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.
6. Lloyds Banking Group (NYSE:LYG)
Number of Hedge Fund Holders: 10
Share Price as of February 14: $3.20
Market Cap as of February 14: $48.55 billion
Lloyds Banking Group (NYSE:LYG) offers banking and financial services in the UK and internationally. Through its multiple segments, it provides services ranging from personal banking and mortgages to corporate lending, insurance, and investment management. It also offers digital banking services and operates under several brands, including Lloyds Bank, Halifax, Bank of Scotland, and Scottish Widows.
It’s pursuing a digital transformation currently, which includes an AI Centre of Excellence. This is to improve customer experience and reduce costs. On January 30, the company appointed Magdalena Lis, who has a PhD in Computational Linguistics (AI) from the University of Copenhagen, as head of responsible development and use of AI. Lis, with over 15 years of AI experience, will focus on enhancing products with AI while establishing safeguards for its safe deployment.
While the financials don’t isolate the impact of just these transformations, they do reflect the overall progress. For the first nine months of 2024, the bank posted a £3.8 billion profit after tax and £12.7 billion in net income. Q3 2024 specifically saw income growth, including a 2% increase in net interest income, reaching £3.2 billion. The bank is investing heavily in new initiatives, including AI, with a target of £0.7 billion in additional strategic income for 2024. These efforts are part of a larger plan to enhance customer experience, boost efficiency, and deliver stronger returns.
5. Wipro Ltd. (NYSE:WIT)
Number of Hedge Fund Holders: 11
Share Price as of February 14: $3.63
Market Cap as of February 14: $37.97 billion
Wipro Ltd. (NYSE:WIT) is a global IT consulting and business process services company. It operates through IT Services and IT Products segments. It offers services like digital strategy, application development, cloud solutions, and business process outsourcing. The IT Services segment serves industries worldwide, while the IT Products segment focuses on the Indian market by providing third-party IT products like enterprise platforms, networking solutions, and security systems.
Its IT Services segment generated $2.63 billion in Q3 2024. This represents a slight 0.1% sequential increase, but a 0.7% decrease year-on-year. However, the company secured $3.5 billion in new bookings, which suggests stronger future performance. It’s now prioritizing large deals, closing 17 such contracts worth $1 billion in Q3. One example that illustrates this strategy is the multi-million dollar, five-year contract with Etihad Airways, announced on January 30, for IT transformation and cost optimization. Wipro Ltd. (NYSE:WIT) will deploy its FullStride Cloud and integrate GenAI for IT operations with support from its UAE Innovation Lab.
The company is heavily investing in AI, with 50,000 employees now certified in advanced AI, together with ongoing investments in AI tools and platforms. This commitment positions Wipro Ltd. (NYSE:WIT) to capitalize on the growing demand for AI-related services. For the next quarter, it forecasts IT Services revenue between $2.602 billion and $2.655 billion.
4. Nokia Oyj (NYSE:NOK)
Number of Hedge Fund Holders: 16
Share Price as of February 14: $4.99
Market Cap as of February 14: $26.81 billion
Nokia Oyj (NYSE:NOK) provides mobile, fixed, and cloud network solutions globally. It operates through four segments: Network Infrastructure, Mobile Networks, Cloud and Network Services, and Nokia Technologies. It offers products and services like fixed and IP networking solutions, optical and submarine networks, and mobile technology. It also provides cloud and network services, enterprise solutions, and licenses intellectual property.
Its Network Infrastructure segment drove significant growth in Q4 2024, with net sales up 17% year-over-year. All units contributed, but IP networks were the star performers and surged 24%. This was driven by improved trends among its service provider customers and increased demand in North America and India.
The company expects this momentum to continue into 2025, predicting strong growth for Network Infrastructure. On February 5, Nokia Oyj (NYSE:NOK) and StarHub announced the completion of a nationwide 10 Gbps fiber network rollout in Singapore. This network uses Nokia’s technology and makes StarHub the first operator globally with a fully software-based access network. To further capitalize on the Network Infrastructure segment, the company is investing more in its IP networks business, aiming for an additional €1 billion in sales by 2028, particularly in the data center market.
3. Ambev (NYSE:ABEV)
Number of Hedge Fund Holders: 19
Share Price as of February 14: $1.87
Market Cap as of February 14: $29.41 billion
Ambev (NYSE:ABEV) produces, distributes, and sells beverages like beer, soft drinks, and other alcoholic and non-alcoholic products. It operates in Brazil, Central America and the Caribbean, Latin America South, and Canada. It offers well-known beer brands like Skol, Brahma, Budweiser, and Corona, as well as soft drinks and other beverages under brands such as Guaraná Antarctica, Gatorade, and Pepsi. It distributes products through third-party distributors and a direct distribution system.
Its Brazil operations were the star of its Q3 2024 earnings, with premium beer leading the charge. This segment, which includes brands like Corona, Spaten, and Original, experienced explosive growth, with each brand’s volume surging over 20%. This translates to significant revenue gains and highlights Brazil’s increasing consumer preference for premium beers. Specifically, Corona, Spaten, and Original each saw volume growth exceeding 25%.
The premium beer segment’s strength is crucial for the company’s future growth. As Brazilian consumers continue to trade up to higher-priced options, this segment offers potential for expansion. Ambev’s (NYSE:ABEV) established brands position it well to capitalize on this trend and drive future profitability.
2. Banco Bradesco (NYSE:BBD)
Number of Hedge Fund Holders: 22
Share Price as of February 14: $2.09
Market Cap as of February 14: $11.06 billion
Banco Bradesco (NYSE:BBD) offers banking products and services to individuals, corporations, and businesses in Brazil and internationally. Operating through its Banking and Insurance segments, it provides services like various types of accounts, loans, credit cards, insurance, investment products, and foreign exchange services.
Its loan portfolio reached nearly BRL 980 billion in Q4 2024, growing by almost 12% year-over-year, which demonstrated substantial commercial traction. Growth was particularly strong in individual loans, up 13.3%, with high-income clients leading the charge. The MSME (micro, small, and medium-sized enterprises) segment also saw expansion, with total growth of 28% and small business loans specifically growing by almost 20%. This loan portfolio growth directly fueled a 5.4% increase in net interest income.
The bank’s focus on careful risk management has allowed it to maintain a healthy portfolio and deliver solid results. Banco Bradesco (NYSE:BBD) expects loan growth to continue, but with a more conservative target of 7-9% for 2025 due to macroeconomic uncertainties. Its strategy focuses on using data and technology to improve credit models and ensure responsible growth in this area.
1. Grab Holdings Ltd. (NASDAQ:GRAB)
Number of Hedge Fund Holders: 39
Share Price as of February 14: $4.96
Market Cap as of February 14: $19.64 billion
Grab Holdings Ltd. (NASDAQ:GRAB) operates a super-app platform across Southeast Asia, which includes Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. Its ecosystem connects driver and merchant partners with consumers, which provides access to mobility, delivery, digital financial services, and enterprise solutions through a single platform.
The company’s Deliveries segment is a powerhouse of growth. In Q3 2024, Deliveries GMV (gross merchandise value) reached $2,965 million, growing by 16% year-on-year. This acceleration from 14% growth in the previous quarter underscores the segment’s strong momentum. The company’s strategic emphasis on affordability and high-value services is attracting a broader customer base. The GrabUnlimited loyalty program continues to drive engagement, with subscribers spending 4x more and exhibiting 3x higher frequency compared to non-subscribers.
Cross-selling between GrabFood and GrabMart is also effective. Mart’s growth, outpacing Food by 1.7x, is boosting overall Deliveries performance. Notably, users who utilize both Food and Mart services demonstrate a 5x higher order frequency and a 2x higher retention rate, highlighting the synergy between these offerings. Grab Holdings Ltd. (NASDAQ:GRAB) is also actively expanding its merchant services, including facilitating dine-in options and providing advertising solutions. These initiatives not only enhance the platform’s value proposition but also contribute to the Deliveries segment’s growth.
While we acknowledge the growth potential of Grab Holdings Ltd. (NASDAQ:GRAB), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GRAB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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