We recently compiled a list of the 10 Hot Penny Stocks to Buy Now. In this article, we are going to take a look at where Butterfly Network, Inc. (NYSE:BFLY) stands against the other hot penny stocks.
How Did Small Caps Do In Q4 2024?
On January 2, Royce Investment Partners published their analysis regarding the performance of the small caps during the fourth quarter of 2024. The report highlighted that small-cap stocks, represented by the Russell 2000 Index, achieved a modest gain of 0.3%, marking the second consecutive positive quarter. However, this performance lagged behind large-cap stocks, as the Russell 1000 Index rose by 2.7% in the same period. Francis Gannon, Co-Chief Investment Officer, and Managing Director, pointed out a unique “bowl-shaped” return pattern among US equities in the last quarter of 2024, with the Russell Microcap Index increasing by 5.9% and the Russell Top 50 Index by 5.5%.
Gannon highlighted that while December’s results were disappointing for many stocks, particularly small-cap and micro-cap indexes, the overall year was strong for small-cap performance, with an annual increase of 11.5%. However, on the other hand, this also marked the eighth consecutive year where small-caps underperformed relative to large-caps. Historically speaking the data reveals that the Russell 2000 has only outperformed the Russell 1000 in four of the last twenty years, with a significant underperformance streak noted since 2016. Gannon acknowledged that this is a long period of wait to see small cap leadership but he sees promising signs for the leadership to be just around the corner.
While explaining his bullish sentiment Gannon discussed the dynamics of volatility in the US equity markets. He contrasted large-cap and small-cap stocks’ performance in 2024 and noted that large-cap stocks experienced relatively low volatility throughout the year, as indicated by the CBOE Volatility Index. Apart from a brief spike in early August, large-cap stocks maintained a notably stable performance, mirroring trends observed in 2023. However, on the other hand, small-cap stocks exhibited a slightly different volatility profile. Gannon highlights that historically, about 42% of trading days in the Russell 2000 see price movements of 1% or more. In 2024, this figure was marginally lower at 41%, indicating that small-caps remained somewhat volatile but not significantly. He emphasizes that this trend of volatility is expected to change, predicting a return to more typical levels of volatility across stocks in 2025. He encouraged investors to view increased volatility not merely as a source of fear but as an opportunity for long-term investment strategies.
Our Methodology
To create the list of 10 hot penny stocks to buy now, we used the Finviz stock screener. Using the screener we first aggregated a list of penny stocks (price between $1-$5) and then sorted it in ascending order of their 6-month performance. Next, we ranked these stocks based on the number of hedge fund holders, in ascending order, sourced from Insider Monkey’s Q4 2024 database. Please note that the data was collected on February 20, 2025.
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 363.5% since May 2014, beating its benchmark by 208 percentage points (see more details here).
A doctor looking at a ultrasound system with a Compass software interface, demonstrating the sophistication of the device.
Butterfly Network, Inc. (NYSE:BFLY)
Price: $4.53
6-Months Performance: 391.85%
Number of Hedge Fund Holders: 26
Butterfly Network, Inc. (NYSE:BFLY) is a pioneering digital health company focused on revolutionizing medical imaging through its innovative, portable ultrasound technology. Its core offering is its Ultrasound-on-Chip technology, which powers its handheld ultrasound devices, including the second-generation Butterfly iQ+ and the third-generation Butterfly iQ3. These devices enable whole-body imaging with a single probe, making ultrasound more accessible and affordable compared to traditional systems.
On January 21, Oppenheimer raised the price target on the firm from $3.5 to $5, while keeping the Overweight rating on the stock. The firm noted that Butterfly Network, Inc. (NYSE:BFLY) is transitioning from merely selling ultrasound devices to becoming an outcomes-based disease-management service provider. This hybrid approach could create substantial revenue opportunities and allow for cross-fertilization across various healthcare settings.
The preliminary Q4 2024 results show that the revenue has grown by around 35% year-over-year. This momentum is anticipated to sustain as the company expands its product offerings and transforms its business model into a service-oriented approach. It is the best hot penny stock to buy now.
Overall BFLY ranks 1st on our list of the hot penny stocks to buy now. While we acknowledge the potential of BFLY as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BFLY 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.
Disclosure: None. This article is originally published at Insider Monkey.
