In this article, we discuss 12 Cash-Rich Penny Stocks To Buy According To Hedge Funds.
Shares priced under $5, commonly referred to as penny stocks, are a tempting bet for investors chasing big returns with minimal upfront investment. They typically come from smaller companies worth less than $300 million and are known for their wild price swings, low liquidity, and high risk. While they can deliver massive gains, they are just as likely to lead to steep losses due to limited financial data and unpredictable price movements. Speculative investors are drawn to them, but smart investing means balancing these high-risk picks with more stable assets.
Sometimes these stocks are undervalued, offering early investors a shot at big rewards if the company takes off. For example, many investors regret not buying up shares of Jeff Bezos’ e-commerce giant when the company went public in 1997, with shares priced under $2. By 1998, it had already shed its penny stock label, and the last time it dropped under $100 was back in 2009. Similarly, investors lament not picking up the iPhone maker’s shares back in 2003, when it was trading at $6.56 and almost a penny stock.
Penny stocks typically come from small-cap and mid-cap companies, which have historically delivered higher returns than large-cap stocks due to their growth potential and higher risk. However, in recent years, these smaller companies have struggled to keep up, as large-cap stocks, especially tech giants, have significantly outperformed. One primary reason is the shifting composition of major stock indices. The broader market’s dominance by a few mega-cap companies has skewed overall market performance. If the Magnificent Seven stocks were excluded each year, the market’s lead over the small-cap Russell would shrink considerably.
Small-cap stocks ended 2024 with their second consecutive positive quarter, rising 0.3% in the fourth quarter, as reported by Royce Investment Partners. However, they still could not keep up with large-cap stocks, as the Russell large cap index gained 2.7%. Despite some volatility, small-cap stocks reached a new high in late November, more than three years after their last peak, making it one of the longest recovery periods in the index’s history. In 2025, market volatility is expected to return to normal levels. But instead of seeing it as a threat, long-term investors view volatility as an opportunity. History shows that after periods of high market turbulence, small-cap stocks often deliver stronger returns than their large-cap counterparts. Keeping that in mind, let’s take a look at some cash-rich penny stocks which are Wall Street favorites as well.
A close-up of a portfolio of stocks, emphasizing the broad equity portfolio of the company.
Our Methodology
For this article, we used the Finviz stock screener to find penny stocks with strong cash reserves. We filtered for companies with stocks priced under $5 and a current ratio (CR) above 2, which indicates they have more assets than liabilities, due to high cash reserves, receivables, or inventory. After that, we manually looked for companies with a trailing twelve-month (TTM) operating cash flow of over $20 million as of December 31, 2024 and picked 12 stocks with the highest cash reserves. We also included hedge fund sentiment as of Q4 2024 and we’ve ranked the list in ascending order of the number of hedge fund holders in each firm.
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).
12. Prospect Capital Corporation (NASDAQ:PSEC)
TTM Operating Cash Flow as of December 31, 2024: $557,725,000
Number of Hedge Fund Holders: 10
Share Price as of March 4: $4.35
Prospect Capital Corporation (NASDAQ:PSEC) is a business development company that invests in middle-market and later-stage businesses. The company specializes in different types of financing, including secured loans, mezzanine debt, private equity, and real estate. Its diversified portfolio spans industries like manufacturing, energy, healthcare, and media. On January 31, 2025, the company announced that it invested $65 million in Taos Footwear through a mix of senior secured loans and preferred equity. Taos is a well-known brand for stylish and supportive footwear. Prospect’s managing director, Robert Melman, stated that PSEC is excited about backing a brand with a strong customer base and innovative products. It is one of the best cash-rich stocks to invest in.
In the December quarter, PSEC’s interest income accounted for 91% of total investment income, demonstrating a strong recurring revenue profile. Payment-in-kind income declined to $20 million, down 39% from the prior quarter and nearly 50% from June 2024. The company has long-term debts that will be paid off over the next 27 years. It has promised $62 million in future investments, but $29 million of that can be decided at its own discretion. As of December 2024, Prospect Capital Corporation (NASDAQ:PSEC) had $1.9 billion in available cash and credit, and $4.8 billion of its assets were free from any debt or obligations.
According to Insider Monkey’s Q4 data, 10 hedge funds were bullish on Prospect Capital Corporation (NASDAQ:PSEC), compared to 5 funds in the last quarter. Dmitry Balyasny’s Balyasny Asset Management was the leading stakeholder of the company, with 2.4 million shares worth $10.6 million.
11. FIGS, Inc. (NYSE:FIGS)
TTM Operating Cash Flow as of December 31, 2024: $81,162,000
Number of Hedge Fund Holders: 14
Share Price as of March 4: $4.575
FIGS, Inc. (NYSE:FIGS) is a California-based direct-to-consumer healthcare apparel company that designs and sells scrubs, outerwear, footwear, and accessories for healthcare professionals. FIGS opened its second retail store, the Rittenhouse Community Hub, in Philadelphia on September 19. This space was designed to give healthcare professionals a unique shopping experience, complete with an embroidery workshop, a lounge, and a café. Philadelphia was a natural choice for the hub, given its large healthcare community and proximity to major hospitals.
FIGS, Inc. (NYSE:FIGS) finished 2024 on a strong note, with Q4 revenue reaching $151.8 million, up 4.8% from last year, supported by repeat orders from loyal customers. US revenue dipped slightly by 0.5%, but international sales soared 45.2% to $24.3 million. The company generated $64.1 million in free cash flow during 2024 and grew its active customer base to 2.7 million, up 3% on a year-over-year basis. Additionally, the company’s board just approved $50 million to its stock buyback program. It is one of the best cash-rich stocks to monitor.
According to Insider Monkey’s fourth quarter database, 14 hedge funds reported owning stakes in FIGS, Inc. (NYSE:FIGS), the same as the prior quarter. Marshall Wace LLP is the biggest stakeholder of the company, with 1.48 million shares worth over $9 million.
10. Olaplex Holdings, Inc. (NASDAQ:OLPX)
TTM Operating Cash Flow as of December 31, 2024: $142,445,000
Number of Hedge Fund Holders: 15
Share Price as of March 4: $1.375
Established in 2014, Olaplex Holdings, Inc. (NASDAQ:OLPX) is headquartered in Santa Barbara, California. It is a hair care company that develops and sells products for hair treatment, maintenance, and protection. Its offerings include shampoos, conditioners, oils, masks, and serums. Olaplex is refreshing its brand while staying focused on science-based hair care. The company is strengthening its digital presence and visual identity to align with its commitment to innovation and professional stylists. OLPX ranks 10th on our list of the best cash-rich stocks to invest in.
In Q4, Olaplex Holdings, Inc. (NASDAQ:OLPX)’s net sales declined 9.8% year-over-year to $100.7 million. The loss in sales resulted from a combination of weaker international performance, delayed impact from brand marketing investments, and higher competition during the holiday season. On the bright side, the balance sheet stayed strong. With lower working capital needs and better operational discipline, the company’s cash reserves grew by $120 million to $586 million in 2024. Inventory was also trimmed down by $20.7 million to $75.2 million at year-end. Heading into 2025, the company feels confident about its inventory and plans to keep investments in line with sales growth.
Among the hedge funds tracked by Insider Monkey in Q4, 15 funds were bullish on Olaplex Holdings, Inc. (NASDAQ:OLPX), compared to 18 funds in the preceding quarter. Jim Simons’ Renaissance Technologies was the biggest stakeholder of the company, with 3 million shares valued at $5.3 million.
9. Cytek Biosciences, Inc. (NASDAQ:CTKB)
TTM Operating Cash Flow as of December 31, 2024: $25,379,000
Number of Hedge Fund Holders: 19
Share Price as of March 4: $4.315
Cytek Biosciences, Inc. (NASDAQ:CTKB) develops advanced cell analysis tools used in biomedical research and clinical applications. Its products include flow cytometers, cell sorters, imaging systems, and reagent kits designed for immune cell profiling. CTKB ranks 9th on our list of the best cash-rich stocks to buy. On December 30, 2024, the company’s board approved a new $50 million share repurchase program, set to begin on January 1, 2025, following the expiration of the current program at the end of 2024. The program will run through December 31, 2025.
In 2024, Cytek Biosciences, Inc. (NASDAQ:CTKB) saw a 4% revenue increase, hitting $200.5 million, supported by robust service revenue and international sales. The company also saw an 8.5% rise in Full Spectrum Profiling and imaging instrument placements, outpacing the broader flow cytometry market. To return value to shareholders, Cytek repurchased 4 million shares in 2024 and commenced a new $50 million buyback program in late December.
According to Insider Monkey’s fourth quarter database, 19 hedge funds reported owning stakes in Cytek Biosciences, Inc. (NASDAQ:CTKB), compared to 12 funds in the last quarter. Lei Zhang’s Hillhouse Capital Management was the biggest stakeholder of the company, with 6.65 million shares worth $43.2 million.
8. Paramount Group, Inc. (NYSE:PGRE)
TTM Operating Cash Flow as of December 31, 2024: $264,926,000
Number of Hedge Fund Holders: 22
Share Price as of March 4: $4.36
Paramount Group, Inc. (NYSE:PGRE) is a real estate investment trust that owns and manages high-end office buildings in New York and San Francisco. On January 22, 2025, the company announced that it sold a 45% stake in its 600,000 square foot office building at 900 Third Avenue in Midtown Manhattan for $210 million, retaining a 55% ownership and management role. The deal will strengthen the company’s financial position. It is one of the best cash-rich stocks to watch out for.
In Q4 2024, Paramount Group, Inc. (NYSE:PGRE) reported a net loss of $38.6 million or $0.18 per share, a significant improvement from the $205.6 million loss in Q4 2023. In the fourth quarter, the company leased 108,824 square feet, with 75,821 square feet being second generation space. The new leases had an average term of 11.1 years, with tenant improvements and leasing commissions averaging $15.74 per square foot per year, or 18.4% of the starting rent.
Among the hedge funds tracked by Insider Monkey, 22 funds were long Paramount Group, Inc. (NYSE:PGRE) at the end of December 2024, compared to 21 funds in the prior quarter. John Khoury’s Long Pond Capital was the largest stakeholder of the company, with 10 million shares worth nearly $50 million.
7. Expensify, Inc. (NASDAQ:EXFY)
TTM Operating Cash Flow as of December 31, 2024: $23,877,000
Number of Hedge Fund Holders: 23
Share Price as of March 4: $3.5250
Expensify, Inc. (NASDAQ:EXFY) is an Oregon-based cloud-based expense management platform that helps individuals and businesses track spending, manage corporate cards, pay bills, send invoices, and even book travel. It is one of the best cash-rich stocks to buy. On February 27, 2025, the company announced a new $50 million share repurchase program, replacing its previous plan set to expire in March 2025. CFO Ryan Schaffer noted that with Expensify’s strong cash flow and zero debt, stock buybacks are a smart way to give back to shareholders.
Expensify, Inc. (NASDAQ:EXFY) brought in $37 million in revenue for Q4 2024, up 5% from both the previous quarter and last year. Paid membership saw a slight increase to 687,000, while interchange revenue jumped 62% year-over-year to $5.1 million, driven by strong growth in its card business. The company generated $7.4 million in operating cash flow and $6.3 million in free cash flow, narrowing its net loss to $1.3 million and getting closer to profitability.
According to Insider Monkey’s fourth quarter database, 23 hedge funds held stakes in Expensify, Inc. (NASDAQ:EXFY), compared to 14 funds in the prior quarter. D E Shaw was the biggest stakeholder of the company, with 2.4 million shares valued at $8.10 million.
6. Maravai LifeSciences Holdings, Inc. (NASDAQ:MRVI)
TTM Operating Cash Flow as of December 31, 2024: $29,893,000
Number of Hedge Fund Holders: 25
Share Price as of March 4: $3.065
Maravai LifeSciences Holdings, Inc. (NASDAQ:MRVI) provides products for drug development, diagnostics, and biopharma research. The company specializes in nucleic acid production, providing RNA and DNA products for gene therapy, vaccines, and molecular diagnostics. It also focuses on biologics safety testing, offering tools to detect impurities in biopharmaceutical manufacturing. MRVI is one of the best cash-rich stocks to monitor.
On January 28, 2025, Maravai LifeSciences Holdings, Inc. (NASDAQ:MRVI) acquired key assets from Molecular Assemblies to strengthen its work in next-gen mRNA and CRISPR therapies. CEO Trey Martin emphasized Molecular Assemblies’ innovative enzymatic DNA synthesis technology and Maravai’s plans to enhance it with TriLink and Alphazyme resources.
Among the hedge funds tracked by Insider Monkey’s fourth quarter database, 25 funds reported owning stakes in Maravai LifeSciences Holdings, Inc. (NASDAQ:MRVI), compared to 31 funds in the prior quarter. 12 West Capital Management was the biggest stakeholder of the company, with 11.6 million shares worth $63 million.
5. GoodRx Holdings, Inc. (NASDAQ:GDRX)
TTM Operating Cash Flow as of December 31, 2024: $155,017,000
Number of Hedge Fund Holders: 27
Share Price as of March 4: $4.90
GoodRx Holdings, Inc. (NASDAQ:GDRX) ranks 5th on our list of the best cash-rich stocks to buy. It is a California-based company that helps people save money on their medical prescriptions by letting them compare prices and access discounts. On February 18, GoodRx achieved HITRUST i1 Certification for 2025, proving its commitment to keeping user data secure. Hosted on AWS, the platform meets high cybersecurity standards to protect against emerging threats. This certification reinforces GoodRx’s leadership in secure and reliable healthcare savings.
GoodRx Holdings, Inc. (NASDAQ:GDRX) had a strong 2024, with fourth quarter revenue hitting $198.6 million and full-year revenue reaching $792.3 million, up 6% from last year. Prescription transaction revenue increased by 5%, while subscription revenue dropped 8% due to the end of a retailer-specific savings program. Pharma manufacturer solutions also saw impressive growth, with revenue for the segment up 26%. The company turned a profit, reporting $16.4 million in net income after a loss of $8.9 million in 2023.
Among the hedge funds tracked by Insider Monkey in Q4, 27 funds were bullish on GoodRx Holdings, Inc. (NASDAQ:GDRX), compared to 20 funds in the prior quarter. David Rosen’s Rubric Capital Management was the biggest stakeholder of the company, with 5.80 million shares valued at $27 million.
4. Sabre Corporation (NASDAQ:SABR)
TTM Operating Cash Flow as of December 31, 2024: $70,594,000
Number of Hedge Fund Holders: 31
Share Price as of March 4: $3.93
Sabre Corporation (NASDAQ:SABR) is a Texas-based global travel technology company that connects airlines, hotels, and travel agencies through its software solutions. It offers reservation systems, data insights, and hotel management tools. On March 4, Sabre Corporation and Coforge Limited announced that they are taking their partnership to the next level with a multi-year deal focused on speeding up product development and rolling out more AI-powered solutions. Together, the companies aim to deliver faster innovation and smarter technology in the travel space. It is one of the best cash-rich stocks to invest in.
Sabre Corporation (NASDAQ:SABR) posted $715 million in Q4 revenue, up 4% from 2023, driven by strong Travel and Hospitality Solutions performance. The company launched SabreMosaic, secured significant deals with Virgin Australia and Riyadh Air, and strengthened its airline and agency partnerships. It also met its Hospitality Solutions Adjusted EBITDA target and refinanced $1.9 billion in debt. Free cash flow for Q4 was $67 million, compared to $77 million in the third quarter of 2023.
According to Insider Monkey’s Q4 data, 31 hedge funds were bullish on Sabre Corporation (NASDAQ:SABR), compared to 25 funds in the prior quarter. Terry Smith’s Fundsmith LLP was the biggest stakeholder of the company, with 21.5 million shares worth $78.4 million.
3. Hertz Global Holdings, Inc. (NASDAQ:HTZ)
TTM Operating Cash Flow as of December 31, 2024: $2,224,000,000
Number of Hedge Fund Holders: 35
Share Price as of March 4: $4.04
Hertz Global Holdings, Inc. (NASDAQ:HTZ) is a Florida-based global vehicle rental company operating under the Hertz, Dollar, and Thrifty brands. It ranks 3rd on our list of the best cash-rich stocks. On December 5, 2024, Hertz announced a $500 million issuance of additional 12.625% First Lien Senior Secured Notes due 2029, increasing its total outstanding notes to $1.25 billion. The proceeds will be used to repay outstanding borrowings under its revolving credit facility, cover consent fees for amending debt terms, and support general corporate purposes.
Hertz Global Holdings, Inc. (NASDAQ:HTZ) recorded just over $2 billion in revenue for the fourth quarter and an adjusted EBITDA loss of $357 million. Revenue was down 7% from the same period last year because of lower rental volumes. However, the company stayed focused on efficiency, improving fleet utilization for the first time in 2024. Hertz also made progress on its fleet rotation, selling over 100,000 vehicles. As for cash flow, the company has a strong liquidity position with $1.8 billion available, about $500 million in cash and $1.2-$1.3 billion left on its credit line. While some cash burn is expected in the first half of 2025 due to fleet updates, Hertz expects to start generating cash again later in the year.
According to Insider Monkey’s fourth quarter database, 35 hedge funds were bullish on Hertz Global Holdings, Inc. (NASDAQ:HTZ), compared to 30 funds in the last quarter.
2. Marqeta, Inc. (NASDAQ:MQ)
TTM Operating Cash Flow as of December 31, 2024: $58,170,000
Number of Hedge Fund Holders: 37
Share Price as of March 4: $4.115
Marqeta, Inc. (NASDAQ:MQ) provides a cloud-based platform offering card issuing, transaction processing, and banking features like direct deposit and bill pay. It serves industries such as financial services, e-commerce, and buy now, pay later providers. Marqeta’s platform processed nearly $300 billion in payments in 2024. On February 25, the company announced that it is acquiring TransactPay, a UK-based payments company, to expand its card program management in the UK and Europe.
Marqeta, Inc. (NASDAQ:MQ) had a strong fourth quarter, with total process volume reaching $80 billion, a 29% jump from the same period last year. The net revenue grew 14% to $136 million, and this growth was driven by a strong business mix, better than anticipated holiday performance, and a partner incentive. Marqeta ended the quarter with $1.1 billion in cash and investments and is focused on expanding its banking partnerships while improving operational efficiency.
According to Insider Monkey’s fourth quarter database, 37 hedge funds were bullish on Marqeta, Inc. (NASDAQ:MQ), compared to 33 funds in the last quarter. Jim Simons’ Renaissance Technologies was the leading stakeholder of the company, with 11.5 million shares worth $43.8 million.
1. Lumen Technologies, Inc. (NYSE:LUMN)
TTM Operating Cash Flow as of December 31, 2024: $4,333,000,000
Number of Hedge Fund Holders: 44
Share Price as of March 4: $4.795
Lumen Technologies, Inc. (NYSE:LUMN) is a networking company that provides internet, cloud, security, and communication services to businesses and consumers worldwide. On December 17, 2024, Prometheus Hyperscale announced that it is teaming up with Lumen to power its energy-efficient data centers and keep up with the rising demand for AI. Lumen’s network will provide fast, reliable connectivity while supporting Prometheus’ commitment to sustainability across its US facilities.
Lumen Technologies, Inc. (NYSE:LUMN) bounced back in Q4 2024 with an $85 million net income, a major turnaround from the $1.995 billion loss in Q4 2023, which was largely due to a $1.9 billion goodwill impairment charge. Earnings per share also improved to $0.09 from a loss of $2.03 in the prior-year quarter. Cash flow was also robust, with $688 million generated from operations in Q4, and free cash flow for the year came in at $1.386 billion, a huge improvement compared to the negative $878 million cash flow in 2023. It is one of the best cash-rich stocks to look out for.
Among the hedge funds tracked by Insider Monkey in Q4 2024, 44 funds reported owning stakes in Lumen Technologies, Inc. (NYSE:LUMN), up from 26 funds in the last quarter.
Overall, Lumen Technologies, Inc. (NYSE:LUMN) ranks first on our list of the best cash-rich penny stocks to buy. While we acknowledge the potential of LUMN to grow, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LUMN 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 Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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.
