15 Penny Stocks with Biggest Upside
In this article, we will take a look at the 15 penny stocks with biggest upside. To see more such companies, go directly to 5 Penny Stocks with Biggest Upside.
Everyone wants to find stocks with upside. But the stock market turmoil that started back in 2022 amid rising inflation and interest rate hikes has shown the importance of managing risks and investing wisely in stocks for the long term. Value investors like Warren Buffett and Howard Marks time and again talk about the concept of downside protection, emphasizing that one of the biggest goals during investing should be not to lose money. A 2016 report entitled “The Upside of Less Downside” by Alliance Bernstein talks about a similar concept. The report said that at the time that the fear of losing money is rapidly increasing worldwide amid changing demographics. As global population begins to age, people are hesitant to take risks and put large amounts of money in equities because they don’t want to lose their safety nets during retirement. The report then talks about a 90/70 upside/downside portfolio and says:
“Imagine a hypothetical global stock portfolio that captured 90% of every market rally and fell only 70% as much as the market during every sell-off. What would the long-term returns of this portfolio look like? You’d be forgiven if you thought it would underperform. It wouldn’t.”
"Smoother Ride" Portfolio
The report calls the portfolio of upside/downside protection as “smoother ride” portfolio. The report analyzes a hypothetical portfolio based on this strategy and says that the portfolio would build capital of nearly US$13,000 over the period examined. The examined period spanned over 40 years through the end of June.
The report however points out some caveats and challenges of having a 90%/70% upside/downside spread approach. First, it’s not easy at all to stick to such a portfolio especially when markets are rising. Investing in low-risk stocks means you are missing out on stock returns when the overall market is in euphoria. But the true mettle of this portfolio is visible during tough times, when markets are down and the downside protected, low risk portfolio is outperforming the market. The report also said that finding low-risk stocks is not easy. While Alliance Bernstein said it believes in investing in resilient companies with strong business models and attractive prices, the firm acknowledged that it’s easier said than done. The report also mentions some data on why investing in low-risk stocks makes sense.
“Research going back to the early 1970s shows that lower-risk stocks, as measured by beta, performed much better than the CAPM would predict. By focusing on absolute risk (a.k.a. the Sharpe ratio), the long-term returns of strategies with less volatile stocks have matched or outperformed the market and more aggressive equity strategies over four decades. Based on Sharpe ratios, lower-risk stocks have delivered significantly more return per unit of risk.”
How to Find Resilient Companies to Invest In
The report also gives examples of resilient and strong businesses. It talks about companies like Alphabet and Amadeus. It also talks about software companies that provide tools and systems for mission critical applications. Once these software are installed in companies' systems it becomes difficult for the firms to make a shift. The report emphasizes the importance of disruption and evaluating “network effect” while finding strong and resilient businesses.
Pixabay/Public Domain
Our Methodology
For this article, we consulted over 10 mainstream financial websites to see which penny stocks they believe have the biggest upside. We picked only those penny stocks that are repeatedly talked about in the mainstream financial media as companies having long-term growth potential and upside. The list is ranked in ascending order of the number of hedge fund investors. We gauged hedge fund sentiment using Insider Monkey’s database of 910 hedge funds and their holdings.
Penny Stocks with Biggest Upside According to Financial News Media
15. Bit Digital, Inc. (NASDAQ:BTBT)
Number of Hedge Fund Holders: 4
Bitcoin mining company Bit Digital, Inc. (NASDAQ:BTBT) ranks 15th in our list of penny stocks with upside potential. As of the end of the second quarter of 2023, 4 hedge funds tracked by Insider Monkey had stakes in Bit Digital, Inc. (NASDAQ:BTBT). Bit Digital, Inc. (NASDAQ:BTBT) produced 139 bitcoins (BTC-USD) in August, which was a 5% increase from July,
14. Canaan Inc. (NASDAQ:CAN)
Number of Hedge Fund Holders: 4
Chinese hardware company Canaan Inc. (NASDAQ:CAN) is one of the notable penny stocks with upside potential. Last month Canaan Inc. (NASDAQ:CAN) posted second quarter results. GAAP EPS in the quarter came in at -$0.65 missing estimates by $0.51. Revenue in the quarter came in at $73.9 million, beating estimates by $3.03 million. Bitcoin mining revenues jumped 43.3% on a QoQ basis.
As of the end of the second quarter of 2023, 4 hedge funds in Insider Monkey’s database of hedge funds had stakes in Canaan Inc. (NASDAQ:CAN).
13. Paysign, Inc. (NASDAQ:PAYS)
Number of Hedge Fund Holders: 6
Prepaid card products company Paysign, Inc. (NASDAQ:PAYS) ranks 13th in our list of the penny stocks with the biggest upside. Last month Paysign, Inc. (NASDAQ:PAYS) posted second quarter results. Revenue of the company jumped about 28% year over year to $11 million.
A total of 6 hedge funds in Insider Monkey’s database reported owning stakes in Paysign, Inc. (NASDAQ:PAYS). The biggest stakeholder of Paysign, Inc. (NASDAQ:PAYS) during this period was Citadel Investment Group of Ken Griffin which had a $595,632 stake in Paysign, Inc. (NASDAQ:PAYS).
12. Smith Micro Software, Inc. (NASDAQ:SMSI)
Number of Hedge Fund Holders: 6
Smith Micro Software, Inc. (NASDAQ:SMSI) is an enterprise and consumer software company. This penny stock has upside potential, according to credible financial websites and analysts surveyed by Insider Monkey. Last month Smith Micro Software, Inc. (NASDAQ:SMSI) posted second quarter results. Adjusted EPS in the quarter came in at -$0.01, meeting estimates. Revenue in the quarter fell 18.4% year over year to $10.34 million, missing estimates by $0.32 million.
11. Science 37 Holdings, Inc. (NASDAQ:SNCE)
Number of Hedge Fund Holders: 8
Clinical research company Science 37 Holdings, Inc. (NASDAQ:SNCE) ranks 11th in our list of penny stocks with the biggest upside according to financial media.
Science 37 Holdings, Inc. (NASDAQ:SNCE)’s management talked about its guidance and future plans in the latest earnings call and said:
"And we expect our fourth quarter to be sequentially higher on a revenue basis based on the timing of our new study starts and project ramps. While we will hold off providing 2024 guidance until a later date, given our current momentum and facility, we expect solid continuing revenue growth in 2024. Turning to our gross margin guidance we indicated during our last quarterly earnings call that we expected adjusted gross margins to improve from the low 20% range in the first quarter of 2023 to the low to mid-30% range in the second half of 2023. We achieved the top end of that range at 36% in the second quarter, and we expect to stay in the mid-30% range for the remainder of this year. On the first quarter earnings call, we also indicated we expected to see a sequential reduction in SG&A and a more dramatic reduction in cash burn exiting the fourth quarter with a cash burn of less than $10 million.
As David noted, we are tracking ahead of this from an expectation standpoint and now anticipate our cash burn in the third quarter to be less than $10 million, 1 quarter ahead of schedule. We expect our cash burn for the full second half of 2023 to be less than $15 million, thus exiting 2023, with more than $50 million of cash on hand. As we progress into 2024, we expect our investments in technology, further increases in utilization and continued process improvements to help us expand quarterly gross margins to 40% or greater delivering a higher gross profit on a relatively fixed level of SG&A, and thereby ending the fourth quarter of 2024 with positive adjusted EBITDA and cash flow, exiting that year with ample cash on hand, without needing to have raised additional capital."
Read the full earnings call transcript here.
As of the end of the second quarter of 2023, 8 hedge funds in Insider Monkey’s database of hedge funds reported owning stakes in Science 37 Holdings, Inc. (NASDAQ:SNCE). The biggest
10. CorMedix Inc. (NYSE:CRMD)
Number of Hedge Fund Holders: 9
New Jersey-based biopharmaceutical company CorMedix Inc. (NYSE:CRMD) ranks 10th in our list of the penny stocks with upside potential according to credible financial websites.
Insider Monkey’s database of 910 hedge funds shows that 9 funds reported owning stakes in CorMedix Inc. (NYSE:CRMD). The biggest hedge fund stakeholder of CorMedix Inc. (NYSE:CRMD) was Paul Singer’s Elliott Management which had a $6.15 million stake in the company as of the end of June.
9. Savara, Inc. (NASDAQ:SVRA)
Number of Hedge Fund Holders: 10
Texas-based Savara, Inc. (NASDAQ:SVRA) works on treatments for respiratory diseases. As of the end of the second quarter of 2023, 10 hedge funds tracked by Insider Monkey had stakes in Savara, Inc. (NASDAQ:SVRA).
8. VAALCO Energy, Inc. (NYSE:EGY)
Number of Hedge Fund Holders: 11
Insider Monkey’s database of 910 hedge funds shows that 11 hedge funds had stakes in VAALCO Energy, Inc. (NYSE:EGY). The biggest stakeholder of VAALCO Energy, Inc. (NYSE:EGY) was George Baxter’s Sabrepoint Capital which owns a $10 million stake in the company.
7. Ardelyx Inc. (NASDAQ:ARDX)
Number of Hedge Fund Holders: 14
Ardelyx Inc. (NASDAQ:ARDX) shares have gained about 71% year to date through September 11.
A total of 14 hedge funds in Insider Monkey’s database of hedge funds had stakes in Ardelyx Inc. (NASDAQ:ARDX). The most significant stake in Ardelyx Inc. (NASDAQ:ARDX) was owned by
6. Solid Power, Inc. (NASDAQ:SLDP)
Number of Hedge Fund Holders: 16
Credible financial websites and analysts we surveyed believe Solid Power, Inc. (NASDAQ:SLDP) is a penny stock that has upside potential.
As of the end of the June quarter, 16 hedge funds in Insider Monkey’s database of hedge funds had stakes in Solid Power, Inc. (NASDAQ:SLDP). The biggest hedge fund stakeholder of Solid Power, Inc. (NASDAQ:SLDP) was
Click to continue reading and see 5 Penny Stocks with Biggest Upside.
Suggested articles:
Disclosure: None. 15 Penny Stocks with Biggest Upside is originally published on Insider Monkey.
