In this article, we will look at the 10 Best Penny Stocks to Buy According to Media.
Penny stocks are those that trade below the price of $5. These stocks represent companies with smaller market capitalization, high risk, and high volatility. Risk-tolerant investors find potential for above-average returns in penny stocks, however, investing in these stocks requires caution and care.
Expected Trends for Small Cap Stocks
On July 17, Chris Retzler, Needham’s small-cap growth portfolio manager, appeared on CNBC where he expressed optimism for the small-cap companies and suggested that we are in a cycle that will prove to be good for many small-cap companies. The Russell 2000 index jumped 3.5% higher on the July 16, hitting the highest levels since January 2022, and was up more than 10% in the previous week. This was one of the biggest rallies investors have seen in the past 4 years.
Retzler believes that small cap stocks have been waiting for a drop in inflation and interest rate cuts. With inflation easing, interest rates are expected to go down as well. He also sees the market broadening, with small companies that have underperformed benefiting from a drop in inflation.
Retzler agrees with Fundstrat’s Tom Lee’s, who sees the Russell 2000 gaining 40% by the end of summer. He believes that the liquidity of small cap companies gives them an edge as it does not take a lot of money to push the stock prices higher, and some expansions by these companies followed by lower interest rates can prove to be good for Russell 2000 companies. We have discussed Tom Lee’s views on how favorable current market conditions are for small-cap companies in 10 Best NASDAQ Penny Stocks To Invest In.
Moreover, Ryan Detrick, who is the Chief Market Strategist at Carson Group also presented his bullish thesis for small and mid-cap companies. He believes that small and mid-cap are going to lead the market in the second half of the year. While addressing the earnings capability of these companies, Detrick said small-cap companies will outperform large-cap companies in 2025 and 2026. As per estimates, S&P 600’s earnings were 4.1% in 2024, whereas S&P 500 earnings were 12.7%. However, moving forward analysts expect S&P 600’s earnings to be at 17.7% in 2025, surpassing estimates of 14.2% for the S&P 500. Detrick believes small-cap stocks now look cheap, economic conditions are favorable, and any interest rate cuts that come along the way will further benefit them.
Now that we’ve discussed what experts think about small caps, let’s now look at the 10 best penny stocks to buy according to financial media.
Our Methodology
To compile our list of the best penny stocks to buy according to media, we aggregated 50 plus penny stocks from financial media websites on the internet. We then selected the top 10 penny stocks that were the most widely held by hedge funds, as of Q1 2024. The list is in ascending order of the number of hedge funds holders in each stock.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Penny Stocks To Buy According to the Media
10. Petco Health and Wellness Company, Inc. (NASDAQ:WOOF)
Number of Hedge Fund Holders: 16
Petco Health and Wellness Company, Inc. (NASDAQ:WOOF) started as a pet product retail business in 1965 and went public in 2021, taking encouragement from the increase in pet ownership during the pandemic. Today, the company operates as a one-stop shop for pets and pet owners offering them veterinary care, grooming, training, telehealth, pet products including food, treats, and toys, and pet health insurance services. The company also operates a mobile clinic called Vetco, that brings veterinary services directly to communities. Petco Health and Wellness Company, Inc. (NASDAQ:WOOF) provides its services through 1,423 pet care centers in the US and Puerto Rico, 131 pet centers in Mexico through joint venture arrangements, and several websites where customers can shop for products online.
The ability of the company to house veterinary clinics and grooming services in stores to become a one-stop shop for pet owners gives Petco Health and Wellness Company, Inc. (NASDAQ:WOOF) a competitive edge over its e-commerce platform competitors. Additionally, its pet food brands including WholeHearted and Reddy, which provide specialized pet products, allow the company to capitalize on the growing pet care market. According to Mordor Intelligence, the US pet care and services market was valued at $12.21 billion in 2024 and is expected to grow at a CAGR of 3.51% to reach $14.51 billion by 2029.
Although the company is not profitable at the moment and reported a revenue of $1.5 billion in Q1 2024, a 2% decrease year over year, the company reported a loss per share of 4 cents, beating analysts’ expectations by 2 cents. Petco Health and Wellness Company, Inc. (NASDAQ:WOOF) has beat earnings estimates for 5 out of the past 8 quarters and management believes they will be generating positive free cash flow during fiscal 2024. Moreover, if we were to look at the company’s annual report for 2023, its revenue increased 3.6% and the comparable sales increased 1.8% year over year, indicating its ability to capitalize on the growing pet care and services market of the US.
The company is also prioritizing strategic partnerships to increase its reach and market share of pet goods and services. In August 2023, the company expanded its partnership with DoorDash to make Petco’s products available nationally through the DoorDash marketplace. In addition, Petco has also upgraded its website with features such as streamlined pet profiles for all wellness needs for your pet. The new feature helps customers stay up to date for their pet’s needs including vaccinations, grooming appointments and much more.
WOOF is one of the best penny stocks to buy according to media. Not only does the company operate in a growing industry which is expected to reach $ 14 billion by 2029, but it also has a competitive edge of being a one-stop-shop for pet owners. Management is positive about its cost-cutting transformation and believes that it is on track to unlock $150 million in cost savings by 2025. The company was also able to reduce its capital expenditures by 47% year over year during the first quarter and are on track to achieve positive free cash flow during the current year. The stock was held by 16 hedge funds in Q1 2024, with total stakes worth $39.795 million.
9. SmartRent, Inc (NYSE:SMRT)
Number of Hedge Fund Holders: 17
SmartRent, Inc. (NYSE:SMRT) is a real estate technology company that specializes in the development of home automation through hardware and cloud-based software solutions. The technology solutions designed by the company provide a single point of control for all devices within a property. For instance, land and business owners can control thermostats, doorbells, security cameras, Wi-Fi and other installed devices on their property through a single interface. The package provided by the company includes training, installation and post-installation support services.
SmartRent, Inc (NYSE:SMRT) is one of hedge funds’ favorite penny stocks as it was held by 17 hedge funds in Q1 2024 with total stakes amounting to $91.528 million. What sets SmartRent apart from its competitors is its focus on the integrated, brand-agnostic approach to automation technologies, meaning that the hardware and SaaS solutions provided by SmartRent are designed to work seamlessly with a range of third-party smart devices rather than relying solely on proprietary devices. This flexibility allows the company to increase its market share in terms of the customers it serves. Moreover, its SaaS segment has also shown remarkable growth in the first quarter, growing 32% year over year on the back of more deployed units and cross-selling.
The financial situation of the company has also improved considerably as of the first quarter of 2024. The company’s revenue grew by 13.66% year over year to reach $50.5 million in the first quarter. Growth in the revenue was mainly attributed to its strong recurring revenue from SaaS products, which contributed $12 million to the revenue during the same time. The company also posted a positive adjusted EBITDA for the second consecutive quarter, amounting to almost $400,000 and surpassing the company’s guidance. Moreover, the full-year guidance remains unchanged at $260 million to $290 million in revenue.
Should you invest in SMRT? Here’s the conclusion:
For risk-tolerant investors, SMRT can be a good stock to invest in given its potential for growth and its improving financials. Management not only expects to reach profitability during 2024, but it has also been expanding its SaaS operations strategically. The company deployed around 750,000 units during the first quarter, a 24% year-over-year increase. With $205 million in cash and cash equivalents as of Q1 2024, SmartRent, Inc (NYSE:SMRT) has room for growth in the future.
8. NIO, Inc. (NYSE:NIO)
Number of Hedge Fund Holders: 19
NIO, Inc. (NYSE:NIO) is a leading automotive company that focuses on designing, manufacturing, and selling smart electric vehicles in China. The company’s vehicle line-up is not only restricted to sedans but also includes 5 and 6-seater SUVs. In addition to designing and selling smart electric vehicles, NIO, Inc (NYSE:NIO) also provides home, mobile, and public charging facilities, maintenance and repair, insurance, and used vehicle services.
What sets NIO, Inc. apart from its competitors is the company’s ability to address the major pain points of electric vehicle customers i.e. battery maintenance and swapping services. Through its NIO Power operations, the company offers a 3-minute battery swap for a fully charged battery without even the need for the driver to get out of the car. The company has been expanding its battery-swapping operations through several strategic partnerships. NIO, Inc. has partnered with Chinese automakers including Changan, Geely, Cherry, and JAC to develop and expand its battery swap network in China. As a result of these partnerships, the company has installed more than 2,300 swapping stations across the country. Although only a small proportion of these stations are breaking even currently, management believes that this investment is at least 2 years ahead of market demand and will reap benefits once demand starts to pick up.
The company’s May 2024 deliveries went up by 233.8% year-over-year, consisting of 12,164 premium smart electric SUVs and 8,380 premium smart electric sedans. However, revenue fell 7.2% year over year during the first quarter of 2024, mainly due to lower average selling prices and a seasonal decrease in delivery volumes. On the bright side, the other sales segment of the business which includes sales of parts, after-sale service and professional power stations was up by 5.2% year over year to RMB 1.5 billion ($206.2 million), indicating a strong customer base.
Should you invest in NIO, Inc. (NYSE:NIO)? Here’s the takeaway: Not only is the company expanding its competitive edge of battery swapping facilities through strategic partnerships but it has increased its deliveries substantially over the past year. The company also quoted improved vehicle margins of 9.2%, up from 5.1% during the first quarter of 2023. NIO, Inc. (NYSE:NIO) has potential to run, analysts’ 1-year average price target points to a 39% upside from current levels.
The stock was held by 19 hedge funds during Q1 2024 with total stakes worth $79.322 million.