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 Ovid Therapeutics Inc. (NASDAQ:OVID) 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 clinical doctor holding a vial of medication with a Healx logo in the background.
Ovid Therapeutics Inc. (NASDAQ:OVID)
Number of Hedge Fund Investors: 12
Ovid Therapeutics Inc. (NASDAQ:OVID), a biopharmaceutical firm, creates life-altering medications for patients and families suffering from neurological disorders in the United States. The company is working on three drug candidates: OV350, a small molecule for treating epilepsies; OV329, a GABA aminotransferase inhibitor for treating seizures linked to tuberous sclerosis complex and infantile spasms; and OV101, a drug candidate that is in Phase 2A clinical trials for the treatment of fragile X syndrome. Additionally, it develops OV815 to treat neurological disorders connected with the kinesin family of proteins and OV882, a short hairpin RNA gene therapy, to treat Angelman syndrome. The firm is under licensing and partnership agreements with Marinus Pharmaceuticals, Inc., Healx, AstraZeneca AB, and H. Lundbeck A/S.
After the partnered epilepsy medication soticlestat failed to reach primary goals in late-stage studies for Lennox-Gastaut syndrome and Dravet syndrome, Ovid Therapeutics’ shares fell by more than 75% over the year. Reliance on partnerships (Takeda, Ligand, etc.) might restrict earnings. The billion-dollar epilepsy industry is competitive, and market acceptability and price are key factors. Ovid had $92.19 million in cash as of July 2024, but it may need to take on debt or dilutionary financing in the future. This might raise concerns, given regulatory uncertainty.
Ovid Therapeutics, which has demonstrated encouraging phase 2 results, is well-positioned for expansion with soticlestat in advanced phase 3 studies for LGS and DS. In Q1 2024, a pooled analysis of DS patients from the P2 ELEKTRA and P3 SKYLINE trials revealed that Soticlestat, as opposed to placebo, significantly decreased the frequency of convulsive seizures from baseline. Long-term growth potential and resilience are demonstrated by the diverse pipeline, which includes OV329, which treats persistent seizures. Following the sale of Kadmon and its ROCK2 inhibitor to Sanofi, Ovid announced a partnership with Graviton, founded by Sam Waksal. Recently, the Phase 1 trial of the OV888/GV101 capsule met safety and tolerability targets, yielded positive pharmacokinetic and pharmacodynamic results, and cleared the path for a Phase 2 investigation into cerebral cavernous malformations beginning in the second half of 2024.
Ovid is also a financially stable company, which reduces the danger of immediate dilution. As of July 10, it has $92.19 million in cash and a cash runway until mid-2026. The company showed strong revenue in Q1 2024, reporting a significant 124.24% increase from the same quarter the previous year, reaching $0.15 million due to reduced personnel costs from corporate cost-cutting efforts and headcount reductions in March 2022. This was driven by royalty and license agreements. The company has maintained growth in sales over the last 4 quarters. EPS of -$0.17 exceeded the analysis consensus of -$0.25.
Due to its diverse pipeline, the stock has earned a consensus “Strong Buy” rating. Analysts predict an average price target of $4.04 within the next 12 months, with estimates ranging from $8.00 to $1.20. The average price target represents a potential upside of over 386.81%.
12 hedge funds were long Ovid Therapeutics Inc. (NASDAQ:OVID) in Q1, with a total stake value of $59.7 million. Oleg Nodelman’s EcoR1 Capital is the largest stakeholder, with 6,117,400 shares valued at $18.66 million.
Overall OVID ranks 6th 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 OVID 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 OVID 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.