We recently compiled a list of the 10 Best Bank Penny Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Itaú Unibanco Holding S.A. (NYSE:ITUB) stands against the other bank penny stocks.
2024 was another strong year for US banking giants. According to a report by the Financial Times, the four biggest banks in the country are on course to grab their largest share of the industry since 2015. As of September 2024, they collectively reported around $88 billion in profits during the first nine months of the year, representing 44% of the American banking industry’s profits.
In further encouraging signs for the industry, Moody’s in December upgraded the global banking industry from negative to stable for the first time since 2023. It cited monetary adjustments and interest rate cuts among G-20 countries as reasons behind the upgrade. The credit rating agency expects these measures to improve asset quality and liquidity in the banking system.
READ ALSO: 10 Best Bank Stocks With High Dividends and 10 Best Bank Stocks To Invest In For the Long Term.
The Federal Reserve on December 18 announced a further quarter-point cut, reducing the central bank’s target interest rate to between 4.25% and 4.5%. This was the third cut for the year. The Feds also projected two more cuts for 2025. While higher interest rates generally allow banks to earn more, they can dry up the demand for more loans when they remain high for too long.
Moreover, Donald Trump’s victory in the presidential elections has also raised hopes of lax regulations in the financial sector amid growing concerns about antitrust scrutiny and capital requirements slowing down investment banking and lending revenues. Financial analyst Mike Mayo believes Trump’s win will be a ‘regulatory game changer’ with reduced oversight and a freer market, benefiting banks by driving revenues and loan growth. A more business-friendly environment is also likely to boost banks’ bottom line.
However, some analysts also warn of the risks of ongoing geopolitical conflicts in Europe and the Middle East, which are resulting in uncertainty around the outlook of the global economy. Val Srinivas, Senior Research Leader at Deloitte, made the following remarks in the firm’s annual banking outlook positions for 2025:
“Bank executives will welcome 2025 with mixed emotions. While inflationary pressures have subsided and interest rates are dropping, subpar economic growth and continuing geopolitical shocks will likely give bank CEOs anxiety.”
Increasing trade tensions between the United States and China, with growing protectionist policies can also hurt investment flows in 2025. Following his election victory, Trump has vowed to impose steep tariffs on imports from Canada, China, and Mexico, which could increase costs for manufacturers.
Last month, in a post on his Truth Social platform, the President-elect threatened the European Union (EU) with tariffs if it does not buy more oil and gas from the US. The spokesperson for the 27-nation bloc, which already relies on Washington for most of its energy needs, stated that the EU was open to negotiations.
Methodology
We sifted through screeners to identify stocks in the banking sector that had a share price of under $5 as of the close of day on Friday, January 3, 2025. From there, we selected the 10 stocks with the highest number of hedge fund investors, based on Insider Monkey’s database of over 900 prominent hedge funds as of Q3 2024.
The 10 best bank penny stocks have been ranked in ascending order based on the number of hedge funds holding stakes in them. Where two or more stocks were tied on hedge fund sentiment, we used a higher market cap as a tiebreaker between them.
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).
An executive in a suit walking through a lobby of *Regional Bank* building.
Itaú Unibanco Holding S.A. (NYSE:ITUB)
Share Price as of the close of January 3: $4.87
Number of Hedge Fund Holders: 26
Itaú Unibanco Holding S.A. (NYSE:ITUB) is a Brazilian financial services company, headquartered in Sao Paulo. It is the largest banking institution in Latin America, with over $555 billion in assets in 2023, and enjoys a global presence across 19 countries. According to Brand Finance, ITUB is also the most valuable company in Latin America, valued at $8.7 billion as of 2023.
ITUB operates as a full-service, universal bank, offering a wide range of services through several channels. Through its business partnerships, it is able to provide regular discounts, promotions, and other exclusive advantages to its customers to address their daily activities beyond the banking ecosystem.
On November 5, Itaú Unibanco Holding S.A. (NYSE:ITUB) announced financial results for the third quarter of fiscal 2024. It reported quarterly managerial recurring results of BRL 10.7 billion, up 20% year-over-year. The consolidated return on equity (ROE) stood at 22.7%, while in Brazil it was measured at 23.8%. The company’s loan portfolio was also up 1.9% from the last quarter, and 10% compared to the third quarter of 2023.
ITUB’s financial margin with clients was also up 8.2% from last year, reflecting the company’s impressive revenue generation capacity. Another highlight from the quarter was that Itaú Unibanco Holding S.A. (NYSE:ITUB) met its 2019 goal of reaching BRL 400 billion in structuring capital markets operations a year and a half early, in June 2024, instead of the end of 2025.
The company has also been working to enhance its digital presence. It has decided to do away with having seven different apps with separate login methods to two apps, the Super App and Ion, with a single login method. This should help improve customers’ digital experience.
Wall Street analysts are bullish on the stock, with a consensus Buy rating. They also anticipate an average uptick of 47% in Itaú Unibanco Holding S.A. (NYSE:ITUB)’s share price. Investor sentiment continues to improve as well. According to Insider Monkey’s database for Q3 2024, 26 hedge funds had a stake in the company, up from 25 at the end of the second quarter.
Overall ITUB ranks 1st on our list of the best bank penny stocks to buy according to hedge funds. While we acknowledge the potential of ITUB 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 timeframe. If you are looking for an AI stock that is more promising than ITUB 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.
