million stake in the company.
Here is what Chartwell Investment Partners has to say about Hanesbrands Inc. (NYSE:HBI) in its Q2 2022 investor letter:
“The three worst-performing stocks in the Dividend Equity accounts includes Hanesbrands (NYSE:HBI, 1.1%), down 30.1%. Hanesbrands’ management is executing well, but the challenging environment includes supply-chain headwinds, higher input costs and some post-Covid inventory build-up.”
13. Infinera Corp. (NASDAQ:INFN)
Number of Hedge Fund Holders: 27
Network connectivity solutions company Infinera Corp. (NASDAQ:INFN) ranks 13th in our list of the best penny stocks to buy now. Insider Monkey’s database of 943 hedge funds shows that 27 funds had stakes in Infinera Corp. (NASDAQ:INFN) as of the end of the first quarter. The most notable hedge fund stakeholder of Infinera Corp. (NASDAQ:INFN) was Howard Marks’ Oaktree Capital Management which owns a $195 million stake in the company.
12. iHeartMedia, Inc. (NASDAQ:IHRT)
Number of Hedge Fund Holders: 27
Audio company iHeartMedia, Inc. (NASDAQ:IHRT) shares have gained about 6% over the past 30 days as of July 8. iHeartMedia, Inc. (NASDAQ:IHRT) is one of the biggest radio companies in the US. A total of 27 hedge funds tracked by Insider Monkey had stakes in iHeartMedia, Inc. (NASDAQ:IHRT) as of the end of the first quarter.
Palm Harbour Capital made the following comment about iHeartMedia, Inc. (NASDAQ:IHRT) in its Q1 2023 investor letter:
“The second largest detractor was iHeartMedia, Inc. (NASDAQ:IHRT) (-37.5% -58 bps), the American radio and podcasting company. The company suffered two self-inflicted wounds, which will impact the first quarter. The first, which the company flagged as temporary was a change in sales incentives. Apparently, they changed their sales force behaviour to sell more lower margin products at the expense of higher margin products (where management believed it should have been incremental volumes of lower margin not a switch). The second was their guidance for interest rate expense. The company did not hedge their floating term loan and is suffering from the higher interest rate environment, something you do not want to see in a highly levered company. Their debt maturities are years out, but every quarter that passes where free cashflow is low will make refinancing more difficult. Up until now, the company has been executing well, and their podcast business is growing strongly. Management has also been buying shares and we believe their major shareholder, if allowed by the Federal Trade Commission, is potentially interested in owning the business.”
11. Mersana Therapeutics, Inc. (NASDAQ:MRSN)
Number of Hedge Fund Holders: 28
Mersana Therapeutics, Inc. (NASDAQ:MRSN) lost a lot of value in June after FDA issued a partial clinical hold stopping the enrollment in its UP-NEXT and UPGRADE-A trials for lead asset UpRi in platinum-sensitive ovarian cancer.
As of the end of the first quarter of 2023 28 hedge funds tracked by Insider Monkey had stakes in Mersana Therapeutics, Inc. (NASDAQ:MRSN). The biggest stakeholder of Mersana Therapeutics, Inc. (NASDAQ:MRSN) was Samuel Isaly’s OrbiMed Advisors which owns a $37 million stake in the company.
10. Nuvation Bio Inc. (NYSE:NUVB)
Number of Hedge Fund Holders: 29
California-based Nuvation Bio Inc. (NYSE:NUVB) focuses on cancer treatments. Nuvation Bio Inc. (NYSE:NUVB) is owned by 29 hedge funds in Insider Monkey’s database. The most notable of these hedge funds is David Abrams’ Abrams Capital which owns 38 million shares of Nuvation Bio Inc. (NYSE:NUVB).
9. Marqeta, Inc. (NASDAQ:MQ)
Number of Hedge Fund Holders: 30
Cards and payments company Marqeta, Inc. (NASDAQ:MQ) is trading at around $4.99 as of July 8. In May, Marqeta, Inc. (NASDAQ:MQ) posted its Q1 results. GAAP EPS of the company in the quarter came in at -$0.13 missing estimates by $0.03. Revenue in the period increased by about 31% year over year to $217.34 million, surpassing estimates by $5.55 million.
As of the end of the first quarter of 2023, HMI Capital of Mick Hellman owns a $91 million stake in Marqeta, Inc. (NASDAQ:MQ), according to Insider Monkey’s database.
8. Sabre Corporation (NASDAQ:SABR)
Number of Hedge Fund Holders: 30
Texas-based travel technology company Sabre Corporation (NASDAQ:SABR) has lost about 50% in value over the past one year. The stock still has a decent hedge fund sentiment as 30 hedge funds tracked by Insider Monkey were bullish on this penny stock as of the end of the first quarter.
Sabre Corporation (NASDAQ:SABR) recently announced to buy hospitality e-commerce provider UK-based Techsembly. Financial details of the deal were not disclosed.
The biggest hedge fund stakeholder of Sabre Corporation (NASDAQ:SABR) as of the end of the first quarter was Fundsmith LLP of Terry Smith which owns a $97 million stake in the company.
7. Brookdale Senior Living, Inc. (NYSE:BKD)
Number of Hedge Fund Holders: 30
Tennessee-based retirement homes company Brookdale Senior Living, Inc. (NYSE:BKD) in May posted strong Q1 results. GAAP EPS in the period came in at -$0.20 beating estimates by $0.09. Revenue in the quarter jumped 11.1% year over year.
6. Lumen Technologies, Inc. (NYSE:LUMN)
Number of Hedge Fund Holders: 31
Communications and network services company Lumen Technologies, Inc. (NYSE:LUMN) ranks 6th in our list of the best penny stocks to buy now according to hedge funds. Insider Monkey’s database of 943 hedge funds shows that 31 funds had stakes in Lumen Technologies, Inc. (NYSE:LUMN) as of the end of the first quarter of 2023. Lumen Technologies, Inc. (NYSE:LUMN) is trading at $2.19 as of July 8.
Longleaf Partners Fund made the following comment about Lumen Technologies, Inc. (NYSE:LUMN) in its Q1 2023 investor letter:
“Lumen Technologies, Inc. (NYSE:LUMN) – Global fiber company Lumen was the top detractor in the quarter on the back of disappointing guidance. Revenues remained weak, and the company surprised negatively by cutting guidance by an additional $500 million in the quarter. New CEO Kate Johnson reiterated the potential for strong enterprise sales improvement, but this will require further selling, general, and administrative (SG&A) investment. Additionally, the company is spending to accelerate the automation of its middle market business, while also running off its declining legacy business. We still believe the key to unlocking the price-to-value gap is a strategic sale or separation of the consumer business, but the current financial pressure likely extends that timeline. To the positive, Lumen retired over $600 million debt in an exchange of new senior debt to retire existing unsecured debt. We reduced our Lumen position in the quarter and remain actively engaged with management and the board.”
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Disclosure: None. 15 Best Penny Stocks To Buy Now is originally published on Insider Monkey.
