In this article, we will discuss the 10 oversold penny stocks to invest in now.
Penny stocks offer some of the best investment opportunities for risk-tolerant investors. While most double up as high-risk, high-reward investment plays, they offer a way of diversifying an investment portfolio at highly discounted valuations.
Since penny stocks are primarily of smaller companies in the early stages of growth, they can be highly speculative and volatile. Likewise, they offer a way of gaining exposure to emerging technologies, products, and services likely to shape the world.
READ ALSO: 10 Worst Performing Blue Chip Stocks in 2024 and 10 Worst Performing NASDAQ Stocks in 2024.
While the overall stock market has been bullish, depicted by the S&P 500 flirting with record highs after a 21% gain year to date, some penny stocks have been under immense pressure. Some have shed more than 30% in market value on investors reacting to their deteriorating fundamentals owing to a challenging macroenvironment.
The challenging macro environment that has seen the global economy come under pressure, depicted by China initiating stimulus measures and the US embarking on interest rate cuts, has forced some investors to question some penny stocks’ long-term prospects. The uncertainty over the upcoming US election has also fuelled volatility, resulting in a significant selloff.
High interest rates were intended to cool inflation by containing a heating U.S. economy. So far, it has worked: According to the annual rate of the consumer price index, inflation has decreased from a peak of 9.1% in June 2022 to 2.4% in September 2024.
“We’ve raised rates a lot, and the US economy has basically absorbed them and still continues to perform quite well,” Minneapolis Federal Reserve President Neel Kashkari said on October 21, 2024. That indicates “the neutral rate seems to be higher” at this point, Kashkari added.
Billionaire hedge fund manager Paul Tudor Jones’s warning of the current government fiscal deficit and increased spending by both presidential candidates also adds to a wave of uncertainty in the market.
“We’re going to be broke really quickly unless we get serious about dealing with our spending issues,” Jones told CNBC’s Andrew Ross Sorkin on October 10, 2024
According to Tudor, increased government spending could trigger a selloff in the bond market, resulting in a significant spike in interest rates. Higher interest rates don’t bode well with penny stock companies, as most are always looking for ways to access cheap capital to accelerate their growth plans.
The International Monetary Fund has shared similar sentiments, which have warned that the global economy faces the risk of plunging into recessions on rising geopolitical risks and weaker long-term growth fuelled by the high interest rate environment.
“The global battle against inflation is almost won,” the IMF report says while pushing for a policy triple pivot” to address interest rates, government spending and reforms and investment to boost productivity.
“Despite the good news on inflation, downside risks are increasing and now dominate the outlook,” said IMF chief economist Pierre-Olivier Gourinchas.
Amid the growth concerns, the US economy is projected to grow much faster owing to robust artificial intelligence-related investments. The US Federal Reserve cutting interest rate by 50 basis points is already impacting steering the economy into a soft landing, which should be accommodative for penny stocks.
That said, now would be the best time to take a look at the best-oversold penny stocks to invest in now as solid underlying fundamentals back most. The stocks promise to generate significant returns down the road as macroeconomics improve.
Source: Pexels
Our Methodology
To compile our list of the Oversold Penny Stocks To Invest In Now, we started by gathering stocks trading below $5, down by more than 30% for the year and with a forward price-to-earnings multiple of less than 15. We then filtered these stocks based on their share price drops as of October 25, creating a list of 10 companies. Finally, we ranked these companies in ascending order according to the number of hedge funds that hold stakes.
At Insider Monkey, we are obsessed with 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).
Oversold Penny Stocks To Invest In Now
10. Vasta Platform Limited (NASDAQ:VSTA)
Year to Date Gain as of October 25: -41.67%
Forward Price to Earnings Ratio: 13.74
Number of Hedge Fund Holders: 2
Vasta Platform Limited (NASDAQ:VSTA) is a consumer defensive e-investment play and one of the top oversold penny stocks to invest in for diversifying an investment portfolio in the Education & Training Services sector. The company provides educational printed and digital solutions to private schools operating in the K-12 education sector in Brazil.
Vasta Platform Limited (NASDAQ:VSTA) offers digital and physical educational solutions in Brazil’s K–12 educational market. It focuses on growing its content, EdTech platform, and digital platform segments. Likewise, it remains dedicated to innovation in educational technology despite a challenging market.
Similarly, it delivered solid second-quarter results as net revenue during the 2024 cycle reached R$1,309 million, representing an 11% increase compared to the same period last year. The increase was driven mainly by converting Annual Contract Value into revenue and the performance of the B2G business unit.
Additionally, its complementary solutions recorded a 20% growth compared to sales cycle 2023, with an accelerated increase in both student base and market penetration. Its accumulated subscription revenue in the 2024 sales cycle totalled R$1,152 million, a 14% increase compared to the same period in the previous sales cycle. The impressive financial results of revenue growth affirm the company’s growth prospects.
Technology can potentially revolutionize the education sector, especially in developing nations like Brazil, which affirms Vasta Platform Limited (NASDAQ:VSTA)’s long-term prospects. Despite fierce competition and volatile markets that have seen the stock go down 41.67% year to date, Vasta is well-positioned in this dynamic environment thanks to its dual focus on digital platforms and content delivery.
9. Rimini Street, Inc. (NASDAQ:RMNI)
Year to Date Gain as of October 25: -47.73%
Forward Price to Earnings Ratio: 8.65
Number of Hedge Fund Holders: 9
Rimini Street, Inc. (NASDAQ:RMNI) is a technology company that provides enterprise software products, services, and support. The company provides support services for Oracle and SAP enterprise software products. It offers enterprise software and managed services for different products, including SAP IBM Salesforce.
While Rimini Street, Inc. (NASDAQ:RMNI) is down by about 48% year to date, it is one of the best-oversold penny stocks to invest in now, owing to its solid recurrent revenue base, robust client base, and international growth prospects. Revenue is up 6.9% over the three years, so the share price drop doesn’t seem to hinge on revenue. Additionally, the company has announced a stock repurchase program as part of its commitment to return value to shareholders while accelerating demand for the stock.
Rimini Street, Inc. (NASDAQ: RMNI) delivered mixed second-quarter results, with revenue falling 3.1% yearly to $103.1 million. The company reported a net loss of $1.1 million despite an increase in billings, and its financial outlook is being impacted by ongoing litigation with Oracle (NYSE:ORCL).
Additionally, Rimini Street, Inc. (NASDAQ:RMNI) is undergoing restructuring to streamline operations and save $35 million. The phase-out of Oracle PeopleSoft services will impact revenue streams. The business is cutting sales and marketing expenses to finance projects and anticipates that the effects of terminating big contracts will lessen in upcoming quarters.
The company hires new talent, like enterprise architects, to support future growth and reallocates resources to higher-margin product lines. It also remains committed to providing value to its investors and safeguarding the security and welfare of all parties involved.
8. TELUS International (Cda) Inc. (NYSE:TIXT)
Year to Date Gain as of October 25: -57.03%
Forward Price to Earnings Ratio: 6.50
Number of Hedge Fund Holders: 9
TELUS International (Cda) Inc. (NYSE:TIXT) designs, builds and delivers digital solutions for customer experience. A string of disappointing financial results and weak guidance has been the catalyst behind the stock coming under pressure and dropping 57.03% year to date.
In the second quarter, revenues were down 2% year over year to $652 million, attributed to lower revenues from a large social media client and other technology clients. Revenues for the year’s first half were down 3% to $1.31 billion. TELUS International (Cda) Inc. (NYSE:TIXT) is one of the companies feeling the full brunt of a challenging macroeconomic environment compounded by competitive conditions in the industry
Nevertheless, the company is slowly inching into profitability, having posted a narrower-than-expected net loss of $3 million compared to a net loss of $7 million delivered in the same quarter last year. Likewise, net income for the first half of the year tripled to $25 million from $7 million a year, affirming why TELUS is one of the oversold penny stocks to invest in now as its profit margins improve.
While TELUS International (Cda) Inc. (NYSE:TIXT) has reiterated its guidance for the year, its quarterly revenue between the second and fourth quarters will have to grow sequentially by 4% to 6%. It is a challenging feat, considering it was last achieved in 2021.
Nevertheless, with the integration of artificial intelligence into its customer experience solutions, the company has the potential to fuel demand. Likewise, TELUS International (Cda) Inc. (NYSE:TIXT) is currently trading at a discount with a price-to-earnings multiple of 6.50 compared to an average P/E of 31 for tech stocks.
7. Ultrapar Participacoes (NYSE:UGP)
Year to Date Gain as of October 25: -32.96%
Forward Price to Earnings Ratio: 8.58
Number of Hedge Fund Holders: 10
Headquartered in São Paulo, Brazil, Ultrapar Participacoes (NYSE:UGP) is an energy company that distributes liquefied petroleum gas to residential, commercial and industrial consumers. While down by about 33% for the year, it is turning out to be one of the oversold penny stocks to invest in now.
The company has been firing on all cylinders, as evidenced by the solid second-quarter results that affirm underlying growth. Net income in the quarter was up 106% to BRL491 million, resulting in an 85% increase in accumulated net income for the year to BRL947 million. Ultrapar Participações S.A. achieved a 3% growth in EBITDA growth due to increased capacity occupancy.
Consequently, Ultrapar Participacoes (NYSE:UGP) reiterated its commitment to returning value to shareholders by approving a payment of BRL276 million in interim dividends for the first half of 2024, reflecting strong financial performance. As it stands, Ultrapar Participações S.A. is a solid investment play for income-focused investors as the stock yields 3.42% in dividends.
Ultrapar Participacoes (NYSE:UGP) trades at a significant discount with a price-to-earnings multiple of 8.58. With oil prices supporting above the $70-a-barrel level amid escalating geopolitics in the Middle East, it is a solid penny stock investment for gaining exposure in the energy sector.
Insider Monkey’s second quarter of 2024 survey of 912 hedge funds revealed that 10 had bought and owned Ultrapar Participacoes (NYSE:UGP)’s shares. In the same quarter, its biggest hedge fund investor was Jim Simons’ Renaissance Technologies due to its $9.58 million stake.
Here is what Third Avenue Management Value Fund has to say about Ultrapar Participações S.A. (NYSE:UGP) in its Q1 2022 investor letter:
“Ultrapar is a Brazilian fuel distribution and storage business. Operating under the Ipiranga brand name, Ultrapar is one of three companies with dominant fuel distribution networks in Brazil. With more than 7,000 service stations, Ipiranga holds an approximate 19% market share in Brazilian vehicle fuel distribution and also operates a related convenience store business under the AmPm brand. Ultrapar also operates one of Brazil’s largest Liquefied Petroleum Gas (“LPG”) distribution businesses as well as one of Brazil’s largest bulk liquids storage terminal networks. The Brazilian equity market has, in recent years been a relatively poor performer, particularly as measured in U.S. dollars. Ultrapar is one example of a relatively high quality Brazilian business that is currently available at valuation levels we haven’t seen in some time. Additionally, like many businesses in Brazil, the fuel distribution business has a few country-specific complexities. In the main, we would say that the overall direction of policy in Brazil has made operating the business more straightforward and the separation of several businesses in the energy storage and distribution arena from state-controlled Petrobras is gradually allowing the industry to operate in a more traditional arms-length manner. Further, as it relates to Ultrapar specifically, in recent years, it is generally accepted that Ipiranga has been the least well operated of the big three fuel distributors. This is most glaringly evidenced by routinely inferior fuel distribution margins. Ultrapar also spent years making ill-advised acquisitions in an attempt to diversify, a process which is currently being put into reverse. The disposition of several large but noncore businesses has led to a substantial cash inflow recently, putting Ultrapar on excellent footing to make operational improvements and, potentially, to make strategic additions to its business. This strategy will be executed by a new CEO, to whom Ultrapar’s controlling family has made a considerable financial commitment. We have high-regard for the new CEO, having familiarity with him from his previous career at Cosan S.A., another one of Brazil’s big three fuel distributors. In summary, we think that there is a lot of room for operational improvement as well as general valuation upside at Ultrapar.”
6. Commercial Vehicle Group, Inc. (NASDAQ:CVGI)
Year to Date Gain as of October 25: -56.40%
Forward Price to Earnings Ratio: 5.13
Number of Hedge Fund Holders: 13
Commercial Vehicle Group, Inc. (NASDAQ:CVGI) is one penny stock that diversifies an investment portfolio into the Auto Parts sector. It designs, manufactures, assembles, and sells systems, assemblies, and components to commercial, electric vehicles and industrial automation markets. Nevertheless, the company has been under pressure, going down by about 56.40% in the year to date.
The underperformance comes against the backdrop of downturns in the broader market compounded by challenges in the commercial vehicle sector. In addition, Commercial Vehicle Group, Inc. (NASDAQ:CVGI) has had to contend with supply chain disruptions and fluctuating demand for its auto parts due to the high inflation environment. Amid the challenges, it divested its Cab Structures unit to Volvo and other assets to SVO LLC in a transaction valued at $40 million. The divestment is the art of the company’s push to focus on higher-growth products and markets.
Additionally, Commercial Vehicle Group, Inc. (NASDAQ:CVGI) has set sights on growth opportunities on the international scene by expanding into Mexico and Morocco, as it also has eyes on European sales. Additionally, the company has won $45 million in new business and is growing its UNITY Seat product line internationally. These changes are a component of CVG’s continuous transformation strategy.
5. Digital Turbine, Inc. (NASDAQ:APPS)
Year to Date Gain as of October 25: -55.76%
Forward Price to Earnings Ratio: 7.87
Number of Hedge Fund Holders: 15
Digital Turbine, Inc. (NASDAQ:APPS) is a technology company operating a mobile growth platform for advertisers, publishers, carriers, and original equipment manufacturers. While the stock is down by about 55.76% for the year, the underperformance comes from the company facing a challenging microenvironment that has resulted in significant financial challenges.
Nevertheless, Digital Turbine, Inc. (NASDAQ:APPS) remains one of the top oversold penny stocks to invest in, having delivered better-than-expected fiscal first-quarter results affirming growth. In its fiscal first quarter, revenue was up 5% sequentially to $118 million, beating consensus estimates of $116.03 million. However, it represented a 19% year-over-year decline.
According to chief executive officer Bill Stone, the first quarter marked a significant milestone affirming the start of a new financial year as Digital Turbine, Inc. (NASDAQ:APPS) slowly bounces back to sequential growth. New international device integrations and an increase in average revenue per device are increasingly driving revenue growth. Additionally, Digital Turbine is experiencing higher demand for its Brand and Exchange offerings.
Digital Turbine, Inc. (NASDAQ:APPS) has reiterated its full-year guidance for fiscal 2025, predicting adjusted EBITDA of $85 million to $95 million and revenue of $540 million to $560 million. As the business continues to navigate a challenging and competitive market environment, its capacity to sustain this momentum will be essential.
According to Insider Monkey’s database, 15 hedge funds held stakes in the Digital Turbine, Inc. (NASDAQ:APPS). D E Shaw had the largest stake, with shares valued at $7.79 million.
4. iQIYI, Inc. (NASDAQ:IQ)
Year to Date Gain as of October 25: -47.29%
Forward Price to Earnings Ratio: 7.91
Number of Hedge Fund Holders: 17
iQIYI, Inc. (NASDAQ:IQ) is a Chinese communication services company that provides online entertainment video services. It offers online video, online games, online literature and other products. The penny stock has taken a significant hit, dropping 47.29% in the year to date.
Amid the significant selloff, iQIYI, Inc. (NASDAQ:IQ) remains one of the oversold penny stocks to invest in now as the company is increasingly bolstering its content library in terms of quantity and quality as it eyes long-term growth. With a subscriber base of over 100 million and an online video platform with over 400 million monthly active users, iQiyi is increasingly expanding into new markets to drive future growth. Its efforts are already bearing fruit as the company’s membership revenue saw an 80% annual increase in markets such as Hong Kong and the UK.
Backed by a massive customer base and millions of active users, iQIYI, Inc. (NASDAQ:IQ) is one company well-positioned to benefit from the burgeoning advertising market. While the company delivered a 5% drop in second-quarter revenues to $1 billion, its streaming service sector remained bright, raking in 1.5 billion Yuan through online advertising services. iQIYI boasts of strong performance abroad, as evidenced by the annual and sequential growth in both total revenues and membership revenue.
In the second quarter, 17 hedge funds held positions in iQIYI, Inc. (NASDAQ:IQ), and their stakes amounted to $148.22 million. As of June 30, Farallon Capital is the most dominant shareholder in the company and has a position worth $162.08 million.
3. Holley Inc. (NYSE:HLLY)
Year to Date Gain as of October 25: -43.24%
Forward Price to Earnings Ratio: 7.18
Number of Hedge Fund Holders: 17
Holley Inc. (NYSE:HLLY) is a designer, manufacturer, and marketer of automotive aftermarket products for car and truck enthusiasts. It mainly deals with performance automotive products, including carburetors, fuel pumps, fuel injection systems, and nitrous oxide injection.
While the stock is down by 43.24%, it remains under pressure after delivering mixed second-quarter results and cutting its full-year guidance. Its net sales fell 3.3% to $169.5 million as the company felt the full effects of a challenging macroeconomic environment. Nevertheless, Holley Inc. (NYSE:HLLY) met its financial priorities regarding cash flow deleveraging and cost cuts. Net income in the quarter soared to $17.1 million from $13 million a year ago. Likewise, it ended the quarter with $24.4 million in free cash flow.
Holley Inc. (NYSE:HLLY)’s competitive edge as one of the oversold penny stocks to invest in now stems from its strong portfolio of well-known brands, which includes Holley, MSD, Simpson, Flowmaster, and over 50 others. These brands enable the company to operate in crucial automotive aftermarket segments, such as safety and racing products and domestic muscle enthusiasts.’
Holley Inc. (NYSE:HLLY)’s current predicament indicates a larger pattern in the automotive industry, where businesses are attempting to position themselves for future growth while battling a variety of economic pressures. The company’s initiatives to increase financial stability and operational effectiveness are necessary to get through the current economic climate.
As of the end of the second quarter of 2024, 17 hedge funds reported owning stakes in Holley Inc. (NYSE:HLLY). The most notable of these hedge funds was Ian Cumming and Joseph Steinberg’s Leucadia National, which has a stake worth about $4.12 million in Holley Inc. (NYSE:HLLY).
2. Kosmos Energy Ltd. (NYSE:KOS)
Year to Date Gain as of October 25: -40.27%
Forward Price to Earnings Ratio: 4.02
Number of Hedge Fund Holders: 25
Dallas Texas based Kosmos Energy Ltd. (NYSE:KOS) is an energy company engaged in oil and gas exploration, development, and production. While it is one of the companies well positioned to benefit from higher oil and gas prices, it has dropped 40.27% year to date.
Kosmos Energy Ltd. (NYSE:KOS) remains one of the best-oversold penny stocks to invest in, as it has made impressive strides to meet its production growth target of 50%. While producing 62,100 barrels of oil daily, it marks a 7% year-over-year increase, with the company able to sell 65,400 barrels daily. Notwithstanding project setbacks and reduced output from Ghana’s Jubilee field, the company is on course to reach a year-end production goal of 90,000 barrels daily.
Over the past 12 months, Kosmos Energy Ltd. (NYSE:KOS) has turned a profit backed by robust revenue growth of 16.34% over the past 12 months and a startling 64.99% quarterly revenue growth in Q2 2024. These numbers imply that although the stock price has been under pressure to decline, the underlying company is expanding significantly.
Additionally, Kosmos Energy Ltd. (NYSE:KOS) plans to produce a substantial amount of free cash flow, estimated to be between $100 million and $150 million every quarter. In accordance with a disciplined capital framework, this cash flow will be used to pay down debt and make investments in future expansion. With capital expenditure estimated at the lower end of the full-year guidance range, the company’s capital expenditures for the year are anticipated to be approximately $750 million.
According to Insider Monkey’s database, 25 out of 912 hedge funds hold stocks in Kosmos Energy Ltd. (NYSE:KOS). Patient Capital Management, spearheaded by Samantha Mclemore, holds the largest stake in the company, possessing 9 million shares valued at approximately $50.33 million.
1. Ferroglobe PLC (NASDAQ:GSM)
Year to Date Gain as of October 25: -33.49%
Forward Price to Earnings Ratio: 9.22
Number of Hedge Fund Holders: 30
Ferroglobe PLC (NASDAQ:GSM) is a basic materials company that produces and sells silicon metal and manganese-based ferroalloys. While the stock is down by about 33.49% year to date, it remains one of the oversold stocks to invest in now as it delivers solid financial results.
In the second quarter, Ferroglobe PLC (NASDAQ:GSM) delivered a 15% increase in revenue that totaled $451 million as adjusted EBITDA more than doubled to $57.7 million. Likewise, the company bounced back to profitability with a net income of $34.9 million, up from a net loss in Q1. The impressive financial results stem from Ferroglobe restarting its French operations, which helped drive silicon metal and manganese-based specialty alloy volumes.
Ferroglobe PLC (NASDAQ:GSM)’s long-term prospects have also received a significant boost after the US Department of Commerce imposed anti-dumping and countervailing duties of 283% and 748%, respectively, on all Russian ferrosilicon imports. The new tariffs should significantly benefit the company’s ferrosilicon business starting early next year.
Ferroglobe PLC (NASDAQ:GSM) is one of the oversold penny stocks to invest in now, as testing using Coreshell nanocoating technology with silicon-rich anode has yielded excellent results. This means that nanocoating technology could play a significant role in the future use of electric batteries, opening a robust market for the company.
In the second quarter, 30 hedge funds held positions in Ferroglobe PLC (NASDAQ:GSM), with total stakes amounting to $164.59 million. As of June 30, Hosking Partners emerged as the largest shareholder, holding a position valued at $48.8 million.
Ave Maria Focused Fund stated the following regarding Ferroglobe PLC (NASDAQ:GSM) in its fourth quarter 2023 investor letter:
“Ferroglobe PLC (NASDAQ:GSM) was added to the portfolio in the fourth quarter. Ferroglobe is a leading manufacturer of silicon metal, which is a critical input for hundreds of industrial and consumer applications. It was formed via a merger of two companies, but the integration initially went poorly, causing a decline in the company’s stock price. New management was brought in to rectify the situation. The new team successfully completed the integration, which lowered the ongoing costs of the operations and eliminated the company’s debt. Going forward, regulations in the United States and Europe should dramatically increase the production of solar panels. Silicon metal is an irreplaceable input for solar panels, and this new demand for silicon metal will make Ferroglobe’s revenue less cyclical. Now that Ferroglobe has a fortress balance sheet, management has room to enact a large share repurchase initiative. At the time of the initial investment, the Fund was able to purchase Ferroglobe for almost half the replacement cost of its assets. The Fund exited positions in Nvidia, Tyler Technologies, and Valvoline, in part, to fund the Ferroglobe purchase and increase the position sizes of some existing holdings.”
While we acknowledge the potential of GSM 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 GSM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
