We recently published a list of 12 best undervalued penny stocks to buy according to hedge funds. Since Nordic American Tankers Ltd (NYSE:NAT) is part of the list, it deserves a deeper look. But first, let’s see what’s happening in the value investing space.
Increasing volatility and uncertainty in the financial markers caused by rising interest rates, geopolitical risks and the generative AI revolution has made it difficult for value investors to know the true value of businesses they want to invest in. With buzzwords like AI, automation, big data and Cloud becoming ubiquitous, the market’s focus seems to have shifted entirely on the future, which is why investors are often ready to pile into stocks trading at sky-high valuations.
Value Investing in an Uncertain World According to Billionaire Bill Ackman
Activist investor and billionaire Bill Ackman earlier this month sat down for a fireside chat at UBS and talked about the recent state of value investing in an uncertain world. Ackman said that one of the hardest things in investing is not building a financial model, but to predict the durability of a business.
Answering a question about using AI to analyze financial markets and invest in stocks — especially in the context of J.P. Morgan’s IndexGPT — Ackman said that it might or might not work, and even if it works for a few months or years, it won’t give us any guarantee it’d keep working in the long run.
Despite these uncertainties, value stocks are still relevant and many value investors, while acknowledging the tough value investing landscape, keep beating the market. David Einhorn of Greenlight Capital is a case in point. Einhorn has repeatedly talked about how the traditional value investing models aren’t working anymore.
In an interview in October 2022, Einhorn sounded skeptical about the future of value investing despite the fact that he’s a famous value investor. Einhorn believes the world has become “passive” and value investors are going “out of business” because there is “nobody to notice” the true value of stocks. Einhorn said that there was a time when value investors used to spot stocks based on valuation multiples and other traditional metrics and sell them when these stocks gained their true potential. But Einhorn believes now that era is coming to an end.
And yet Einhorn’s fund returned 37% in 2022 and 22% last year.
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Methodology
In this backdrop, we decided to take a look at some undervalued penny stocks hedge funds are buying this year. For this article we first used a stock screener to list down all penny stocks with P/E ratios less than 20. From these stocks we chose 10 companies with the highest number of hedge fund investors. 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).
Nordic American Tankers Ltd (NYSE:NAT)
Number of Hedge Fund Investors: 16
P/E Ratio: 8.43
With an over 11% dividend yield and a PE ratio of 8.45, Nordic American Tankers Ltd (NYSE:NAT) is one of the most undervalued penny stocks loved by hedge funds. Over the past one year the stock has gained about 16%.
Nordic American recently posted Q1 results. GAAP EPS in the period came in at $0.07, missing estimates by $0.04. Revenue in the period fell 30.5% year over year to $60.57 million, missing estimates by $5.62 million.
There are some concerns regarding Nordic American Tankers Ltd (NYSE:NAT)’s fleet age, which is higher when compared to competitors like Frontline (FRO), Euronav (EURN) and International Seaways (INSW). However, Nordic American Tankers Ltd (NYSE:NAT) dividend and cash flow remains an attractive point for investors. In Q1, the company generated $37.6 million in cash from operating activities. Despite the troubles in international waters which are causing shipping traffic disruptions, Nordic American Tankers Ltd (NYSE:NAT) doubled its dividend earlier in the year to $0.12 per share
Nordic American Tankers Ltd (NYSE:NAT) ranks 8th in Insider Monkey’s list of the 12 Most Undervalued Penny Stocks to Buy Now.
If you are looking for an AI stock that is as promising as Microsoft 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.
