We recently compiled a list of 8 High Growth Penny Stocks That Are Profitable in 2024. In this article, we will look at where Kolibri Global Energy Inc. (NASDAQ:KGEI) ranks among high-growth penny stocks that are profitable in 2024.
Do Small Cap Stocks Offer More Value?
Many investors and analysts are concerned regarding the valuations of large-cap stocks and there is a growing concern that maybe the turn is coming for small and mid-cap stocks.
Brent Schutte, Chief Investment Officer of Northwestern Mutual Wealth Management Company joined CNBC to discuss how small caps offer more value. Schutte mentioned the 1999 and 2000 markets which were very similar to the current market. During that time the market became very narrow, he thinks that the current market is barely holding up. To explain his point he mentioned the manufacturing market and the lower and middle income consumers have been harmed by the interest rate hike over the past years. Schutte does not see the Fed being able to alleviate the suffering market and what consumers have been through and believes that how the economy will perform in the future remains an unanswered question.
For investors who are more interested in returns over a 3 to 5-year period, small-cap stocks regardless of a soft landing or not, offer value as these stocks are priced for recessions. On days when interest rates rise, large cap stocks, particularly those in the S&P 500, tend to perform better while small-cap stocks often decline. However, Schutte argued that there is a debate about how much of the current economic situation is already reflected in stock prices. He thinks optimism is a contrarian indicator, meaning when many believe stocks will rise, it could signal a downturn. He suggests that as investors the strategy of investment should be towards undervalued stocks where optimism is low, suggesting that this approach may yield better returns as conditions change and currently small caps are undervalued indicating better returns.
On the other hand, Tom Lee, managing partner and head of research at Fundstrat Global Advisors, who has been backing up the small-cap bull case thesis, thinks that there is a lot of firepower supporting stocks post-elections.
He recently joined CNBC in another interview expressing his caution before the election period but optimism as soon as the new president takes charge. He noted that many investors are sitting on the sidelines until they have clarity on the presidential outcome and mentioned that he advises his clients to buy the dip as he expects potential market recovery post-election.
Lee believes that once the election is behind us, there is significant “firepower” supporting stocks. He expects a decent rally, with a target for the S&P 500 around 6,000. He thinks this because of a dovish Federal Reserve and a healthy economy. Unlike Schutte, Lee does not foresee a recession in the near term. He however does acknowledge concerns about stock valuations being stretched, particularly with the S&P 500 trading above its historical average. He argued that this is misleading due to the higher multiples of top-performing stocks.
Lee has been bullish on small-cap stocks, we have covered his bullish sentiment in 8 Most Undervalued Penny Stocks To Buy According To Analysts. Here’s a piece from the article:
“To talk about what the stock market looks like today and in the near future. Tom Lee, co-founder of Fundstrat Global Advisors joined CNBC in a recent interview. He has been one of the strong proponents and supporters of small-cap stocks. Lee says that we are in a volatile environment currently, due to a few reasons, one being the elections in less than 30 days, the second being the Middle Eastern crisis which is scaring investors, and lastly the port strike that has the potential to cripple the economy. However, he still expressed his optimism that the year-end has a lot of tailwinds and investors shouldn’t be afraid to buy the dip. Moreover, Lee also highlighted that these current events are all short-term headwinds in a buying cycle and are expected to die down quickly.
Lee thinks that bottoms are tough and processed, and small caps are in the process of what could be a multi-year bottom. Therefore the conviction is that some people might want to buy the big names on NASDAQ and the AI market, however, with small caps trading at lower multiples of P/E less than 10, the risk and reward lie in small caps. Lee further mentioned that interest rate cuts and better earnings growth make the path for small-cap growth more visible.
Tom Lee has also reaffirmed his belief that the S&P 500 could close above 5,700 by year-end, supported by strong economic fundamentals and a dovish Federal Reserve beginning to cut interest rates. He noted that significant cash reserves are available for investment, which could drive stock prices higher in the next three to twelve months.”
Our Methodology
To get the list of 8 high growth penny stocks that are profitable in 2024 we relied on the Finviz stock screener, Yahoo Finance, and Seeking Alpha. Using the screener we got a consolidated list of stocks which are trading below the share price of $5 with positive forward P/E, and more than 8% sales growth during the past 5 years. For this aggregated list we sourced the 5-year net income growth and revenue growth rates from Seeking Alpha and the GAAP trailing twelve-month net income from Yahoo Finance. Lastly, we ranked our stocks based on the number of hedge fund holders as per Insider Monkey’s Q2 2024 database. Please note that the share prices were recorded on October 12 and that the list is ranked in ascending order of the number of hedge fund holders.
Why do we care about what hedge funds do? 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).
Kolibri Global Energy Inc. (NASDAQ:KGEI)
Share Price: $3.44
5-Year Net Income Growth: 16.84%
5-Year Revenue Growth: 20.72%
TTM Net Income: $14.52 Million
Number of Hedge Fund Holders: 3
Kolibri Global Energy Inc. (NASDAQ:KGEI) is a North American energy company that focuses on the exploration and extraction of oil and gas. The company owns and operates several properties in the United States, which are used to develop energy products. As per management, the company has around 32.4 million Barrels of Oil Equivalent in proven reserves, with around 58 proved locations still under development.
The company recently announced that it has completed the drilling of the first three 1.5-mile lateral wells in its Tishomingo field. This was significant because management was able to complete the drilling within the budget and in much less time than originally anticipated. The drilling was anticipated to be completed in 20 days, however, management pulled it off in only 14 days, indicating operational efficiency. The wells will start contributing in the fourth quarter thereby increasing the cash flow for Kolibri Global Energy Inc. (NASDAQ:KGEI).
The second quarter results for 2024 were also motivating for investors. The average production for the quarter improved by 30% year-over-year, with adjusted EBITDA also going up by 31% during the same time. The company has also been experiencing a significant tailwind from increased oil prices which are up around 7%. Increased prices topped with increased production, and forecasted production increase from recent drilling makes up a strong investment case for Kolibri Global Energy Inc. (NASDAQ:KGEI).
Overall KGEI ranks 6th on our list of high-growth penny stocks that are profitable in 2024. While we acknowledge the potential of KGEI 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 a promising AI stock 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 on Insider Monkey.
