On February 4, Brian Jacobsen, the chief economist at Annex Wealth Management, joined a discussion on CNBC’s ‘Power Lunch’ to analyze the impact of tariff threats on markets and supply chains. He thinks that large-cap growth is the way to play tariffs. The conversation centered around whether markets are becoming desensitized to tariff talk or if they remain vulnerable due to the ongoing uncertainty. Jacobsen suggested that the truth lies somewhere in between. Markets might be somewhat inured to tariff discussions, but until these tariffs manifest in data, specifically that which affect profit margins, their full impact remains uncertain. He emphasized that investors face a catch-22: with elevated margins across large-cap stocks like those in the S&P 500, there’s concern about whether companies can pass on price increases without compressing profit margins.
Small-cap stocks are particularly vulnerable due to weaker profit margins and less ability to absorb increased costs from tariffs. Historically, during trade tensions like those seen from 2018 to 2019, large-cap growth stocks performed well because many received exclusions from tariffs. Jacobsen speculated that this might happen again if actual tariffs are imposed. For investors navigating this complex environment, he advised sticking to investment fundamentals and focusing on long-term valuations rather than short-term market fluctuations. He emphasized considering margin pressures and adjusting growth expectations accordingly while seeking a margin of safety for investments. So while markets may show some resilience against tariff threats due to past experiences with similar uncertainties, ongoing fears about potential tariffs continue to affect supply chains and investor strategies negatively. Investors should prioritize fundamental analysis over immediate market reactions when making decisions amidst such volatility.
That being said, we’re here with a list of the 8 best large-cap penny stocks to invest in.
Methodology
We sifted through the Finviz stock screener to compile a list of the top stocks trading between a market cap of $10 billion and $200 billion and at a share price of less than $5. We then selected the 8 penny stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024. The hedge fund data was sourced from Insider Monkey’s database, which tracks the moves of over 900 elite money managers.
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).
8 Best Large Cap Penny Stocks to Invest in
8. Banco Santander Brasil (NYSE:BSBR)
Number of Hedge Fund Holders: 7
Share Price as of February 14: $4.49
Market Cap as of February 14: $16.75 billion
Banco Santander Brasil (NYSE:BSBR) offers financial products and services to individuals, businesses, and corporations in Brazil and internationally. Operating through its Commercial and Global Wholesale Banking segments, it provides loans, financing, cash management, investment services, and capital market solutions, among other offerings. It distributes its services through a multi-channel network, which includes branches, ATMs, online platforms, and mobile banking.
In 2024, the company’s Consumer Finance division grew by 20%, exceeding market growth. This division provides loans for individuals and is focused on vehicle financing. This expansion was coupled with an emphasis on credit quality, with 80% of the portfolio holding top credit ratings (8, 9, and 10). This was an improvement since 2021. Holding a substantial 20-21% market share in vehicle financing, the Consumer Finance division navigated rising funding costs with disciplined pricing and selective client acquisition.
A major factor in the division’s success is its complete digital transformation. The 100% digital platform streamlines the process for both dealers and customers. This enhances efficiency and customer experience. This focus positions the Consumer Finance division for continued success.
7. Telefonica (NYSE:TEF)
Number of Hedge Fund Holders: 9
Share Price as of February 14: $4.34
Market Cap as of February 14: $24.47 billion
Telefonica (NYSE:TEF) provides a range of telecommunications services across Europe and Latin America. Its offerings span mobile, fixed, and internet services, which include broadband, fiber, and voice-over IP. Beyond traditional telecom, it also provides video/TV services, smart connectivity solutions, IoT products, and digital services such as cloud, security, and big data.
The company’s Tech division is experiencing substantial growth, with €2 billion in revenue over the past year, which represents a 12% increase. The rising bookings are also promising, which indicates accelerated growth shortly. Q3 2024 bookings alone surged 40% year-on-year due to major private sector contracts. This influx of large contracts, particularly in finance, healthcare, and manufacturing, is building a robust backlog. This translates to increased recurring revenue, making the Tech division’s growth sustainable over the long term.
The Tech division is seeing positive shifts in its revenue composition. Managed and professional services, along with platform revenue, are contributing more significantly. Furthermore, the division’s reliance on hard currency revenue has grown to 87%, which strengthens its financial position. All these factors combine to paint a positive picture for the company’s continued expansion.
