In this article, we will take a look at the 5 cash-rich penny stocks hedge funds are buying. To see more such companies, go directly to 13 Cash-Rich Penny Stocks Hedge Funds Are Buying.
5. Citizens, Inc. (NYSE:CIA)
Operating Cashflow (TTM): 56.45M
Number of Hedge Fund Holders: 7
Citizens Inc. is a Texas-based insurance company that offers life and disability insurance products. As of the end of the third quarter, 7 hedge funds tracked by Insider Monkey reported having stakes in Citizens, Inc. (NYSE:CIA), compared to 11 funds in the previous quarter. Some of the notable hedge fund stakeholders of Citizens, Inc. (NYSE:CIA) include Thomas E. Claugus’ GMT Capital, Israel Englander’s Millennium Management and Jim Simons’ Renaissance Technologies. In November, Citizens Inc posted its third quarter results. Citizens, Inc. (NYSE:CIA)’s total premium revenue in the quarter jumped 1% to total $43.9 million.
In November, Citizens, Inc. (NYSE:CIA) also announced that it entered into a white-label partnership with The Titan Agency to market and sell Citizens’ newly developed life and final expense insurance products.
4. CleanSpark, Inc. (NASDAQ:CLSK)
Operating Cashflow (TTM): 71.44M
Number of Hedge Fund Holders: 7
CleanSpark is a US-based Bitcoin mining company. The stock has been suffering due to the bearish trends in the crypto market. It has lost about 70% in value over the past 12 months. Earlier this month, CleanSpark, Inc. (NASDAQ:CLSK) announced that it mined 464 Bitcoin (BTC-USD) in December 2022. CleanSpark, Inc. (NASDAQ:CLSK)’s annual production came in at 4,621 Bitcoins, which shows a whopping 200% growth. CleanSpark, Inc. (NASDAQ:CLSK) also said that it has 63,700 latest-generation Bitcoin miners deployed with a hashrate of 6.2 EH/s, up 13% from November 2022.
As of the end of the third quarter, 7 hedge funds tracked by Insider Monkey had stakes in CleanSpark, Inc. (NASDAQ:CLSK), compared to 5 funds in the previous quarter. Among the most notable funds having stakes in CleanSpark, Inc. (NASDAQ:CLSK) are Mark Coe’s Intrinsic Edge Capital (about $3 million stake) and Cliff Asness’ AQR Capital Management ($1.4 million stake).
3. OppFi Inc. (NYSE:OPFI)
Operating Cashflow (TTM): 219.52M
Number of Hedge Fund Holders: 10
Oppfi is an Illinois-based financial technology company. OppFi Inc. (NYSE:OPFI) says its target market is the 60 million US adults who lack access to traditional credit.
In the third quarter of 2022, OppFi Inc. (NYSE:OPFI)’s revenue jumped 35% on a YoY basis and beat analyst estimates by a whopping $14.59 million. Receivables in the quarter rose 39% to reach $407.7 million.
As of the end of the third quarter, 10 hedge funds tracked by Insider Monkey reported having stakes in OppFi Inc. (NYSE:OPFI), compared to 7 funds in the previous quarter.
2. Altice USA, Inc. (NYSE:ATUS)
Operating Cash Flow (TTM): 2.58B
Number of Hedge Fund Holders: 42
Altice is a media company that provides services such as television, Internet access and cable TV to about 4.9 million residential customers in the US. Altice is one of the most popular cash-rich penny stocks among the 920 hedge funds tracked by Insider Monkey. Of the 920 funds in our data, 42 hedge funds reported having stakes in Altice USA, Inc. (NYSE:ATUS) as of the end of the September quarter, compared to 35 funds in the previous quarter. However, the stock in November tanked to record lows after Altice USA, Inc. (NYSE:ATUS) posted weak Q3 results, mainly due to broadband subscriber losses and higher operating costs.
Investment firm UBS also cut its price target on the stock to $9 from $19 after the results. However, the firm maintained its Buy rating on the stock.
Here is what MPE Capital has to say about Altice USA, Inc. (NYSE:ATUS) in its Q2 2022 investor letter:
“Two (very) costly mistakes I’ve made over the last twelve months have been my investments in Altice USA and Poshmark. Both are down over 50% from my initial purchase price. I not only poorly appraised business quality, I also incorrectly appraised the intrinsic value of both of these companies. It should rarely end up the case that we pay over intrinsic value, at worst case we should never lose money on an investment. I will dive into one of these mistakes below and maybe dive into the other in a future letter. My thinking when buying Altice USA was that they operate as a duopoly in their main footprint, the New York Tri-State area. They provide a needs-based service: internet, video, and voice services. I figured this is a very stable business with high barriers to entry. Management seemed competent as well based on historical capital allocation decisions. I didn’t fully appreciate at the time how poorly positioned they were relative to Verizon Fios, as well as how fiercely competitive the business can get on promotions and customer acquisition.
Altice offers hybrid fiber coaxial (HFC) while Fios offers fiber-to-the-home (FTTH). FTTH is a far superior product, which has led to some share loss to Fios in the parts of their footprint that overlap. There have also been some subscriber losses in their other footprint due to new cable entrants and fixed wireless offerings.
My original thinking was that the video business will go to zero overtime due to continued pressure from services like Netflix. In hindsight, I overstated their free cash flows excluding the video business due to difficulties disaggregating their business results. This FCF delta is a huge contributor to the difference between my current and original estimates of intrinsic value. Now, it’s possible that the video business doesn’t go to zero; however, I have a hard time envisioning that many households in ten years will still subscribe to linear television.
After losing some subscribers and facing some headwinds, they are now reinvesting many billions over the next few years in order to fiberize the majority of their footprint. I think this is a great plan and it will hopefully cement their position as a true duopoly in the New York TriState area. However, in their other major footprint, new fiber entrants are coming in and competition will only intensify. There are also some new entrants entering this space like Starlink satellite internet and fixed wireless internet from tier one mobile carriers. I think these will generally be more expensive and inferior to FTTH; however, they may end up putting some pricing pressure on Altice overtime.”
1. UWM Holdings Corporation (NYSE:UWMC)
Operating Cashflow (TTM): 4.61B
Number of Hedge Fund Holders: 17
UWM Holdings is a Michigan-based mortgage lending company. The stock has gained about 2% over the past six months. The stock is one of the most attractive cheap dividend plays in the market. Its dividend yield stands at 10% as of January 12. In November, UWM Holdings Corporation (NYSE:UWMC) declared a $0.10/share quarterly dividend, in line with previous.
Last month, UWM Holdings agreed to buy a majority stake in NBA’s Phoenix Suns and the WNBA’s Phoenix Mercury.
As of the end of the third quarter, 17 hedge funds tracked by Insider Monkey reported having stakes in UWM Holdings Corporation (NYSE:UWMC), compared to 15 funds in the previous quarter. The total value of the hedge funds stakes in UWM Holdings is $13.4 million.
You can also take a peek at Top Stocks in Each Sector and Dow 30 Stocks List 2022.
