We recently compiled a list of the 10 Hot Penny Stocks On the Move. In this article, we are going to take a look at where Red Cat Holdings, Inc. (NASDAQ:RCAT) stands against the other hot penny stocks.
Interest Rate Cuts and The Stock Market
The economy of the United States has stabilized, the risks of a recession have been delayed, and inflation continues to cool down. On August 30, Reuters reported that the Federal Reserve received a fresh confirmation regarding inflation continuing to ease. The personal consumption expenditure price index rose 2.5% year-over-year in July and inflation has stayed within the 2% goal set by the Fed. Fed Chairman has indicated that the “time has come to cut rates”.
Moreover, in another report by Reuters on the same day there were reports of the US dollar gaining as another key inflation measure fell in line with the forecasts. The Fed is expected to cut rates by 25 basis points this month. Moving forward markets have forecasted 100 bps of cuts by the end of 2024.
The stock market is already riding the tide of expected interest rate cuts. On August 20, CNBC reported that the stock market was climbing yet again, putting the S&P 500 and NASDAQ on track for their eighth positive session in a row, marking their longest winning streak this year.
Nick Colas, DataTrek Research co-founder in a CNBC interview indicated a few more positive points for even more upside for the stock market. He expressed that he feels positive about the market and the slight shuffle that caused some volatility a few weeks ago is now over. He sees the market getting back to July levels.
Colas also pointed out that the small caps and cyclicals lead the market. We have covered Chris Retzler, Needham’s small-cap growth portfolio manager’s bull case for small caps in 10 Best Penny Stocks To Buy According to the Media. Here’s an excerpt from the piece:
“On July 17, Chris Retzler, Needham’s small-cap growth portfolio manager, appeared on CNBC where he expressed optimism for the small-cap companies and suggested that we are in a cycle that will be good for many small-cap companies. The Russell 2000 index jumped 3.5% higher on July 16, hitting the highest levels since January 2022, and was up more than 10% in the previous week. This was one of the biggest rallies investors have seen in the past 4 years.
Retzler believes that small-cap stocks have been waiting for a drop in inflation and interest rate cuts. With inflation easing, interest rates are expected to go down as well. He also sees the market broadening, with small companies that have underperformed benefiting from a drop in inflation.”
Similar to Retzler, Colas is also vouching for small caps to continue outperforming the market. He believes that the market has high expectations from the Fed and the current upside is a result of the news. Moreover, he also mentioned that the stock market tends to react both before and after the cuts have been made and believes that the same pattern of growth will follow if not more after the rate cut.
Our Methodology
To compile the list of 10 hot penny stocks on the move we used the Finviz stock screener. We set the price filter to under $5, current and average stock volume to over 750,000 and the performance filter to positive 30% during the last month. Using these filters we were able to accumulate a list of hot penny stocks on the move. Next we ranked these stocks based on their one month performance, as of August 30 2024. We have also added number of hedge funds that held the stock in Q2 2024.
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).
A high-tech robotic drone, showcasing the companys advancements in unmanned aerial systems.
Red Cat Holdings, Inc. (NASDAQ:RCAT)
Share Price as of August 30: $3.11
Current Volume as of August 30: 674,000
Number of Hedge Fund Holders: 3
1-Month Performance as of August 30: 47.39%
Red Cat Holdings, Inc. (NASDAQ:RCAT) operates in the drone technology industry. Through its subsidiaries, the company integrates robotic hardware and software technologies to deliver actionable intelligence. It also provides data storage and analytic services for the drone industry. The company sells its products and technologies to military, government, and commercial customers.
The technology portfolio of the company ranges from its flagship Teal Drones (approved by the U.S. Department of Defense), Skypersonic technology that enables drones to complete inspections in GPS-denied environments, Fat Shark which provides first-person view for drone pilots, and much more.
Fiscal 2024 proved to be a record-breaking year for Red Cat Holdings, Inc. (NASDAQ:RCAT). During the year, the company grew its revenue by 286% to reach $17.8 million. The latest quarter was the most successful quarter as revenue doubled year-over-year to $6.4 million.
Two major factors contributed to the company’s growth, one being its strong organic growth and the other being its expanded drone portfolio topped with key acquisitions of companies such as FlightWave Aerospace and Sentien Robotics. The acquisition of FlightWave Aerospace alone is expected to add around $10 million to $20 million in revenue next year.
The strategic edge of Red Cat Holdings, Inc. (NASDAQ:RCAT) stems from its operating industry. As the company sells its products and technologies to the government, a hike in defense spending improves its revenue and order volumes.
Management is confident that the defense budget spending trends will continue to drive growth for the company. Moreover, its Teal 2 drones are setting the company apart from its competitors based on its strong performance. Red Cat Holdings, Inc. (NASDAQ:RCAT) has resumed its guidance for the next quarter and anticipates another record year moving to 2025.
RCAT was held by 3 hedge funds in Q2 2024, with total stakes worth $5.97 million. AIGH Investment Partners is the top shareholder of the company, with a position worth $5.65 million.
Overall RCAT ranks 8th on our list of the hottest penny stocks on the move. While we acknowledge the potential of RCAT 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 at Insider Monkey.