In this article, we will take a detailed look at the 13 Cheap Penny Stocks to Buy According to Hedge Funds. To see more such stocks, click 5 Cheap Penny Stocks to Buy According to Hedge Funds.
Stocks are roaring as investors celebrate the Fed’s latest announcement saying it’s ready to begin cutting interest rates next year. While the Fed’s decision has caused a lot of stir among the market skeptics who question the motives behind the sudden pivot and warn against the possible implications of this move, the bulls believe now is the time to pile into stocks as they don’t see the rally stopping anytime soon. Oppenheimer’s John Stoltzfus, who is very optimistic on the stock market and believes the S&P 500 could touch 5,200 in 2024, said in a program on CNBC that the stock market rally of 2023 would continue in 2024 and it would not be limited to just the mega-cap tech stocks or the Magnificent Seven group, which includes companies like Meta Platforms Inc (NASDAQ:META), NVIDIA Corp (NASDAQ:NVDA) and Amazon.com Inc (NASDAQ:AMZN). The analyst also said that he does not believe the Fed would cut rates in the first quarter.
Wise investors have time and again said that bear markets provide an opportunity for long-term investors to buy and hold because after all bear markets do not tend to last long. A report by Mawer Investment provides an interest data point proving this:
“What people don’t realize, though, is that most downturns are reasonably minor and short lived. Since 1945, for example, the S&P 500 Composite Index has experienced, on average, declines of 5% or more three times a year, declines of 10% or more once a year, and declines of 15% or more once every four years. The length of those downturns ranged, on average, from about a month and a half, to four months, to nine months, respectively. True “bear markets”— when the S&P 500 declines 20% or more from its previous high—have occurred 14 times since 1946, and have lasted, on average, about a year.”
Photo by Ruben Sukatendel on Unsplash
Methodology
For this article we first used a stock screener to identify penny stocks (trading under $5) with PE ratios of less than 15. From this dataset we picked 13 stocks with the highest number of hedge fund investors.
13. Banco Bradesco SA (NYSE:BBD)
Number of Hedge Fund Investors: 15
Banco Bradesco SA (NYSE:BBD) is a cheap penny stock with a high dividend yield (over 5%). The Brazilian financial services company Banco Bradesco SA (NYSE:BBD) talked about its guidance and other important business updates during Q3 earnings call and said:
“Even considering that we grew during the quarter and we have not yet recovered in all portfolios by the same pace. It is a fact that lower origination and lower rates mix are still squeezing the client NII. We believe that we will get to normalized origination levels throughout the third quarter and throughout the year ’24. At this moment, we are operating below the guidance range.
All our reviews and reevaluation of credit models and policies have shown important results. The new credit vintages are still performing 50% better than the 2021 vintages. And we continue to monitor these delinquency ratios in the short run and the volumes. The new vintages already account for 57% of the individual’s portfolio in the retail banking segment. The quarter’s ALL was BRL9.2 billion. For credit provision expense it was 10.9% lower than the previous quarter, so this lowered the cost of risk to 4.2%. The year’s guidance range goes from BRL36.5 billion to BRL39.5 billion. At this time we are expecting to end the year close to the top as we indicated previously. Despite the improvement, we are still operating with a high level of cost of risk because this is a long-tailed process.”
Read the entire earnings call transcript here.
A total of 15 hedge funds in Insider Monkey’s database of 910 hedge funds shows that 15 funds had stakes in Banco Bradesco SA (NYSE:BBD). The most significant stakeholder of Banco Bradesco SA (NYSE:BBD) was Ken Fisher’s Fisher Asset Management which owns an $111 million stake in Banco Bradesco SA (NYSE:BBD).
12. Sibanye Stillwater Ltd (NYSE:SBSW)
Number of Hedge Fund Investors: 16
With a dividend yield of about 7% and a PE ratio of 4.6, Sibanye Stillwater Ltd (NYSE:SBSW) ranks 12th in our list of the cheap penny stocks to buy according to hedge funds.
Out of the 910 hedge funds in Insider Monkey’s database, 16 hedge funds had stakes in Sibanye Stillwater Ltd (NYSE:SBSW). The most significant stakeholder of Sibanye Stillwater Ltd (NYSE:SBSW) was Cliff Asness’s AQR Capital Management which owns a $31 million stake in Sibanye Stillwater Ltd (NYSE:SBSW).
11. VAALCO Energy, Inc (NYSE:EGY)
Number of Hedge Fund Investors: 16
VAALCO Energy, Inc (NYSE:EGY) is among the most popular penny stocks among the elite hedge funds tracked by Insider Monkey. The stock has a PE ratio under 15 and a dividend yield of 5.75%. During the third quarter VAALCO Energy, Inc’s (NYSE:EGY) adjusted EPS in the period came in at $0.07, missing estimates by $0.07. Revenue in the quarter jumped about 49% year over year to $116.27 million.
As of the end of the third quarter of 2023, 16 hedge funds out of the 910 funds in Insider Monkey’s database had stakes in VAALCO Energy, Inc. (NYSE:EGY).
10. Origin Materials Inc (NASDAQ:ORGN)
Number of Hedge Fund Investors: 16
Carbon-negative materials company Origin Materials Inc (NASDAQ:ORGN) ranks 10th in our list of the cheap penny stocks to buy according to smart money investors. In November, Origin Materials Inc (NASDAQ:ORGN) announced a restructuring and said it would cost about $2.7 million in charges in connection with a roughly 30% workforce reduction.
A total of 13 hedge funds tracked by Insider Monkey had stakes in Origin Materials Inc (NASDAQ:ORGN).
9. Nokia Oyj (NYSE:NOK)
Number of Hedge Fund Investors: 17
Nokia Oyj (NYSE:NOK) has been a popular but rather disappointing stock for investors over the past few years. Nokia Oyj (NYSE:NOK) shares have lost about 45% over the past five years. But analysts are hopeful that the 5G revolution would boost the stock. Back in October, Nokia Oyj (NYSE:NOK) maintained its FY23 outlook despite industry weakness and said it would lay off 14,000 employees by the end of 2026.
A total of 17 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in Nokia Oyj (NYSE:NOK). The most significant stakeholder of the firm during this period was Richard S. Pzena’s Pzena Investment Management which had a $160 million stake in Nokia Oyj (NYSE:NOK).
Among some other stocks poised to benefit from the 5G revolution are Meta Platforms Inc (NASDAQ:META), NVIDIA Corp (NASDAQ:NVDA) and Amazon.com Inc (NASDAQ:AMZN).
Artisan International Value Fund made the following comment about Nokia Oyj (NYSE:NOK) in its second quarter 2023 investor letter:
“Nokia Oyj (NYSE:NOK) is the world’s third-largest provider of telecommunications equipment. The company sells its products to service providers, such as AT&T and Vodaphone. While we have held the stock, new management has simultaneously improved competitiveness and reduced costs—a remarkable achievement that has resulted in improved growth and profitability. Despite that, the share price has declined, and the valuation multiple has shrunk below 10X forward earnings. The reason is that telecommunications operators are cutting back on investment. Higher interest rates, inflation and competition are eating into customer cash flows, resulting in less capital spending. For now, Nokia will experience reduced demand. At some point, the ever-increasing need for wire and wireless bandwidth will force service providers to increase investment. In addition, Nokia’s market share is improving due to geopolitical changes and improved market competitiveness. The share price declined by 15% during the quarter.”
8. Overseas Shipholding Group Inc. (NYSE:OSG)
Number of Hedge Fund Investors: 17
Oil tanker company Overseas Shipholding Group Inc. (NYSE:OSG) is one of the undervalued penny stocks popular among hedge funds. Last month Overseas Shipholding Group Inc. (NYSE:OSG) posted Q3 results. GAAP EPS in the quarter came in at $0.22. Revenue fell 6.2% year over year to $115.44 million.
Of the 910 hedge funds in Insider Monkey’s database, 17 had stakes in Overseas Shipholding Group Inc. (NYSE:OSG). The biggest stakeholder of Overseas Shipholding Group Inc. (NYSE:OSG) was Stephen C. Freidheim’s Cyrus Capital Partners which owns a $31 million stake in Overseas Shipholding Group Inc. (NYSE:OSG).
7. B2Gold Corp (NYSE:BTG)
Number of Hedge Fund Investors: 19
Canadian mining company B2Gold Corp (NYSE:BTG) ranks 7th in our list of the undervalued penny stocks popular among hedge funds.
As of the end of the third quarter of 2023, 19 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in B2Gold Corp (NYSE:BTG). The biggest stakeholder of B2Gold Corp (NYSE:BTG) was John Overdeck and David Siegel’s Two Sigma Advisors which owns a $34 million stake in B2Gold Corp (NYSE:BTG).
Unlike Meta Platforms Inc (NASDAQ:META), NVIDIA Corp (NASDAQ:NVDA) and Amazon.com Inc (NASDAQ:AMZN), B2Gold is a small stock with risks involved.
6. W&T Offshore, Inc. (NYSE:WTI)
Number of Hedge Fund Investors: 19
W&T Offshore, Inc. (NYSE:WTI) in the third quarter of 2023 earned $0.01 per share, missing estimates by $0.04. Revenue in the quarter fell by 46.6% year over year, still beating estimates by $3.52 million.
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Disclosure. None. 13 Cheap Penny Stocks to Buy According to Hedge Funds was initially published on Insider Monkey.
