In this article, we will discuss the 10 Best Value Penny Stocks to Invest in Now 

The US market has been resilient over the past years despite higher interest rates, however, recent reports showed a sharp decline in the growth of the U.S. job market. According to reports from the Labor Department, the economy added just 114,000 jobs in July compared to 179,000 in June. This marks a sharp drop in employment generation from 482,000 in January 2023, raising the unemployment rate to 4.3% in July 2024, the highest level in nearly 3 years. The significant slowdown in hiring can potentially make the economy vulnerable to recession and therefore leads to an ease in monetary policy guaranteeing an interest rate cut in September. Economists are calling for a 50 basis point reduction in borrowing costs.

With the current uncertainty in the market and delay in rate cuts, investors are worried about a possible recession. The question is should investors pick penny stocks to diversify their portfolios? Penny stocks, though cheap, are without any doubt risky investments with a high rate of volatility and are even more sensitive to monetary policy changes. A higher interest rate negatively affects stocks’ earnings performance because these stocks are mostly running on debt and, therefore, can benefit from a possible rate cut in September 2024.

Moreover, these stocks are prone to speculative trading and scams, and therefore, are suitable for investors that can do diligent research and have a high tolerance for risk. However, not all stocks are the same and investors may yet benefit from long-term investments in high quality penny stocks with strong fundamentals. Value investing is an investment strategy focused on finding stocks that are being traded for less than their intrinsic or true value. In other words, value stocks are undervalued by the market and can be rewarding long-term investments once the market realizes their true value.

Investing in small-cap penny stocks is no doubt risky owing to their high volatility and low liquidity, however, using the value investing strategy one can generate long-term profits from investing in these stocks.

Investing in Small-cap Stocks in 2024

Most penny stocks have small market caps. Large-cap stocks generally dominate the market outperforming small-caps, and last year was no different as the large-cap stocks beat small-cap stocks by an average of 9.6 percentage points. Moreover, in 9 out of the last 10 years, large caps outperformed penny stocks, however, small caps showed competitiveness back in the days of the internet boom, when the dot-com bubble was breaking in the period 1999 to 2004.

There is hope for a small-cap rebound in 2024, and that is because the historical trends tell us that after nearly a decade of underperformance, the tables turn and small-caps, which include many penny stocks, can rebound. Moreover, in the fourth quarter of 2023, penny stocks showed a recovery in growth and this could set the stage for a renaissance for the small-caps in 2024.

In a recent interview with CNBC, Fundstrat’s head of research, Tom Lee expressed optimism about the potential rise of small-cap stocks in 2024 owing to the softening of inflation in June. Tom Lee further discussed the performance of the small-cap stocks that rose 30% in 8 weeks from October to December 2023. Lee believes that the current rally can be even more substantial compared to last year as it’s driven by factors like larger institutional short positions, small-cap even more oversold, and valuations like median P/E at 10 times 2025 earnings. In addition, June’s Consumer Price Index has declined to its lowest level in the last 3 years, this can lead to the feds cutting the interest rate expected in September 2024. According to the estimates of Tom Lee, in case the interest rate is cut down, the small caps can gain as much as 50% in 2024.

Secondly, presidential elections have been historically in favor of these stocks, research shows that seven out of eleven election times, the small-cap outperformed by an average of 2.68 percentage points.

The recent consumer price index data released in June 2024, suggests a deceleration in inflation, the prices are getting stabilized particularly in core consumer segments such as shelter and food. According to the latest Inflation report, the Personal Consumption Expenditure index (PCE) rose by 0.1% from April matching the Wall Street expectations. Furthermore, the report shows a growth of 0.5% in personal income in the U.S. which is up by $114.1 billion. This potential relief to consumers can stabilize the US market and might influence the Federal Reserve’s Monetary policy decisions in favor of small-cap by cutting interest rates as expected by the end of 2024.

Methodology:

To compile this list of the 10 best-value penny stocks to invest in, we used a screener to narrow down penny stocks trading under $5 on the basis of relatively lower forward p/e ratios compared to their respective industry averages. We further screened these stocks by using metrics like institutional ownership of greater than 40% and ensured that the companies had positive upsides based on analysts’ consensus.

After shortlisting the stocks based on the above-mentioned value metrics, we ranked those stocks based on hedge fund sentiment towards each stock. To rank the penny stocks, we assessed Insider Monkey’s database of hedge fund sentiment of 920 elite hedge funds and their holdings tracked at the end of the first quarter of 2024.

Why are we interested in the stocks that hedge funds pile into? 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. Profire Energy, Inc. (NASDAQ: PFIE)

Number of Hedge Fund Holders: 7

Profire Energy, Inc. (NASDAQ: PFIE) is a technology company that is involved in the engineering and design of burner and combustion management systems. These systems manage and monitor the burners used in the oil and gas industry. The company primarily serves to enhance the efficiency, safety, and reliability of industrial combustion appliances in the upstream, midstream, and downstream transmission segments of the oil and gas industry.

President Biden’s administration announced a pause on pending and future permits for LNG exports in January 2024. The decision slowed down the oil industry capital expenditures to some degree, and may prove to be a headwind for traditional energy stocks.

However, LNG will continue to play a key role in the long-term solution for global energy. The demand for LPG and methane will grow by 1.9% annually in the 2022 to 2028 period, a forecast by the International Energy Agency (IEA).

Profire Energy, Inc. (NASDAQ: PFIE) has strong fundamentals as evident from the trailing P/E of 8.42 in contrast to the industry’s average of 20.47 which could mean the stock is undervalued compared to the overall industry, and we think it is not a value trap since the company has been growing its revenue for the past three years at an annualized rate of 5.42% and the EPS has also been improving for the past four years.

Moreover, analysts have estimated a forward P/E of 10.42 which means that the earnings per share are likely to improve for the current fiscal year. Profire Energy reported a Non-GAAP earnings per share of $0.03 which is in line with the expected EPS in Q1 2024.

The Q3 of 2023 was the second-best quarter in the company’s 21-year earnings history, the firm generated a record-breaking revenue of $14.8 million compared to $12.8 million in the prior year.

The stock was trading at an average price of around $1.3 in July which increased to $2.8 by the end of August and reached around $3 by the end of September 2023, roughly an upside of 130% from the initial price. This drastic price increase was due to a significant increase of 28% in oil prices globally, the oil prices were in the range of $70 to $80/barrel all year but reached $90/barrel in the third quarter of 2023 the highest price since mid-November 2022.

The surge in oil prices was attributed to the increase in demand for oil, a positive shift in the macroeconomic sentiment due to an ease in inflation, and most importantly OPEC’s announcement of production cuts. Moreover, the voluntary export cuts of Saudi Arabia and Russia amid increased demand for oil increased the price of oil products globally.

According to the U.S. Energy Information Administration energy outlook report of 2023, the projection suggests that Energy Vehicles (EVs) will represent just one out of every 5 light vehicles sold by 2035 through 2050 under a situation if fuel prices reach 190$ a barrel. The adoption of clean energy as a means of transportation faces challenges, as consumers are hesitant over the hefty pricing of EVs, a lack of enough charging stations, and range limitations.

Moreover, the charging stations need electricity made primarily out of coal and natural gas. Therefore, an increase in demand for electricity will likely increase the demand for fossil fuels and subsequently, the demand for combustion management products, and companies like Profire may benefit and grow further.

On May 22, 2024, Profire Energy, Inc. (NASDAQ: PFIE) announced the approval of its share buyback program. Under this program, the company can repurchase up to $2 million worth of its common stock till June 30, 2025. Repurchases will be under management’s supervision keeping in view the interest of the company’s stakeholders. This buyback program will increase earnings per share by cutting down the share count.

According to Insider Monkey’s database, 7 hedge funds held stakes in Profire Energy, Inc. (NASDAQ: PFIE) and Royce and Associates held the biggest stake with around 2 million shares worth $3.7 million.

9. Gilat Satellite Network Limited (NASDAQ: GILT)

Number of Hedge Fund Holders: 7

Gilat Satellite Network Ltd. (NASDAQ: GILT) is a technology company based in Israel that provides satellite-based broadband communication solutions globally. The company through its expertise in telecommunication technology manufacturers and market satellite systems for global communication. Gilat operates in three core segments: Network Infrastructure and services, Satellite Networks, and Integrated Solutions.

The company’s portfolio includes a diverse set of platforms to deliver high-value solutions for multiple orbit constellations with very high throughput satellites (VHTS) and software-defined satellites (SDS).

Moreover, the company offers a cloud-based platform and high-performance satellite terminals; high-performance Satellite On-the-Move (SOTM) antennas; highly efficient, high-power Solid State Power Amplifiers (SSPA) and Block Upconverters (BUC). In addition, it includes integrated ground systems for commercial and defense, field services, network management software, and cybersecurity services.

Gilat Satellite Network Ltd. (NASDAQ: GILT) in its Q1 2024 financial highlights, reported a revenue of $76.1 million up by 29% YoY compared to $59 million in Q1 2023. Moreover, the company’s Non-GAAP net income of $6 million and EPS of $0.11 had a significant growth compared to $3.8 million net income and EPS of $0.07 in the same quarter the previous year.

The revenue growth was driven by a solid sales growth of two key segments; Satellite Networks and the Network Infrastructure and Services segment. In addition, the company acquired a defense communication business called Datapath Inc. in November last year. The company’s acquisition of Datapath has contributed to the quarter’s revenue growth by opening up orders from the defense sector.

Gilat is a good value stock to invest in and has a trailing P/E of 11.02 compared to the communication equipment sector’s average P/E of 36.16. That said, Gilat has struggled with various challenges over the past years that affected its share price. In 2015 and 2018, the company signed contracts with PRONATEL, a part of Peru’s Ministry of Transport and Communications to establish a regional communication network in Peru, the sum contractual value was $549 million. However, the COVID-19 outbreak considerably affected the company’s operations due to travel restrictions and supply-chain disruptions, and according to estimates, the project was delayed by 14 to 16 years.

The company received $53.6 million in settlement from a merger dispute with Comtech in the year 2020. By the end of the year 2020, the company generated a net profit of $35.1 million, however, excluding the amount received from Comtech, the company would have incurred a net loss of $18.5 million. Gilat gradually recovered from the effects of the pandemic in 2021.

In 2022, Gilat launched the Sky Edge IV a high-power and high-capacity satellite, a multi-orbit and multi-service platform that aided in a 12% growth in revenue compared to the previous year.

Moreover, in 2023 the company launched Endurance, a new line of high-availability solid-state power amplifier solutions. In addition, the acquisition of Datapath, an American company that provided satellite communication solutions to the U.S. Department of Defense proved to be a cornerstone and opened new avenues of growth derived from the defense sector. In fiscal year 2023, the company reported a revenue of $266.1 million, up 11% compared to $239.8 million in 2022.

In a recent development, Gillat secured $14 million worth of orders related to its IFC segment (In-flight connectivity products and solutions). These orders demonstrate the company’s strong position in the growing IFC market for commercial and business aviation.

As of the first quarter of 2024, the company has a total asset value of $426.07 million and total liabilities of 145.25 million. According to Insider Monkey’s database, 7 hedge funds held stakes in the Gilat Satellite Network Ltd. (NASDAQ: GILT). ARK Investment Management is the largest stakeholder with 358,750 shares worth approximately $1.94 million.

8. Manitrex International, Inc. (NASDAQ: MNTX)

Number of Hedge Fund Holders: 8

Manitrex International, Inc. (NASDAQ: MNTX) is a firm related to the Farm and Heavy Construction Machinery industry that manufactures heavy-lifting machinery to aid in the construction business. The company provides engineered lifting solutions in the U.S., Canada, France, and Internationally. Manitrex International, Inc. was founded in 2003 as a result of a merger of three companies specializing in crane manufacture and distribution, these companies are: Manitrex, Badger Equipment, and an Italian company called PM.

The firm manufactures and develops cranes, boom trucks, sign cranes, truck cranes, rough terrain cranes, and material handling products. This heavy machinery is primarily used in industrial projects, energy exploration, and infrastructural development.

Manitrex International, Inc. (NASDAQ: MNTX) delivered a strong first-quarter 2024 performance with a revenue of $73.8 million that grew by 8% year-over-year. Moreover, the company reported a 17.2% YoY growth in gross margin of $16.9 million.

The performance was driven by strong sales growth in North America coupled with continued cost reductions and improvement in business operations. In addition, there was solid growth in both lifting equipment and rental segments.

The lifting equipment segment generated a revenue of $66 million, up by 7.9% YoY, driven by ongoing improvements and innovation in the lifting machinery business. In addition, the rental segment grew by 9.2% YoY generating a revenue of $7.4 million in Q1 2024. The growth in rental revenue was driven by the expansion of business through the Lubbock, Texas location that opened in March 2023 and contribution from strong end-market demand, new rental fleet, and pricing gains through expansion into the Lubbock Market.

Manitrex International has recently adopted the PM 70.5 articulated truck-mounted crane to its product portfolio. This crane is the latest advancement in the PM group 65 series of articulated cranes with a wide range of applications for the global construction market. The novel crane offering from PM group is being sold to the European markets and is expected to be launched in the North American market later this year. This launch is projected to boost the lifting segment growth in the future.

Though the company put forth strong earnings in this quarter, there are some headwinds in terms of the current market uncertainties that have declined new orders. In addition, the adjusted EBITDA for the trailing 12 months couldn’t meet the expected target range and was slightly below the range of 11 to 13%.

Let’s look at the company’s fundamentals, Manitrex has a trailing P/E ratio of 10.35 compared to its competitor industries’ average of 12.52. Moreover, the company has a forward PE of 13.73 based on the earnings forecast and changing market trends affecting the share price. Furthermore, the company reported a Non-GAAP EPS of $0.17 beating the analyst’s expectations by $0.09 showing growth in YoY earnings.

According to Insider Monkey’s database, 8 hedge funds held stakes in Manitrex International, Inc. (NASDAQ: MNTX). Royce and Associates group managed by Chuck Royce had the largest stake of 1.48 million shares worth $10.18 million.

7. Destination XL Group, Inc. (NASDAQ: DXLG)

Number of Hedge Fund Holders: 11

Destination XL Group, Inc. (NASDAQ: DXLG) is a specialty retailer of big and tall men’s clothing and shoes in the U.S. The company offers a wide range of apparel like dress wear, casual clothing, sportswear, polo shirts, and T-shirts specifically designed to fulfill the clothing needs of men with big stature.

Apart from retail stores the firm also operates through e-commerce, which gives big men the freedom and comfort to choose their preferred clothing online. Research suggests that around 14.5% of the U.S. men’s population is 6 feet or taller, and a lot of men struggle with choosing clothes that fit.

The plus-size market was valued at $288 billion in 2023 and is expected to reach $501.35 billion in the next ten years. The social adaptation of body positivity campaigns largely drives the fast-paced growth of the plus-size market. Given the fact that there is high market potential fueled by body positivity, there is a lot of room for companies like Destination XL Group, Inc. (NASDAQ: DXLG) to grow.

Destination XL Group, Inc. (NASDAQ: DXLG)’s sales went down by 7.9% from $125.4 million in Q1 2023 to $115.5 million in Q1 2024. Furthermore, the net income of $3.79 million was down by 45.6% YoY. However, the company completed its $25 million stock repurchase program by the end of Q1.

The decline in sales performance was attributed to macroeconomic pressures first observed in the second half of the 2023 fiscal year that continued to reduce consumer demand and online traffic. Moreover, the lack of brand awareness owing to delays in starting a brand-building campaign affected the sales. Apart from a lack of awareness, the dearth of short-distance retail stores also had an impact on sales.

In an effort to improve sales, the company is committed to implementing its growth initiatives which will provide meaningful catalysts to derive sales and grow its share in the Big and Tall market. One of the initiatives is the launching of a new brand advertising campaign on May,13 to address the lack of brand awareness for the DXL offering. The last campaign of such a scale was carried out seven years ago back in 2017.

In addition, the company is set to open new shop outlets to address the consumer demand for easily accessible retail stores. To this end, a new store was opened in May this year with six more to follow. Online shopping is trending in the aftermath of the Pandemic, and the firm is focused on enhancing consumer experience by transitioning to a new and improved E-commerce platform.

Over the past year, Destination XL Group, Inc. (NASDAQ: DXLG) stock price has declined over 26%, the company struggles with quarterly decreases in revenue amid macroeconomic pressures and changing market trends. However, we do know that strong fundamentals of a stock may yet drive long-term growth. Let’s have a look at the Return on Equity (ROE) value which signifies a company’s profitability, the metric is calculated by dividing a firm’s net income (through continuing operations) by the stakeholder’s equity. This metric helps gauge how efficiently a business can generate profit over time.

Destination XL Group, Inc. (NASDAQ: DXLG) has a 12-month trailing operating net income of $37.67 million and stakeholder’s equity of $153.55 million for the same period. The trailing 12-month ROE value is 0.24 or 24%, which means the company generated $0.24 in profit for every $1 of shareholder’s equity. In comparison, the Apparel industry in the U.S. as of July 2024 had an average ROE of 16.9%.

Though the company had a downfall in its stock price in recent months yet if we look at the past 5-year performance, Destination XL Group, Inc. (NASDAQ: DXLG) has strong growth figures. The firm reported a 54% net income growth and even surpassed the industry’s growth of 26.6% in the same period, this shows the company’s growth potential reflected in its ROE.

According to Insider Monkey’s database, 11 hedge funds held stakes in the Destination XL Group, Inc. (NASDAQ: DXLG). Royce and Associates group is the largest stakeholder with total shares valued at $6.72 million.

6. Finvolution Group (NYSE: FINV)

Number of Hedge Fund Holders: 11

Finvolution Group (NYSE: FINV) is a company based in China that operates in the online consumer finance industry. The company was established in 2007 and since then has developed innovative finance solutions and gained in-depth experience in credit-risk assessment, automated loan transaction, and fraud detection.

Finvolution Group (NYSE: FINV) is at the forefront of combatting online fraud in the financial market globally. The company has made an anti-fraud AI technology that employs advanced facial and document forgery detection systems coupled with voice synthesis algorithms. These advanced AI system services are integrated into the apps of leading international brands.

The company had 185.5 million cumulative users in China, the Philippines, and Indonesia as the first quarter of 2024 came to an end, the users grew by 8.3% YoY. China has the largest share of 159 million users, leveraging its technological and operational capabilities, the firm serves over 30 million borrowers in the Pan-Asian Market.

In Q1 2024, the company generated a revenue of $438.4 million (RMB3165 million) up by 3.75% Year over Year. Notably, the international revenue contributions of $82.4 million grew 32.9% compared to the previous year. Finvolution Group (NYSE: FINV) reported a net income of RMB532 million that improved 1% quarter over quarter.

Revenue growth was primarily driven by an expansion of transaction volume in the China market up 10.31% reaching RMB46.1 billion with an outstanding loan balance increased to RMB65 billion up by 4.4%.

In addition, the International Markets had a robust growth in transaction volume that reached RMB2.21 billion highlighting a year-over-year increase of 40.8%. On the other hand, the outstanding loan balance further expanded to RMB1.27 billion, an increase of 33.7%.

On March 28, 2024, Finvolution Group (NYSE: FINV) announced that its Philippines financial app platform Juanhand has entered into a strategic partnership with SeaBank, an innovative bank offering financial services in the region.

According to this agreement, SeaBank will be offering around PHP300 million in funds to facilitate and broaden Juanhand’s user’s access to financial services. With this pipeline agreement, the company is looking to expand its mission of expanding its international service offerings and connecting underserved borrowers with financial institutions.

Finvolution Group (NYSE: FINV) is highly undervalued with a P/E ratio of 4.61 and has a current trade price of $4.98 whereas analysts have given the stock a fair value of $18.49 using a discounted cash flow model.

Last year in March, the company’s stock price fell 16% although in the last quarter of 2022, a revenue growth of 25% was reported that was driven by a 25% jump in transaction volume.

However, Finvolution Group (NYSE: FINV) had a net revenue fall of 14% due to credit losses for quality assurance commitments spiked by a large volume of outstanding loan balances. The stock price took a hit after a major leadership change as Feng Zhang CEO resigned for personal reasons.

In the last 12 months, Finvolution Group (NYSE: FINV) generated an EPS of $1.09, which increased by an aggregate of 13% in the last 3 years. Seven analysts have given a ‘Buy’ rating as of July, according to analysts’ forecast, the company should generate a 13% growth in Earnings per Share each year. Finvolution has a lot of room to capitalize on the fast-growing market of China, which is projected to grow at a CAGR of 7% by 2027 and will be valued at $3.5 trillion.

According to Insider Monkey’s database, 11 hedge funds held stakes in the Finvolution Group (NYSE: FINV). GLG partners managed by Noam Gottesman is the largest stakeholder with total shares worth $13.5 million.

5. Commercial Vehicle Group, Inc. (NASDAQ: CVGI)

Number of Hedge Fund Holders: 13

Commercial Vehicle Group, Inc. (NASDAQ: CVGI) is a leading manufacturer and supplier of electrical vehicle assemblies, electrical wire harnesses, seating systems, mechanical assemblies, plastic products, warehouse automation, and robotic assemblies. In addition, the company serves the industrial and recreational vehicle markets, e-commerce, transportation, and construction equipment markets.

Commercial Vehicle Group, Inc. (NASDAQ: CVGI) is based in Ohio U.S., and is organized into four key segments: Vehicle Solutions, Industrial Automation, Electrical Systems, and After-Market Division.

The company is facing headwinds due to changing market dynamics amid softening of consumer demands, supply chain issues, and a quarterly decline in revenue. As a result, over the last year, the share price has dropped over 49%.

During the first quarter of 2024, Commercial Vehicle Group, Inc. (NASDAQ: CVGI) struggled with generating sales and reported a revenue of $232.1 million, down by 11.6% YoY. Net income during the quarter witnessed a serious downfall of over 66%, down from $8.7 million in q1 2023 to just $2.9 million in q1 2024. The firm reported an EPS of $0.09 that fell significantly short of analysts’ expected EPS of $0.18.

This decline was primarily driven by a softening of consumer demand, partially offset by an increase in Electrical System Sales. Furthermore, Vehicle solution revenue declined by 14.1% due to the wind-down of certain programs due to supply shortages. Industrial Automation segment revenue decreased by 55.9% with an operating loss of $2 million due to a decrease in consumer demand.

Electrical Systems was the only segment that performed well with a revenue of $55.8 million, an improved growth of 1.9% YoY from increased pricing and sales volume amid supply chain challenges.

Moreover, there was a decline of over 55% in the operating income owing to reduced sales volume and an increase in restructuring charges. However, this was somewhat offset by reduced selling, general, and administrative expenses (SG&A).

Despite the challenges, the company’s management is optimistic about the future outlook and is focused on strengthening operational efficiency and commercial excellence to improve order intake in all sections. In parallel, to these operational improvements, the management is set to explore new end markets and develop innovative products. For instance, the development of a product called STACC which was exhibited at the Modex Show in March 2024.

STACC is a novel automation system prototype that is poised to revolutionize the Micro-fulfillment sector of e-commerce. STACC stands for Stacked, Tote, Automated Conveyance Cube, a modular and expandable goods-to-person service solution that is specifically designed to cater to growing e-commerce storage demands.

Micro-fulfillment is a small-scale warehouse facility that helps e-commerce businesses store their inventories within a short distance to the end consumers. In this way, businesses save a lot of costs and reduce transit time. These fulfillment centers are secure and highly automated, with high demand for these units.

According to research, the global micro-fulfillment market is set to grow at a CAGR of 24.3% from 2024 to 2030 and reach $15.2 billion by 2030 owing to the recent growth of e-commerce, particularly online grocery with a focus on delivery speed. With live demonstrations of STACC and the company’s offering to join the pre-order list, Commercial Vehicle Group, Inc. (NASDAQ: CVGI) is set to capitalize on this growing market.

With the forward P/E of 9.51 relative to the trailing p/e of 4.9, the company is expected to grow its share price relative to earnings in the current fiscal year.

At present, 70.8% of the company’s shares are held by a total of 118 institutional owners which adds to the investor confidence but also makes the stock price vulnerable to the institutional owners’ trading decisions.

Moreover, Gary Prostopino, an analyst of Barrington Research, maintains the 12-month price target of $10 for the stock with a price upside of over 85%. Gary gave the stock a “Buy” rating based on the firm’s ability to maintain its guidance for the rest of the year and resilience in sales of $232.1 million despite headwinds aligning with analyst’s expectations.

According to the Insider Monkey database, 13 hedge funds held stakes in the Commercial Vehicle Group, Inc. (NASDAQ: CVGI). Royce and Associates managed by Chuck Royce is the largest stakeholder having over 2 million shares valued at $13.16 million. Shares are up 10% compared to the last quarter of 2023.

4. Rimini Street, Inc. (NASDAQ: RMNI)

Number of Hedge Fund Holders: 13

Rimini Street, Inc. (NASDAQ: RMNI) is a software application company that provides software products, services, and support to enterprises. The company was founded in 2005 and offers a third-party software solution including support, managed services, and, maintenance for software companies like Oracle, IBM, SAP, Salesforce, and AWS partners.

Rimini ONE is a service program that offers a unified set of integrated systems that can run, manage, support, configure, protect, and optimize its client’s database and technology apps.

Similarly, Rimini Connect is an interoperability solution to connect email systems, operating systems, and browsers. Rimini Protect is a personalized security service solution. In addition, there is Rimini support, Rimini watch and Rimini consult service solutions for software enterprises.

Rimini Street, Inc. (NASDAQ: RMNI) serves clients in nearly 150 countries and has over 2100 employees. The company’s active clients have grown by 1.1% to 3,040 in Q1 2024 from 3,007 same period last year. Rimini award-winning software support has an average engineered response time of less than 2 minutes and achieved an outstanding client satisfaction score of 4.9/5. However, the stock is currently undervalued with a trailing P/E ratio of 12.88 compared to the industry’s average P/E of 44.36.

Rimini Street. Inc. (NASDAQ: RMNI) has continued to streamline its operations and adopt innovative solutions to better serve and expand its clients. Early in June 2024 Ricoh Company Limited, a Japanese-based multinational firm that processes images and makes electronic products chose Rimini Support and Rimini Protect to ensure the safeguard of its Oracle EBS and database environments.

In addition, the company is focused on diversifying its portfolio by launching new services to expand its support and services to a broader scope. For instance, in February 2024, Rimini Custom was launched and is poised to be a game-changer for enterprises that need to focus their scarce IT resources on innovations and transformations while ensuring that the current database continues to support mission-critical operations. Rimini Custom helps organizations lower operating costs and complexities involved in heterogeneous IT environments and allows them to narrow down their focus on higher-value projects.

In the first quarter of 2024, Rimini Street, Inc. (NASDAQ: RMNI) reported a revenue of $106.7 million that improved marginally by 1.2% compared to $105.5 million for the same quarter last year. Whereas the annualized recurring revenue was $415.8 million for the first quarter and grew 1.8% YoY. However, the management noted that the total revenue was affected negatively by 0.8% due to FX movements.

Although recurring sales were in line with the quarter growth plan, new client sales were a bit demanding. Several new sales failed to close in the quarter and slipped to the next quarter. To address these challenges, the company held a comprehensive sales kick-off in January to train and develop the sales skills of 400 global revenue team members.

In addition, a major headwind faced by Rimini Street is a 14-year-long legal battle with Oracle. The company is still facing ongoing litigation with Oracle which has led to uncertainties and affected guidance on future financial results. In  2010, Oracle Corporation, a database software and cloud-based solution provider sued Rimini Street accusing the company of infringing its copyrights and engaging in unfair business practices.

Oracle alleged that Rimini Street illegally copied Oracle’s software and provided unauthorized support services to its customers. In defense, Rimini Street argued that its practices were legal as it provided a low-cost support service within the bounds of fair use and complied with the licenses held by its customers who were unsatisfied with Oracle’s costly service. In 2014, Rimini filed a declaratory judgment action aka Rimini2 declaring that it had made changes to its software support practices.

In 2015, the jury found Rimini Street liable for copyright infringement and awarded Oracle $125 million in damages. The decision was challenged by Rimini, and the court made some changes and reaffirmed some damages while modifying others.

Oracle withdrew its monetary relief claim of $1.4 billion as the court rejected Oracle’s arguments that its license agreements prevent Rimini from documenting its own operations and technical specifications.

Last year, Nevada Federal Judge Miranda Du found that Rimini Street once again violated Oracle’s copyright claims. The judge ordered a permanent injunction limiting Rimini Street’s long-term support practices. The court issued further orders that the company must issue a press release and provide its customers with true information regarding misleading marketing campaigns.

The company disagreed with many points of this ruling, appealing the injunction at the court of appeals. As of now, an administrative stay of the injunction remains in effect. The appeal is pending and may or may not turn in favor of the company. However, the uncertainty of events may yet impact the stock’s share price in the future.

According to Insider Monkey’s database, 13 hedge funds held stakes in Rimini Street, Inc. (NASDAQ: RMNI) and Adams Street Partners held the largest stake of over 23.56 million shares with a value of $76.82 million.

3. OPAL Fuels Inc. (NASDAQ: OPAL)

Number of Hedge Fund Holders: 14

OPAL Fuels Inc. (NASDAQ: OPAL) is a fully integrated firm that together with its subsidiaries engages in the production of low-carbon intensity renewable natural gas. The company operates a waste-to-energy model that combines the upstream production and downstream distribution approach to decarbonize the heavy-duty transportation industry. With over 20 years of experience, the experts in OPAL Fuels Inc. (NASDAQ: OPAL) capture methane emissions at their source, purify it, and offer a scalable and low-cost RNG resource that can replace diesel and other high-carbon fossil fuels.

OPAL Fuels Inc. (NASDAQ: OPAL) reported solid growth in revenue in the first quarter of 2024 as the results are aligned with expectations, the company is on track to meet its full-year guidance. The company generated a revenue of $65 million up by 51% compared to $43 million same period last year. This growth was driven by an increase in production and higher environmental credit sales including RNG fuel, Fuel station services, joint venture projects, and third-party RNG supplies.

In addition, the company became profitable as it reported a net income of $0.7 million, a robust improvement from a net loss of $7.3 million in Q1 2023. This significant development in net income was primarily driven by the increase in revenue from the timing of environmental credit sales. In addition, the Emerald RNG project gained recognition as it came online and attracted investments giving the revenue a much-needed boost.

Last year, on June 12 2023 OPAL Fuels and GFL Environment Inc. announced the completion of their largest landfill gas to RNG production facility called Emerald RNG. The facility is said to have a nameplate capacity of 10,000 SCFM (Standard Cubic Feet Per Minute). Emerald RNG is poised to restore naturally occurring biogas from the decomposition of organic matter and will refine it into low-carbon RNG. The facility can efficiently generate over 2.5 million MMBtu (Metric Million British thermal units).

Landfill gas to RNG is a relatively cleaner source of energy and is a proven solution to reduce emissions across the transportation ecosystem. The drastic effects of climate change have led the world economies to look for alternative or cleaner sources of energy to lower the global carbon imprint.

In the wake of climate change, the Renewable Natural Gas industry can grow significantly, for instance in 2022, the global RNG market size was over $8 billion and is projected to reach over $215 billion by 2031, exhibiting a CAGR of 44%. These growth figures are encouraging for investors looking to benefit from the long-term growth of companies like OPAL Fuels Inc. (NASDAQ: OPAL).

Furthermore, the company recently announced the 9th RNG facility called the Prince William has commenced operations and has begun construction on the 15th RNG project at the Cottonwood landfill which has 0.7 million MMBtu design capacity. In addition, Sapphire and Polk RNG construction projects remain on track to begin operations in the 3rd and 4th quarters. All these combined projects are poised to bring out the aggregate portfolio of operating and in-construction RNG projects to 10.3 million annual MMBtu of design capacity.

Though the company is benefitting from industrial tailwinds that encourage the production of RNG, the firm is still awaiting the Internal Revenue Service (IRS) clarification to govern the ITC eligibility for landfill gas to RNG projects. Therefore, this important point should be factored in to forecast the company’s future earnings.

Furthermore, there are some ongoing disputes currently in arbitration related to EPC contractors and owners for the California Dairy Biogas projects. In addition, the renewal power revenue decreased from $15.4 million in Q1 2023 to $10.1 million in Q1 2024 because the Emerald RNG project used up gas available for renewable power. Despite positive results, the recent ramp-up of the Emerald project reduced the firm’s utilization of inlet gas from 86% down to 81% YoY.

According to Insider Monkey’s database, 14 hedge funds held stakes in OPAL Fuels Inc. (NASDAQ: OPAL).

2. iQIYI, Inc. (NASDAQ: IQ)

Number of Hedge Fund Holders: 15

iQIYI, Inc. (NASDAQ: IQ) is an entertainment company based in China that provides online video entertainment services in China. Apart from online entertainment videos the company also offers online games, literature, and animations. The company’s platform combines technology with creative talent to foster an innovative environment to produce blockbuster content.

iQIYI, Inc. (NASDAQ: IQ) distinguishes itself from the online entertainment industry by its AI-powered leading technology entertainment platform. With an in-house studio spearheading the content production, the company is home to some acclaimed drama series and show franchises. The company also offers online advertisement and content distribution services and operates iQIYI Show, a live broadcasting platform that lets viewers follow their favorite TV hosts in real time.

iQIYI Inc. (NASDAQ: IQ) kicked off the year 2024 with a strong first quarter, the company reported a net income of RMB655.3 million grew 6% compared to RMB618.1 million in the same period last year. The growth was driven by a 5% YoY reduction in the cost of revenue and outperformance in key service sectors. For instance, Online advertising services revenue increased 6% YoY and reached RMB1.5 billion driven by the growth of the performance-based advertising business.

In addition, the company had a robust growth of 27% YoY in the content distribution business hitting a historical high by reaching RMB928 million primarily driven by the distribution of several key titles. These figures illustrate the content creation capabilities of iQIYI to produce quality content that is in demand by television stations and viewers.

For instance, last year the company aired a drama called “The Knockout” a gritty crime thriller series about a cop that proved to be a blockbuster and gained 10.79 billion views on the internet. Notably, in the drama category, iQIYI has held the number one position in terms of viewership for 9 straight quarters.

Furthermore, Yu Gong said in the earnings call, that the monthly average revenue per member (ARM) growth reached a new high which marks the sixth consecutive quarter of sequential growth driven by improved operations, enhanced membership offers, and rich content offerings.

In addition, the ad business is flourishing as almost half of the revenue stems from content-targeted ads. For example, the drama “Always on the Move” reached exceptional ad sales performance. Similarly, a show debuting in 2023 named “ Become a Farmer” has seen a notable revenue growth of 80% in ads.

Despite the improvement in sales performance of core segments and a YoY reduction in expenses, the company’s overall revenue decreased by 5% year-over-year. The reason is a fall in membership revenue of RMB4.8 billion down by 13% compared to last year was due to the high base effects created last year with the release of a big hit “ The Knockout”. Moreover, online viewership was reduced partially owing to the surge in travel and offline activities during the Chinese New Year holidays.

Furthermore, the company stated that ARM’s monthly business is growing, though the number of platform users is not mentioned in the earnings call. Don Youqiao, senior vice president of the membership business explained that the decision not to release the number of users was made after careful deliberations and implied that these were neither objective nor a complete measure of business dynamics. He noted that a famous streaming service, Netflix similarly decided to not release the subscriber data.

Netflix (NASDAQ: NFLX) announced that it will stop releasing the subscriber number from the first quarter of 2025, and planned to focus on operating income and revenue as metrics of performance. However, this reasoning failed to convince investors, and the company’s share price fell on concerns that growth might have slowed down. Similarly, iQIYI’s decision may have an impact on share price, if the management fails to convince the investors.

The logical explanation for an increase in revenue per subscriber and a decreasing membership income could be a possible drop in membership numbers. The popularity of dramas does impact the number of viewership, for instance, the success of “The Knockout” series early last year increased the subscriber’s number to 129 million from 111.6 million in the fourth quarter of 2022. Although the company produced good dramas later on but none could gain the same popularity resulting in the drop of membership to 100.3 million in Q4 2023.

According to the Insider Monkey database, 15 hedge funds held stakes in iQIYI Inc. (NASDAQ: IQ), and Farralon Capital has the highest stakes which are worth $161.37 million.

1. Nordic American Tankers Limited (NYSE: NAT)

Number of Hedge Fund Holders: 18

Nordic American Tankers Ltd (NYSE: NAT) is a leading tanker company in the marine shipping industry. The company acquires and charters double-hull Suezmax oil tankers and operates in Bermuda and internationally. The company was founded in Bermuda in 1995 and ever since has grown to be a leader in shipping oil to long-haul trade routes operating its fleet of 20 Suezmax Crude oil tankers.

NAT has one of the largest fleets of Suezmax tankers in the world with a cargo lifting capacity of 1 million barrels of oil each. The company is putting extra effort into maintaining the highest standard of care for the safety of crew, cargo, and environment. In a capital-intensive industry like marine shipping, the careful maintenance of ships and a timely financial expansion are key factors in maintaining financial stability.

In the first quarter of 2024, the company reported a net Voyage revenue of $60.57  million down 30.4% compared to $87.09 million last year. The net voyage revenue represents the voyage revenue minus the expenses incurred such as bunker fuel, port charges, canal tolls, and brokerage commissions. Furthermore, the company had a net income of $15.1 million, down 14% quarter-over-quarter. Although the earnings were positive,  the company reported EPS of $0.07 missed the analyst’s expectations by $0.04.

The decrease in net voyage revenue and net income is driven by the decrease in demand for vessels. For instance, the average Time Charter Equivalent (TCE) for spot vessels during Q1 2024 was $34,320 per day per ship down from $51,902 per day per ship in Q1 2023, and the daily operating cost of running a ship was $9000. TCE is a measure of the profitability of running a vessel per day, it’s calculated by the shipping firms by dividing the net voyage revenue by the round-trip voyage duration in days.

Nordic American Tankers Ltd (NYSE: NAT) one of the leading companies in the marine shipping industry is facing challenges due to shipping traffic disruptions caused by the ongoing Israel-Palestine conflict’s effect on international waters. Over the past few months, international trade has faced setbacks, repeated attacks on the Red Sea trade route have reduced shipping traffic through the Suez Canal, a key regional hub for shipping oil and connecting Asia with Europe.

According to a report, 50% of the trade through the Suez Canal has dropped over the first two months of 2024 compared to a year ago while trade through the Panama Canal has dropped 32% YoY.  A severe drought broke out last year at the Panama Canal that led the authorities to impose restrictions and limit the daily crossings since October 2023. These challenges in the two key shipping routes have diverted the shipping traffic to the Cape of Good Hope, this route adds thousands of nautical miles to the journey increasing the expenses and delaying the cargo deliveries. With the fluctuations in fuel prices, shipping companies are struggling to manage their operating expenses.

Though Nordic American Tankers Ltd (NYSE: NAT) underperformed and missed expectations on the revenue front, it still managed to keep up strong positive earnings for the quarter amid trade route challenges. Moreover, the company managed to lower its net debt from $232 million in Q4 2023 to $228 million in the first quarter of 2024. Interestingly, the company had an annual dividend yield growth of 13.9% and has recently doubled its quarterly dividend to $0.12 per share from $0.06/share making it an attractive choice for investors looking for dividend growth.

Wall Street analysts expect an earnings growth of 6% this year keeping in view the strong quarterly revenue earnings of the past, the analysts gave a consensus “Buy” rating with a price upside of 36% from current levels.

Looking forward, Nordic American Tankers Ltd (NYSE: NAT) is optimistic for growth despite the macroeconomic challenges, the company sees a high demand for oil, a fragmented trade owing to logistical insufficiencies, and a shortage of ships. The company is looking to benefit from a tight supply of Suezmax tankers that is poised to remain low for at least the next two years. The World’s Suezmax tanker fleet counted as of March 2024 was 588, with only 6 new Suezmax tankers to enter the market by the end of 2024. When the ship numbers are low in a region the rates go up and vice versa, therefore the supply/demand dynamics look favorable for the growth of the company.

According to Insider Monkey’s database, 18 hedge funds held stakes in the Nordic American Tankers Ltd (NYSE: NAT). Two Sigma Advisors fund held the largest stake of 2.18 million shares valued at $8.57 million.

While we acknowledge the potential of Nordic American Tankers Ltd. as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Nordic American Tankers Ltd. but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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