In this article, we will take a look at the 16 most undervalued penny stocks to invest in. To see more such companies, go directly to 5 Most Undervalued Penny Stocks To Invest In.
US stock markets jumped recently as investors cheered the much-awaited Nvidia’s results which showed the chip company enjoying strong sales on the back of the AI-related boom. In the short-term, the results may have defied many warnings which called the latest AI boom a hype. Overall, the market seems to be in euphoria as tech stocks continue to jump. There have been many skeptical takes from many circles warning that the real effects of the latest rate hikes would be visible in the coming months and could cause slower growth and recession. But investors are brushing aside these warnings for now.
The AI boom not a phenomenon that could be overlooked or ignored. And perhaps this AI boom is exactly what is keeping the markets in an optimistic mood. Recently, talking to Yahoo Finance, Marco Argenti, Goldman Sachs’s chief information officer, said he believes AI is “probably one of the biggest revolutions or changes that I have ever seen. We believe that AI could be a profound disrupter not only of our industry but all digital and all information and knowledge industries in general.”
The analyst said that AI could become a translator between machines and programmers and help workers increase their productivity. He believes technology is no longer relevant only in back office. It has become a part of agenda of companies and businesses. He believes the short-term challenges for AI remain making sure the information and answers shared by generative AI are accurate.
There has been much talk about how a handful of tech companies are accounting for most of the gains of the stock market. Despite this concentration of value, there are notable analysts betting that major tech companies will continue to outperform. Recently, Wedbush Securities Managing Director Scott Devitt gave bullish ratings to eight major technology stocks which have already made a lot of moves earlier this year. These companies include Meta (META), Alphabet (GOOGL), and Amazon (AMZN).
Devitt believes Alphabet will benefit from AI and current trends due to its ads innovation, YouTube experience and Cloud. The analyst said that Google has always been a leader in advertising innovation and its YouTube video experience is one of the best in the industry. The analyst set a $160 price target on Alphabet, which shows a strong upside potential from its current level ($132).
For Meta, Devitt believes Instagram would be a great driver for the stock, in addition to AI. The analyst said Instagram could account for over 50% of Meta’s revenue by 2025.
But these are expensive, mature stocks. What about beginner investors with limited budget who want to invest in small companies which are yet to see huge gains in stock value?
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Our Methodology
For this article we scanned Insider Monkey’s database of 910 hedge funds and picked 16 penny stocks with PE ratios under 15 which have the highest number of hedge fund investors. That means these are the best undervalued penny stocks to invest in according to hedge funds.
Most Undervalued Penny Stocks To Invest In
16. Banco Bradesco S.A. (NYSE:BBD)
Number of Hedge Fund Holders: 14
Banco Bradesco S.A. (NYSE:BBD) is a high-dividend penny stock. The Brazilian bank’s shares were owned by 14 hedge funds tracked by Insider Monkey as of the end of the second quarter of 2023. The biggest stakeholder of Banco Bradesco S.A. (NYSE:BBD) during this period was Oaktree Capital Management of Howard Marks which owns a $107 million stake in the company.
During its latest earnings call, Banco Bradesco S.A. (NYSE:BBD)’s management said the following about its future expectations and Brazil’s economy:
“Regarding what the Brazilian economy can be, we opened 2023 with economists talking about a GDP growth of 0.8%. And now we’re talking about maybe 2.2% of GDP increase for 2023. And this will certainly carry a tail into 2024. ’24 already indicates to have a better scenario interest rate, it’s low, yes, of course, it’s from 325 [ph] is small, but it’s the beginning of a reduction. And the reduction of interest rate seems to be already a given the drop on the liquid [ph] rate is already agreed in a percentage that is higher than we expected from 25 bps to 50 bps, even higher maybe, so that also gives us very good expectations for the future. For what’s going to unfold the expectations we have for the year 2024 seems much better. So I think all of these variables combined give us the expectation that we will have a better second half of ’23 and the year 2024 also better with lower delinquency better growth of loan portfolios with quality, with IPOs and follow-ons already coming in and being able to increase revenues, the insurance company has been going through a good phase.”
15. Nokia Oyj (NYSE:NOK)
Number of Hedge Fund Holders: 15
Nokia Oyj (NYSE:NOK) is perhaps one of the most popular companies still trading under $5. Over the past several years Nokia Oyj (NYSE:NOK) has gone practically nowhere. It has lost about 31% in the period. Still, analysts are hopeful that Nokia Oyj (NYSE:NOK) could leverage its strengths in the 5G market. As of the end of the second quarter of 2023, 15 hedge funds tracked by Insider Monkey had stakes in Nokia Oyj (NYSE:NOK).
14. AdTheorent Holding Company, Inc. (NASDAQ:ADTH)
Number of Hedge Fund Holders: 15
Digital ads services company AdTheorent Holding Company, Inc. (NASDAQ:ADTH) ranks 14th in our list of the most undervalued penny stocks to buy according to hedge funds. As of the end of the second quarter of 2023, 15 hedge funds tracked by Insider Monkey were long AdTheorent Holding Company, Inc. (NASDAQ:ADTH).
AdTheorent Holding Company, Inc. (NASDAQ:ADTH)’s management said the following about its future expectations in 2023 and beyond during the company’s latest earnings call:
“We’re guiding towards a second half that’s going to return us to growth. We’re guiding towards at the midpoint. Our third quarter would be the highest third quarter in AdTheorent history in terms of revenue. We have a lot of very specific data that we see regarding customer adoption, regarding pipeline, high probability pipeline, bookings at this point year-over-year, and we are very encouraged. The new customers in health, the new customers in self-service, the new customers across our audience products, they’re driving that demand, and we’re very excited about where we’re headed. The strategy that we implemented, we’ve done a number of things over the last you know four quarters. We invested in these products, because we believe they will drive customer adoption and revenue growth, and we are excited to be at a point to say that those results are going to start showing up in our financial results in the third quarter.”
13. Lufax Holding Ltd (NYSE:LU)
Number of Hedge Fund Holders: 16
China-based financial services company Lufax Holding Ltd (NYSE:LU) was in 16 hedge fund portfolios as of the end of the second quarter, according to Insider Monkey’s database of 910 hedge funds.
Lufax Holding Ltd (NYSE:LU) fell recently after the company’s Q2 total income missed analysts’ price estimates.
12. Nordic American Tankers Limited (NYSE:NAT)
Number of Hedge Fund Holders: 16
Oil tanker firm Nordic American Tankers Limited (NYSE:NAT) is a high-yield dividend penny stock that also looks undervalued when its PE ratio is taken into account.
As of the end of the second quarter of 2023, 16 hedge funds in Insider Monkey’s database of 910 funds were long Nordic American Tankers Limited (NYSE:NAT). The biggest stakeholder of Nordic American Tankers Limited (NYSE:NAT) during this period was Paul Marshall and Ian Wace’s Marshall Wace LLP which owns a stake worth about $20 million in the company.
11. Banco Santander, S.A. (NYSE:SAN)
Number of Hedge Fund Holders: 16
Spanish bank Banco Santander, S.A. (NYSE:SAN) ranks 11th in our list of the most undervalued penny stocks to buy. A total of 16 hedge funds in Insider Monkey’s database of 910 funds were long Banco Santander, S.A. (NYSE:SAN) as of the end of the June quarter. The biggest stakeholder of Banco Santander, S.A. (NYSE:SAN) was Ariel Investments of John W. Rogers which had a $25 million stake in the company.
Banco Santander, S.A. (NYSE:SAN) jumped in July after the company posted strong Q2 results and reaffirmed its 2023 financial targets.
10. Baytex Energy Corp. (NYSE:BTE)
Number of Hedge Fund Holders: 17
Canadian energy company Baytex Energy Corp. (NYSE:BTE) posted Q2 results in July. GAAP EPS in the second quarter came in at C$0.36. Revenue in the period fell about 30% year over year to C$598.76 million.
As of the end of the second quarter of 2023, 17 hedge funds in Insider Monkey’s database were long Baytex Energy Corp. (NYSE:BTE).
9. B2Gold Corp. (NYSE:BTG)
Number of Hedge Fund Holders: 17
Canadian mining company B2Gold Corp. (NYSE:BTG) is another hedge fund favorite penny stock that is undervalued.
8. Overseas Shipholding Group, Inc. (NYSE:OSG)
Number of Hedge Fund Holders: 17
Headquartered in Florida, oil tanker company Overseas Shipholding Group, Inc. (NYSE:OSG) ranks 8th in our list of the most undervalued penny stocks to invest in according to hedge funds. A total of 17 hedge funds were long Overseas Shipholding Group, Inc. (NYSE:OSG) as of the end of the second quarter, according to Insider Monkey’s proprietary database.
7. W&T Offshore, Inc. (NYSE:WTI)
Number of Hedge Fund Holders: 18
W&T Offshore, Inc. (NYSE:WTI) earlier in August posted mixed Q2 results. Adjusted EPS in the period came in at -$0.08, missing estimates by $0.02. Revenue in the quarter came in at $126.2 million, surpassing estimates by $2.59 million.
Kingdom Capital Advisors made the following comment about W&T Offshore, Inc. (NYSE:WTI) in its Q4 2022 investor letter:
“W&T Offshore, Inc. (NYSE:WTI) was our favorite trading vehicle, taking advantage of its volatile nature and gunslinging risk management department, to ride multiple >100% moves in the stock during 2022. WTI is a Gulf of Mexico E&P with a colorful CEO, no capital return plan, a valuable pile of reserves, and a slug of calls on the price of natural gas. We found this to be an exciting trade to express our belief in energy stocks, and a dangerous place to stay after sentiment peaks.”
6. Destination XL Group, Inc. (NASDAQ:DXLG)
Number of Hedge Fund Holders: 18
Retail company Destination XL Group, Inc. (NASDAQ:DXLG) is one of the undervalued stocks bought by hedge funds. Destination XL Group, Inc. (NASDAQ:DXLG)’s PE ratio stands at 3.37 as of August 23. Out of the 18 hedge funds that had stakes in Destination XL Group, Inc. (NASDAQ:DXLG) as of the end of the second quarter, Chuck Royce’s Royce & Associates had the biggest stake in the company with $6.4 million worth of DXLG shares.
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Disclosure: None. 16 Most Undervalued Penny Stocks To Invest In is originally published on Insider Monkey.
