We recently compiled a list of the 10 Best Penny Stocks to Buy Under $1. In this article, we are going to take a look at where Forte Biosciences, Inc. (NASDAQ:FBRX) stands against the other penny stocks under $1.
Penny stocks are defined by the Securities and Exchange Commission (SEC) as stocks that trade for less than $5 per share. They exhibit high price volatility due to their low pricing. Even a slight movement in the stock price can translate into a substantial percentage gain. Despite this advantage, it’s important to be aware of the risks associated with penny stocks. A study conducted by the Securities and Exchange Commission (SEC) found that most penny stocks are speculative and have low liquidity, which makes it challenging to trade them. Only around one in 1,000 penny stocks goes on to become profitable mid-cap or large-cap businesses, according to the study. Therefore, even if penny stocks seem attractive, investing in them needs a thorough assessment of the dangers as well as the possible benefits.
Penny stocks may provide large profits, with particular industries expected to develop in 2024 as a result of technological improvements, legislative changes, and altering customer tastes. These dynamic industries may be of interest to investors looking to diversify their portfolios or seek strong growth potential.
Among the industries where one might look for penny stocks to purchase in 2024 is renewable energy. It has experienced tremendous growth in recent years. The global renewable energy industry was estimated at $1.21 trillion in 2023, with a compound annual growth rate (CAGR) of 17.2% between 2024 and 2030, per Grand View Research. In 2023, Asia Pacific had a noteworthy revenue share of 40.98%.
The IEA’s Renewables 2023 study states that in 2023, the capacity of renewable energy worldwide increased by 50% to approximately 510 GW, with solar photovoltaics accounting for three-quarters of these increases. Leading the way, China added twice as much solar PV as the rest of the world in 2022 and had a 66% rise in wind power. According to IEA 50, renewable energy capacity increased at unprecedented rates in Brazil, the United States, and Europe. As per the latest IEA research, under present policies and market circumstances, worldwide renewable capacity would rise by two and a half times by 2030. Hence, investors may interact with innovative companies at the forefront of solar, wind, and other renewable technologies by purchasing penny stocks in the renewable energy space.
Biotech penny stocks also provide a unique investment opportunity for investors interested in medical innovation and the potential of major breakthroughs in healthcare. Recent analysis by investment bank Jefferies indicates that biotechnology businesses raised about $10 billion in follow-on stock offerings in January and February, signaling increased optimism in the industry.
The size of the worldwide biotechnology industry was assessed to be worth $1.38 trillion in 2023 and is expected to grow at a CAGR of 11.8% from 2024 to 2033, predicted to be worth around $4.25 trillion, per Precedence Research. Currently, the biotechnology industry consists of 673 publicly traded stocks, including penny stocks, with a combined market capitalization of $1,511.21 billion.
Investors interested in biotech stocks may question which sectors are prone to buyouts. Laura Chico, Senior Biotechnology Analyst at Wedbush Securities, noted key areas to keep an eye out for possible buyouts:
“Obesity has been a really big theme in 2023, and will probably continue for the foreseeable future, but across the area, at least in these recent M&A transactions, it’s been really broad-based, and I think that’s really a testament to the innovation in the space. We have several deals in oncology, immunology, inflammation, neuro, and even rare diseases. So it’s not just within certain verticals at this point.”
Methodology:
In this article, we first used a stock screener to list down all stocks trading under $1 (as of the writing of this article) with over 40% institutional ownership. From the resulting dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 920 hedge funds in Q1 2024 to gauge hedge fund sentiment for stocks.
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).
A medical scientist in a laboratory, hard at work creating a new drug for autoimmune diseases.
Forte Biosciences, Inc. (NASDAQ:FBRX)
Number of Hedge Fund Investors: 8
Forte Biosciences, Inc. (NASDAQ:FBRX) is a clinical-stage biopharmaceutical company that focuses on autoimmune and associated diseases. It is developing the FB-102 program to treat autoimmune diseases such as vitiligo and alopecia areata.
This company’s stock price was $261 when it launched six years ago, and now it is worth $0.53, decreasing by 99.8% as of July 10. Currently, its market capitalization is $19 million, and back then, it was worth about $203.00 million. Forte Biosciences’ (NASDAQ: FBRX) stock price fell drastically following the failure of its key product, FB-401, in clinical studies, resulting in a loss of investor confidence. Following this, there was institutional selling, as significant investors such as BVF, Orbimed, and Perceptive Advisors sold all of their holdings, demonstrating doubt about the company’s future. The net income has also significantly decreased by 126.74% in 2023 from 2022, and operating expenses increased.
Overall, with just $30.44 million in cash as of July 10, Forte Biosciences is facing severe financial restrictions. The firm is still not profitable, with a significant burn rate. It has lost over $28.33 million in cash since 2020, and its sales have not been strong enough to make up for this deficit. Given the competitive market and unpredictable clinical outcomes, the company expects to require a large amount of funding to develop its early-stage product, FB-102. This is a single asset company with a very focused bet on a very early stage asset for which there is little evidence that it has an advantage over existing treatments.
Forte had a $0.9 million increase in payroll and related expenditures from a greater workforce in Q1 2024, as well as an increase in trial expenses of $1.4 million as a result of the FB102 program’s development. Nonetheless, R&D spending dropped from $4.8 million to $4.4 million, mostly as a result of a $2.7 million drop in manufacturing expenses. Net loss per share in terms of revenue improved from $0.32 to $0.16, however, it was still negative.
Despite the challenges, the single ascending dose (SAD) component of the FB102 phase 1 study was completed successfully in 2023. According to the company, FB102 has shown a favorable safety profile thus far, even in the MAD cohorts. Forte Biosciences’s underlying company is fundamentally improving as a result of increased earnings projections and the ensuing rating upgrade. Earnings for Forte Biosciences are expected by analysts to improve in the coming year, from -$0.59 to -$0.55 per share, generating -$0.88 EPS over the last year.
Analysts have given FBRX a “strong buy” rating. The average Wall Street analyst price target for Forte Biosciences, Inc. (NASDAQ:FBRX) is $3.38, which presents a 537.74% upside potential from the current price of $0.53.
8 hedge funds made investments in this company, according to Insider Monkey’s Q1 database. With 3,624,548 shares worth $2.52 million, Eashwar Krishnan’s Tybourne Capital Management held the largest stake in the company.
Overall FBRX ranks 9th on our list of the best penny stocks to buy under $1. You can visit 10 Best Penny Stocks to Buy Under $1 to see the other penny stocks that are on hedge funds’ radar. While we acknowledge the potential of FBRX as an investment, our conviction lies in the belief that some 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 FBRX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
Disclosure: None. This article is originally published at Insider Monkey.
