In this article, we discuss the 7 best rising penny stocks to invest in along with the impact of recent Federal Reserve rate cuts on small-cap stocks.
Fed’s Rate Cut Sets the Stage for a Strong Q4
In an episode of Market Storylines on the Inside the Icehouse Podcast feed by Intercontinental Exchange, Jay Woods, Chief Global Strategist at Freedom Capital Markets, discussed Fed rate cuts and the Q4 outlook. Woods discussed the latest Fed rate cut and said that the market absorbed the rate cuts quite positively, with the S&P 500 reaching new all-time highs.
Woods mentioned that, historically, when markets hit new highs in September, the fourth quarter tends to perform well, especially in election years. As the fourth quarter approaches, he highlighted that sectors such as real estate, utilities, and industrials have led the market in the third quarter, while technology has lagged. However, it may rebound in Q4.
Woods also emphasized the importance of upcoming economic data, including the ISM manufacturing report, jobless claims, and the U.S. unemployment report, which will give insight into the labor market and the potential impact of the rate cuts.
Small and Mid-Cap Stocks Set for Major Gains
Ryan Dietrich, Chief Market Strategist at Carson Group, joined Yahoo Finance for an interview on September 29, where he expressed optimism about the stock market’s future. He believes the rate cut was necessary and should have been smaller earlier.
He mentioned that the labor market is showing signs of slowing, with initial jobless claims at a four-month low, and forward earnings for the S&P 500 improving. However, he does not foresee a recession.
Dietrich highlighted that historically, rate cuts near market highs have been followed by strong market performance, with an average annual return of around 14%. He thinks the broader market could see 12-15% gains in the next year, while small and mid-cap stocks might outperform with over 20% returns. His firm is especially focused on mid-cap stocks, which tend to perform well after rate cuts.
While the upcoming election may cause some volatility, especially in October, Dietrich remains confident that markets will stabilize afterward, as they usually react better once uncertainty passes. He expects a strong end-of-year rally and advises investors to remain diversified and take advantage of any market weakness.
With that, we look at the 7 Best Rising Penny Stocks To Invest In Now.
7 Best Rising Penny Stocks To Invest In Now
Our Methodology
For this article, we used stock screeners to identify over 60 stocks under $5 with a 1-month share price gain of over 10%, as of September 30. The best rising penny stocks are listed in ascending order of their hedge fund sentiment, which was taken from Insider Monkey’s database of over 900 elite hedge funds.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7 Best Rising Penny Stocks To Invest In Now
7. New Gold Inc. (NYSE:NGD)
1-Month Stock Price Performance: 26.92%
Number of Hedge Fund Holders: 21
New Gold Inc. (NYSE:NGD) is an intermediate gold mining company engaged in the exploration and operation of mineral properties across Canada. It is focused primarily on gold, silver, and copper deposits. The company ranks 7th among our best rising penny stocks to invest in.
It has established itself with key assets such as the Rainy River mine in Northwestern Ontario and the New Afton project in South-Central British Columbia.
In the second quarter, New Gold (NYSE:NGD) reported production figures that met expectations, as it produced 68,598 ounces of gold and 13.6 million pounds of copper. The performance led to a strong cash flow from operations amounting to $100 million, alongside a free cash flow of $20 million.
The positive cash flow situation shows its financial health and marks a sustained period of free cash flow generation since the beginning of the year. Over the first half of 2024, gold production accounted for 42% of the company’s guidance midpoint, while copper production represented 49%, which aligned well with prior forecasts.
New Gold (NYSE:NGD) expects production to increase in the near future, and all-in-sustaining costs are projected to decrease in the latter part of the year. The company remains on track to meet its 2024 consolidated production goals, aiming for 310,000 to 350,000 ounces of gold and 50 to 60 million pounds of copper. The operational efficiency and strong cash flow generation suggest a solid financial foundation for future growth.
6. The RealReal, Inc. (NASDAQ:REAL)
1-Month Stock Price Performance: 33.74%
Number of Hedge Fund Holders: 21
The RealReal, Inc. (NASDAQ:REAL) runs an online marketplace and is engaged in the resale of luxury items in the United States. It provides a diverse range of products, including women’s and men’s fashion, jewelry, and watches. Its client base is made up of conscious consumers seeking high-quality goods at more accessible prices.
It has a member base exceeding 37 million and 13 retail locations. It has successfully sold over 40 million items, which establishes it as a key player in the luxury resale sector. The company takes its place on our list of the best rising penny stocks to invest in now.
In the second quarter, the company demonstrated strong performance with a revenue of $144.93 million, which showed a year-over-year increase of 10.8%. The revenue beat market estimates by over $5 million.
Although the company reported a non-GAAP loss per share of $0.13, it still managed to surpass estimates by $0.01. It is important to know that net loss improved by $76 million compared to the previous year, and adjusted EBITDA rose by $46 million, further emphasizing the operational improvements being made.
The second quarter also saw a 4% increase in gross merchandise value (GMV). Analysts are optimistic about the company’s potential for growth, particularly following strategic changes implemented by new CEO John Koryl over the past 18 months.
On September 16, Northland initiated coverage of The RealReal, Inc. (NASDAQ:REAL) with an Outperform rating and a $6 price target. The firm mentioned that the company’s strategy changes have “completely changed REAL‘s trajectory,” and show the significant shifts in operations that are expected to translate into enhanced financial performance.
The firm called the company a leading digital marketplace in the expanding luxury resale market, which is set for further growth as consumers increasingly value sustainability and quality.
According to our database, 21 hedge funds held stakes in The RealReal (NASDAQ:REAL) in the second quarter, with positions worth $169.455 million. Woodson Capital Management is the biggest shareholder in the company and has a position worth $16.747 million as of Q2.
