In this article, we will discuss the 12 Best Multibagger Penny Stocks to Buy Now.
Investors in the United States and abroad are girding themselves for a turbulent week amid a looming tariff war. President Trump imposed tariffs on imports from Mexico, China, and Canada on February 1—these are the country’s largest trading partners. Goods crossing the border from Mexico and Canada will attract a 25% duty and 10% for those from China. Washington’s justification for this policy action is that it will address trade imbalances, illegal immigration, and drug trafficking.
The problem is that such policy direction doesn’t often sit well with investors. Soon after the tariff announcement, major stock indexes saw significant drops. The S&P 500 is down 0.5% after registering an impressive run since Trump’s inauguration. The Nasdaq has shaved off 0.28%, while the Dow is down 0.75% from the previous close.
In other words, the tariffs are bad news for the US stock market. Experts, such as Jeremy Siegel, believe that we are likely to see more uncertainty and heightened volatility as a result. “Tariffs are the only negative aspect of Trump’s economic agenda. They can lead to higher prices for consumers and potential disruptions in the supply chain. This creates uncertainty and volatility in the stock market,” he told CNBC’s Closing Bell.
Periods of uncertainty often do not favor small caps, according to BlackRock’s Christopher DiPrimio and Travis Cooke. They write, “As a result of some of this more cyclical sector exposure, the Russell 2000 has lagged the S&P 500, especially during periods of market volatility and increased uncertainty.” This is also evident in the latest drops. The Russell 2000 dropped more than major stock indices in the past few hours after the activation of Trump’s tariffs.
Small-cap companies typically derive a larger portion of their revenue domestically. And when uncertainties arise from events like a tariff war, these companies are insulated from external shocks. As such, the potential for higher earnings will make small-cap stocks increasingly attractive to investors.
That aside, small-cap valuations are now attractive. Small-cap stocks are currently trading at attractive valuations, with price/earnings (P/E) ratios slightly above their long-run average of 16.7 times (excluding companies with negative earnings) but still more than 30% below large-cap indices.
Geoff Dailey and colleagues at BNP Paribas Asset Management offer an apt summary of the multibagger potential of US small caps. They write that “The outlook for US small-capitalization stocks is better now than it has been for several years. The main reasons include the US interest rate cutting cycle (small caps tend to benefit), currently attractive valuations, the reshoring trend, and (expected) merger & acquisition activity.”
Beyond these factors, the current market environment offers unique opportunities for penny stock investors. Corporate earnings are showing resilience despite economic headwinds, with companies in the Russell 2000 reporting better-than-expected results. Recent data shows that approximately 58.6% of the companies in the Russell 2000 have reported earnings above analyst expectations for Q4 2024. Besides that, the outlook for 2025 suggests that M&A activity in the small-cap space will pick up momentum. This combination creates a compelling setup for small cap stock investments in 2025.
An investor confidently checking stock market fluctuations on a laptop computer.
Our Methodology
For this article, we used a stock screener to first identify stocks priced under $5 that have posted huge gains over the past year (at least 100%). From the obtained dataset, we selected penny stocks with the highest percentage gains in stock performance over the past year (as of February 5). The list is ranked based on stock performance, from lowest to highest.
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).
12 Best Multibagger Penny Stocks to Buy Now
12. Porch Group, Inc. (NASDAQ:PRCH)
Stock Performance Over Last Year: 102.91%
Number of Hedge Fund Holders: 7
Share Price as of February 5: $4.52
Porch Group, Inc. (NASDAQ:PRCH) provides homeowners insurance with vertical software solutions, creating a unique platform in the property services sector. The company’s innovative approach to home services sets it apart in a fragmented market.
A game-changing milestone arrived with the formation of the Porch Insurance Reciprocal Exchange (PIRE), which transformed its insurance business model. The $105 million transaction streamlines operations and promises higher margins and more predictable financial performance.
The financial picture brightened considerably in Q3 2024. Porch Group, Inc. (NASDAQ:PRCH) swung to a $14.4 million profit from a $5.7 million loss year-over-year. Despite revenue dipping 14% to $111.2 million due to one-time factors, core metrics tell a different story – the insurance segment’s attritional loss ratio improved dramatically to 21% from 32%, while premium per policy jumped 25%. The company also repurchased $43 million of notes for just $20 million, strengthening its balance sheet for future growth.
11. Innovid Corp. (NYSE:CTV)
Stock Performance Over Last Year: 107.95%
Number of Hedge Fund Holders: 11
Share Price as of February 5: $3.14
Innovid Corp. (NYSE:CTV) develops software solutions for creating, delivering, measuring, and optimizing digital advertising across connected TV, linear TV, and digital platforms. The company stands out for its independent status in the competitive CTV advertising space.
The company’s recent strategic moves are a testament to its market leadership. For instance, Innovid Corp. (NYSE:CTV) was selected as one of two partners for impression verification within Netflix’s ad-supported platform. The launch of Harmony Reach & Frequency with Roku marks another significant milestone.
Financial performance has been impressive. Innovid Corp.’s (NYSE:CTV) Q3 2024 revenue increased 6% year-over-year to $38.3 million, and net income improved to $4.7 million from a $2.7 million loss in the prior year. The company’s focus on profitability is evident in its ninth consecutive quarter of Adjusted EBITDA margin expansion, reaching 22%. Recent partnerships with industry giants like LG Ad Solutions and a 13% year-over-year jump in CTV impression volume suggest Innovid’s momentum in shaping the next generation of TV advertising is just beginning.
