We recently published a list of 10 Most Promising Penny Stocks According to Hedge Funds. In this article, we are going to take a look at where Grab Holdings Ltd. (NASDAQ:GRAB) stands against other most promising penny stocks.
Value in Small-Caps
With the current resilience of the bull market, there is optimism surrounding the potential for the S&P 500 to close at 5,700 or higher by year-end, as pointed out by some experts. This positive outlook is driven by expectations of the Fed cutting interest rates and stimulus measures being implemented in key global markets. The interaction between monetary policy, geopolitical factors, and market sentiment will be crucial in shaping market dynamics in the coming months. Investors are encouraged to stay informed as they navigate this evolving landscape. Tom Lee, Fundstrat co-founder, appeared on CNBC a few days back to discuss the staying power of the current bull market. His overall market outlook was discussed in one of our other articles, 8 Most Profitable Penny Stocks To Invest In, here’s an excerpt from it:
“…He attributed this potential growth to a dovish Fed beginning to cut rates and the stimulus measures being implemented in China, which he believes will positively impact the market. With significant cash still on the sidelines, Lee sees a favorable environment for stocks over the next 3 to 12 months.
Despite Lee’s bullish outlook, he acknowledged that small-cap stocks have exhibited weakness since the Fed began raising rates. He noted that while small caps are within a few percentage points of their all-time highs, they have not performed as well as expected. The market’s current risk appetite is mixed, and with the upcoming election and elevated oil prices contributing to uncertainty, investors may be hesitant to take on new risks.”
However, on October 11, Sebastien Page of T. Rowe Price joined ‘Closing Bell’ on CNBC to discuss the bullish case for international small caps. Sebastien Page expressed a cautiously optimistic outlook for the stock market as the year progresses, particularly in light of a hotter-than-expected Consumer Price Index report. Page indicated that he is looking for opportunities to add risk heading into year-end, aligning with the sentiment that while many investors are comfortable with economic fundamentals, they remain uneasy about high valuations. He noted that the investment committee at T. Rowe Price shares this perspective, emphasizing a balanced approach where they are more likely to add to risk assets rather than reduce exposure in the coming months.
Page highlighted that their current strategy includes a slight overweight of half a percent in stocks compared to bonds, which marks an increase in risk appetite compared to previous conversations over the last 18 months. He acknowledged that while the overall market multiple may appear expensive, it is skewed by the largest market-cap stocks. This suggests that there are still opportunities beyond mega-cap names, which have become too consensus-driven and costly.
Addressing concerns about valuations, Page pointed out that while the price-to-earnings ratio appears high, it is essential to consider the context. He mentioned that if one adjusts for return on equity, current valuations may fall below historical medians. Additionally, he noted that the average stock globally trades at a P/E of about 13, which aligns with its long-term average. This indicates that while some segments may seem overvalued, many stocks are positioned reasonably relative to their historical performance.
When discussing international small-cap stocks, Page explained that despite macroeconomic challenges outside the US, international small-caps offer compelling fundamentals. He highlighted that these stocks have a return on equity that is twice as high as their US counterparts, presenting an opportunity for contrarian investment. Page believes that as global markets begin to perform better amid a broader easing cycle, international small caps could play a significant role in portfolio diversification.
His insights reflect a strategic positioning for potential market broadening and highlight the importance of looking beyond mega-cap stocks to identify value in various sectors and regions. His approach suggests optimism about the market’s ability to navigate current challenges while capitalizing on emerging opportunities as we approach year-end.
Methodology
We sifted through Finviz to compile an initial list of the top penny stocks, with a share price under $5. From that list, we narrowed our choices to 10 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 Q2 2024.
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 customer enjoying the convenience of a mobile financial services transaction.
Grab Holdings Ltd. (NASDAQ:GRAB)
Share Price as of October 11: $3.63
Number of Hedge Fund Holders: 34
Grab Holdings Ltd. (NASDAQ:GRAB) is a leading Southeast Asian super app that offers services like ride-hailing, food delivery, payments, and financial services. It operates in 700 cities in 8 Southeast Asian countries.
In 2018, it acquired the Southeast Asian operations of Uber Technologies Inc (NYSE:UBER). Its digital banks segment is growing rapidly in Southeast Asia. Deposits and loans have increased significantly. It’s scaling the ecosystem, using AI, and investing in GenAI. It rolled out AI-powered DISH descriptions for automated engaging and descriptive text for menu items in 5 out of 8 markets at scale.
The company reported a 17.11% increase in Q2 2o24 revenue. The company’s 3 digital banks are fully operational, with deposits in GXS Bank in Singapore and Malaysia growing over 50% quarter-on-quarter to $730 million. GrabFin and its digital banks provided $2 billion in loans during the second quarter. Its near-monopoly position in Southeast Asia and growing user base have contributed to its recognition as one of the most innovative companies in the Asia-Pacific region.
It has seen a recent surge in its stock price, benefiting its institutional shareholders. The 4.3% increase has pushed its one-year return to a healthy 6.4%. Institutions, the largest shareholders, hold 42% of the company. The Top 9 Shareholders collectively own more than half the company. Insiders, owning 10% of the shares, have their interests aligned with shareholders. The General Public holds 21% while public companies and private equity firms collectively own the remaining 27% stake.
The company’s recent financial performance reinforces its bullish outlook. With a diverse investor base and positive sentiment from institutional shareholders, Grab Holdings Ltd. (NASDAQ:GRAB) is poised to capitalize on the region’s growing digital economy.
Overall, GRAB ranks 7th on our list of most promising penny stocks according to hedge funds. While we acknowledge the potential of GRAB as an investment, 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.
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Disclosure: None. This article is originally published at Insider Monkey.