On March 11, Kevin Mahn, President and CIO of Hennion & Walsh Asset Management, joined CNBC’s ‘Closing Bell Overtime’ for a discussion on the recent dramatic stock market moves. Mahn compared the current stock market ups and downs to March Madness, but instead of happening on basketball courts, it’s happening in the stock market. He attributed the pullback and increased volatility to investor concerns. These include fears of an economic slowdown, a potential recession, tariffs, overspending on AI, and other uncertainties. Despite these challenges, Mahn expressed optimism about market leadership. He pointed out that sectors like consumer discretionary and IT were performing well year-to-date. He observed value stocks outperforming growth stocks and international markets surpassing US markets, which emphasized the importance of diversification beyond large-cap tech stocks.
Mahn was asked about sentiment among retail investors in light of recent volatility. He acknowledged that after two consecutive years of over 25% returns, many investors were unprepared for this level of market turbulence. While double-digit returns may not be realistic for 2025, Mahn advised investors to remain committed to their long-term financial goals rather than attempting to time the market. He raised a critical question about whether the Fed would intervene if the economic slowdown worsened. Mahn predicted three rate cuts totaling 25 basis points this year but noted that inflation and economic conditions would dictate Fed policy.
Methodology
We used the Finviz stock screener to compile a list of the top penny stocks (share price under $5). We then selected the 10 cheap stocks with a forward P/E ratio under 15 that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Note: All data is sourced as of March 11.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Cheap Penny Stocks to Buy According to Hedge Funds
10. Cosan (NYSE:CSAN)
Forward P/E Ratio as of March 11: 12.45
Share Price as of March 11: $4.92
Number of Hedge Fund Holders: 14
Cosan (NYSE:CSAN) is a Brazilian conglomerate that operates across diverse sectors. These include fuel distribution, logistics, and infrastructure. Through its various segments like Raízen, Compass, and Rumo, it is involved in everything from ethanol production and natural gas distribution to railway logistics and agricultural property management. It has a global presence spanning multiple continents.
In 2024, the company reported an EBITDA under management of ~30 billion Brazilian Reals. However, this positive EBITDA was offset by a net loss of 900 million Brazilian Reals for the year. This negative earnings result was attributed to the depreciation of the Brazilian Real and the devaluation of the company’s shares. Despite the net loss, the company’s corporate net debt stood at 23.4 billion Brazilian Reals at the end of 2024, with a debt service coverage ratio of 1.1.
Despite the net loss, Cosan (NYSE:CSAN) reported an increase in dividends and interest on capital received, which reached 4.3 billion Brazilian Reals in 2024. Operationally, Rumo achieved record levels in transported volumes and tariffs during the Q4 2024. Rumo is a major Brazilian railway logistics company and a significant revenue driver for Cosan (NYSE:CSAN). The company’s management plans to further improve its capital structure through additional strategic transactions in 2025.
9. Hafnia Ltd. (NYSE:HAFN)
Forward P/E Ratio as of March 11: 5.96
Share Price as of March 11: $4.03
Number of Hedge Fund Holders: 15
Hafnia Ltd. (NYSE:HAFN) is a major player in the oil product tanker industry. It owns and operates a fleet of 200 vessels across various segments and facilitates the global transportation of refined oil products, vegetable oils, and chemicals. It serves a diverse clientele and provides comprehensive shipping services.
The company’s product tanker operations delivered record-breaking results in the first nine months of 2024. Hafnia Ltd. (NYSE:HAFN) earned $1.36 per share, which was an improvement from the previous year’s performance. This surge in profitability was fueled by strong Time Charter Equivalent (TCE) earnings, which reached $1,157.7 million and translated to an average TCE of $36,330 per day. Time Charter Equivalent (TCE) earnings represent the average daily revenue a vessel earns after deducting voyage expenses. It provides a standardized measure of profitability.
For the Q3 2024 alone, the company reported a $0.42 EPS. The company’s fleet, which consists of over 130 vessels, continues to operate efficiently. Hafnia Ltd. (NYSE:HAFN) is also implementing a share buyback program of up to $100 million, which demonstrates its commitment to shareholder value.