Earlier on March 18, Keith Fitz-Gerald, Fitz-Gerald Group CIO, joined ‘Power Lunch’ on CNBC to talk about how to make sense of the market and the recession versus the growth scare. Keith Fitzgerald has favored some big momentum names in recent years and is still very positive on these stocks, despite feeling frustrated by recent market action. He thinks this volatility partially comes from computers, algorithms, and equity beta. He advised the average investor to focus on fundamentals and pay attention to the insights of leaders like Jensen Huang as a way to move forward. Fitzgerald also revealed that he had been adding to all of his positions over the then-past week and planned to continue doing so, instead of joining the selloff stride. He explained that he invests with a 3, 4, or even 10-year horizon and believes that these companies are dramatically undervalued at present, even if that view is unpopular.
As the conversation turned to how Fitzgerald distinguishes between stocks that have further downside and those that are poised for a turnaround, he suggested slowing down buying rather than trying to perfectly time the bottom. Fitzgerald emphasized that he is more concerned with finding a good entry point than catching the absolute lowest price. He views deeper selloffs as more attractive opportunities, and recognizes that technical factors driven by algorithms are pushing prices. Fitzgerald agreed that the persisting sources of uncertainty remain, such as the ongoing confusion around Trump’s tariff policies and uncertainty in the AI sector. He noted that traders dislike uncertainty above all else because it prevents decisive actions.
However, Fitzgerald remains focused on long-term trends and themes, such as AI, automation, and full-service business models. As he evaluates opportunities, he looks for where this investment will flow, which companies are most likely to benefit, and whose customers are most engaged. For Fitzgerald, the focus remains on companies with high-quality leadership, strong products, and loyal customers.
With that acknowledged, we’re here with a list of the 10 most undervalued penny stocks to buy according to hedge funds.
A financial analyst on a business call, studying a portfolio of stocks.
Our Methodology
We used the Finviz stock screener to compile a list of cheap penny stocks that were trading under $5 and had a forward P/E ratio under 15. We then selected the 10 stocks 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 1000 elite money managers.
Note: All data was sourced on April 18.
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 Most Undervalued Penny Stocks to Buy According to Hedge Funds
10. Coty Inc. (NYSE:COTY)
Share Price as of April 18: $4.73
Forward P/E ratio as of April 18: 8.6
Number of Hedge Fund Holders: 28
Coty Inc. (NYSE:COTY) manufactures, markets, distributes, and sells beauty products. It operates through the Prestige and Consumer Beauty segments. It offers fragrance, color cosmetics, and skin & body care products. It also sells its products through third-party distributors.
In FQ2 2025, sales for the company’s Prestige Fragrances segment grew in the mid to high single digits due to the segment’s unique and valued nature of high-end scents. Coty is pursuing several strategies to further capitalize on its Prestige Fragrance business. Successful recent launches like Gucci Flora Orchid and ongoing growth within the BOSS brand exemplify this strategy. The BOSS brand has become Coty’s number one brand with high single-digit growth.
The company is also expanding the distribution of its Prestige fragrance brands in previously underserved markets, such as the introduction of Chloe in the US. Due to the current market headwinds, such as those in Asia travel retail and China, Coty Inc. (NYSE:COTY) has shifted resources towards more robust markets like the US and Europe. On April 1, RBC Capital analyst Nik Modi maintained a Buy rating on the stock with a $13 price target.
Meridian Hedged Equity Fund stated the following regarding Coty Inc. (NYSE:COTY) in its Q4 2024 investor letter:
“Coty Inc. (NYSE:COTY) is a global beauty company with a growing portfolio of prestige and consumer brands. We hold Coty for its transformation potential through strategic investments in brand development and expansion within high-growth beauty markets. Performance this quarter was impacted by broader retail headwinds, as distributors in the U.S., Australia, and Asian retail channels maintained cautious inventory positions. Weak sales in China further pressured results. Despite these challenges, management implemented cost-saving measures to protect margins while maintaining strategic growth initiatives. We anticipate sales momentum to reaccelerate, supported by holiday season performance and continued expansion of the prestige portfolio.”
9. Newell Brands Inc. (NASDAQ:NWL)
Share Price as of April 18: $4.7
Forward P/E ratio as of April 18: 6.35
Number of Hedge Fund Holders: 29
Newell Brands Inc. (NASDAQ:NWL) designs, manufactures, sources, and distributes consumer and commercial products. It operates in three segments: Home & Commercial Solutions, Learning & Development, and Outdoor & Recreation. It serves diverse customers, such as warehouse clubs, mass merchants, specialty retailers, as well as DTC channels.
The company’s Learning and Development segment delivered positive core sales growth in every single quarter throughout 2024. The preliminary outlook for 2025 projects another year of positive core sales growth for this division. This is due to the successful execution of the company’s strategic initiatives and the effectiveness of the operational changes, specifically within the Learning and Development business.
While the overall company experienced a 3.4% sales decline in 2024, the consistent positive performance of the Learning and Development segment demonstrates the potential of the new strategy and operating model to yield positive results. On March 11, Barclays analyst Lauren Lieberman maintained a Buy rating on Newell Brands Inc. (NASDAQ:NWL) and set a price target of $11.
8. Array Technologies Inc. (NASDAQ:ARRY)
Share Price as of April 18: $4.33
Forward P/E ratio as of April 18: 7.47
Number of Hedge Fund Holders: 31
Array Technologies Inc. (NASDAQ:ARRY) manufactures and sells solar tracking technology products. It operates through two segments: Array Legacy Operations and STI Operations. Its product portfolio includes DuraTrack HZ v3, Array STI H250, Array OmniTrack, Array SkyLink, and SmarTrack.
In Q4 2024, North America accounted for ~73% of the company’s total revenue, while it contributed roughly 70% to the full year revenue. Notably, the domestic portion of Array’s order book experienced more than 20% growth throughout 2024. For the full year 2025, the company forecasts a double-digit year-over-year increase in both volume and revenue.
Array Technologies Inc. (NASDAQ:ARRY) entered 2025 with a robust order book of $2 billion, with over 50% of the current order book scheduled to be delivered in 2025. The company is on track to provide 100% domestic content trackers in H1 2025. The anticipated stabilization of the US market in 2025 further supports a positive outlook for Array’s largest revenue-generating segment.
7. Hanesbrands Inc. (NYSE:HBI)
Share Price as of April 18: $4.4
Forward P/E ratio as of April 18: 9.4
Number of Hedge Fund Holders: 31
Hanesbrands Inc. (NYSE:HBI) designs, manufactures, sources, and sells innerwear apparel for men, women, and children. It offers its products under the Hanes, Bali, Bonds, Maidenform, Playtex, JMS/Just My Size, Comfortwash, Hanes Beefy-T, Polo Ralph Lauren, Sheridan, Bras N Things, Wonderbra, Berlei, Zorba, Sol y Oro, and Rinbros brand names.
In Q4 2024, the company’s net sales in the US increased by 3% year-over-year, which was fueled by innerwear innovation. This included successful product lines like Hanes Absolute Socks, Hanes Moves, Hanes Supersoft, and Bali Breathe. Additionally, increased brand investments, effective holiday programming, and strong performance in the online channel contributed to this trajectory within the US Innerwear business.
The company’s consumer-centric approach drives its market share gains, retail space expansion, and attracts younger consumers. For the full year 2025, Hanesbrands Inc. (NYSE:HBI) anticipates positive organic constant currency sales growth, with the US Innerwear business expected to be a significant contributor. This growth will be supported by innovations and distribution gains in key channels.
6. Sabre Corp. (NASDAQ:SABR)
Share Price as of April 18: $2.03
Forward P/E ratio as of April 18: 11.27
Number of Hedge Fund Holders: 31
Sabre Corp. (NASDAQ:SABR) operates as a software and technology company for the travel industry. It has two segments: Travel Solutions and Hospitality Solutions. Some of its products include commercial & operations products and data-driven intelligence solutions. It also has the SabreMosaic, which is an order retailing platform for airlines to create, sell, and deliver personalized content to travelers.
The company’s Hospitality Solutions segment achieved a record-high total revenue in 2024. The Q4 Hospitality Solutions revenue alone was up 8% year-over-year, which was driven by higher Central Reservation System (CRS) transactions. This is a computerized system that manages hotel room inventory and reservations. The revenue acceleration was also fueled by businesses like the Hyatt deployment, where Sabre’s CRS technology is implemented for the global Hyatt Hotels.
On April 1, Bernstein upgraded Sabre Corp. (NASDAQ:SABR) to Market Perform from Underperform while lowering the price target to $3.50 from $3.60. Reuters reported that the company is engaging Evercore to explore the sale of its hospitality suite SynXis. The company’s SynXis Retail Studio enables hoteliers to enhance revenue through personalized offers. The firm said that a positive stance on Sabre could come from an enhanced sale and commercial momentum in the remaining businesses.
5. Shoals Technologies Group Inc. (NASDAQ:SHLS)
Share Price as of April 18: $3.38
Forward P/E ratio as of April 18: 8.45
Number of Hedge Fund Holders: 31
Shoals Technologies Group Inc. (NASDAQ:SHLS) provides electrical balance of system (EBOS) solutions and components. It designs, manufactures, and sells various products used by the solar and battery storage industries, such as solar big lead assembly (BLA) solutions, and plug-and-play cable and cabinet solutions.
On February 26, Mizuho Securities analyst Maheep Mandloi reaffirmed a Buy rating on Shoals Technologies Group Inc. (NASDAQ:SHLS) with a $6 price target due to its growth potential despite current challenges. 2024 was tough due to project delays, but Shoals focused on improving its business. It launched new products, expanded into new markets, and won international deals. Mandloi also highlighted that the company’s transition to a Tennessee facility is expected to enhance its performance.
The company’s main business is providing electrical components for large solar projects. In Q4 2024, it made $107 million in revenue and booked $145 million in new orders, which totaled $635 million in backlog. It won $8 million in new international projects, ending with $86 million in international backlog. For the full year 2025, Shoal expects $410-450 million in revenue. Mandloi noted that the company forecasted an 8% year-over-year revenue increase by 2025.
4. Commscope Holding Company Inc. (NASDAQ:COMM)
Share Price as of April 18: $3.33
Forward P/E ratio as of April 18: 3.72
Number of Hedge Fund Holders: 32
Commscope Holding Company Inc. (NASDAQ:COMM) provides infrastructure solutions for communications, data centers, and entertainment networks. It operates in three segments: Connectivity & Cable Solutions (CCS), Networking, Intelligent Cellular & Security Solutions (NICS), and Access Network Solutions (ANS).
In 2024, Commscope’s Connectivity and Cable Solutions (CCS) segment improved its full-year revenue by 4.5% year-over-year, which was driven by the expanding data center market. The enterprise fiber business particularly generated $623 million in revenue because of its focus on data center products, and represented 22% of CCS revenue. This was a 73% year-over-year increase. In Q4 alone, the CCS revenue was up 36%, while the enterprise fiber business was up 96%.
Commscope Holding Company Inc. (NASDAQ:COMM) is expanding its production capacity to meet the demand from the data center market, which is projected to grow by over 30% annually. The company is in the middle of a capacity expansion that is expected to add $300 million to its revenue. Commscope also improved its financial position by completing a debt refinancing and selling its OWN and DAS businesses to Amphenol for $2.1 billion, using the proceeds to repay ~$2 billion of debt.
3. Playtika Holding Corp. (NASDAQ:PLTK)
Share Price as of April 18: $4.93
Forward P/E ratio as of April 18: 9.12
Number of Hedge Fund Holders: 32
Playtika Holding Corp. (NASDAQ:PLTK) develops mobile games in the US, Europe, the Middle East, Africa, the Asia Pacific, and internationally. It owns a portfolio of casual and social casino-themed games. It distributes its games to the end customer through various web and mobile platforms and DTC platforms.
In Q4 2024, the company’s Bingo Blitz made $159.1 million in revenue, which was up 5.8% year-over-year. Notably, the DTC business for Bingo Blitz achieved another record quarter. Playtika highlighted the underlying growth in year-over-year average daily paying users for Bingo Blitz, which showed an expanding player base for the company’s largest game.
The company has a portfolio of multiple game titles that attract more than 20 million monthly active users. Playtika Holding Corp. (NASDAQ:PLTK) is investing in its existing portfolio, with a particular focus on titles that hold leadership positions and exhibit strong growth potential, such as Bingo Blitz. On March 26, Bank of America Securities upgraded the stock’s rating from Underperform to Buy and raised its price target from $6 to $6.50.
2. Bumble Inc. (NASDAQ:BMBL)
Share Price as of April 18: $4.36
Forward P/E ratio as of April 18: 7.2
Number of Hedge Fund Holders: 33
Bumble Inc. (NASDAQ:BMBL) is an online dating and social networking company that owns and operates websites and applications with subscription and in-app purchases of products. It operates apps like Bumble, which is a women-centric dating app. It also has other apps like Badoo, Bumble BFF, and Bumble Bizz Modes.
However, in April 2024, Bumble rolled out a new feature called ‘opening moves’, which allowed men to initiate conversations on the platform as well. Under this feature, female users can set a prompt for men to respond to start a conversation. In the full year 2024, the Bumble app’s paying user base grew by 290,000 during this year. In Q4, the App’s paying users increased by 5% to 2.8 million.
The company is heavily investing in Bumble App’s future through product innovation and ecosystem improvements. Key features being introduced include AI-driven matching, enhanced safety tools like ID Verification, and new engagement features such as Instant Match. The app’s relaunch last year also included badges that let users state their dating intentions by indicating whether, for instance, they are looking for a ‘life partner’ or a ‘casual relationship’.
1. Alight Inc. (NYSE:ALIT)
Share Price as of April 18: $4.99
Forward P/E ratio as of April 18: 8.35
Number of Hedge Fund Holders: 42
Alight Inc. (NYSE:ALIT) is a technology-enabled services company that provides Alight Worklife, which is an intuitive, cloud-based employee engagement platform. Its platform services include integrated benefits administration, healthcare navigation, financial wellbeing, leave of absence management, and retiree healthcare.
The company’s Recurring Revenue made up 91% of its Q4 2024 revenue. Alight saw recurring revenue grow sequentially in Q4 and aims for a 4% to 6% long-term revenue increase, which is fueled by ARR Bookings. Alight achieved $114 million in total ARR bookings in 2024, which is an 18% increase from 2023. It expects $130 to $145 million in ARR bookings for 2025, with a sales pipeline up 54%. The company also saw an 8% increase in client retention rates in its last renewal cycle.
For 2025, Alight Inc. (NYSE:ALIT) expects recurring revenue to grow about 1% overall. Alight’s long-term TAM is projected at a substantial $50 billion. With that opportunity, the company aims for a total annual revenue growth of 4% to 6% by 2027. Needham analyst Kyle Peterson reaffirmed a Buy rating on the stock with a $9 price target in March.
While we acknowledge the growth potential of Alight Inc. (NYSE:ALIT), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than ALIT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
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