We recently compiled a list of the 11 Penny Stocks That Will Make You A Millionaire. In this article, we are going to take a look at where Sandstorm Gold Ltd. (NYSE:SAND) stands against the other penny stocks.
Why Should You Invest in Penny Stocks?
Penny stocks are often overlooked by most investors. These are the smallest of the small companies operating in the market, and so they typically lose out on being covered in detail by financial reporters and analysts. However, because of this conundrum, many penny stocks end up becoming excellent under-the-radar investments for those investors who don’t mind a bit of risk. This is especially the case for penny stocks operating in the artificial intelligence space today. This isn’t to say that penny stocks offer a sure-shot way of making big profits at all times, though. Since these stocks are of companies that are incredibly small relative to the usual players we hear about in the market news, they are also incredibly risky to invest in – as such, investing in penny stocks is a move that only investors with a tolerance for high-risk, high-reward strategies should make.
In the current market landscape, there may be more room to consider investing in smaller companies. This is because of the potential September rate cut from the Fed. Financial professionals are considering this potential cut to be a catalyst for the growth of smaller companies in the market, which have been largely left ignored over the past two years since the Fed’s policy has been so tight. So a rate cut in September may actually result in an overall growth cycle emerging for smaller players in the market.
Read Also: 7 Most Popular AI Penny Stocks Under $5 and 10 Best Technology Penny Stocks to Invest In Right Now.
How’s The Market Looking For Smaller Stocks Today?
On August 21, Tom Lee, co-founder of Fundstrat Global Advisors, joined CNBC’s “Closing Bell Overtime” to discuss this very development. He noted that as the Fed is starting to normalize its policy and as merger activity in the US is beginning to accelerate, smaller companies are becoming increasingly more poised to benefit. Lee also added that there’s a misconception in the market that smaller companies are growing, or at least have the tendency to, grow slower than bigger companies. In fact, he noted that the small cap index has a median earnings growth that is almost 700 basis points faster than the broader market index, while top-line growth is almost 400 basis points faster. Lee also said the following:
“For small caps to rise 40% means that the P/E, the median Russell 2000 stock goes from 10x to 14x. So, it’s not asking the market to provide some magic and a huge re-evaluation… [With small-caps] you’re getting better growth, lower valuation, and I think the catalyst is now that the market is convinced that the Fed is embarking on a rate cutting cycle.”
According to Lee, money that’s been on the sidelines over the past few years because of the Fed’s rate policy could now potentially funnel into smaller companies because they offer a good risk-reward balance to investors now. Because of these developments, we’ve compiled a list of some of the smallest stocks trading on the market today by going through five months’ worth of articles on Stock Gumshoe, a financial analysis website that offers unique insights into what some call “secret stocks,” which have been going largely ignored by most investors.
Our Methodology
We read Stock Gumshoe articles from April to August of 2024 and then selected the penny stocks that have promising futures ahead of them. The stocks are ranked in ascending order of the number of hedge funds holding stakes in them as of the end of the second quarter of 2024, according to Insider Monkey’s hedge fund data.
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 panoramic view of a gold mine, highlighting the company’s global mining operations.
Sandstorm Gold Ltd. (NYSE:SAND)
Number of Hedge Fund Holders: 20
Sandstorm Gold Ltd. (NYSE:SAND) is a materials company based in Canada. It focuses on acquiring royalties and gold alongside other metals purchase agreements from companies that have advanced-stage operating mines.
Daniela Cambone, in Stansberry’s Commodity Supercycles newsletter, floated a teaser for what was called the number-one gold play for 2024. According to Travis Johnson, this teaser is probably referring to Sandstorm Gold Ltd. (NYSE:SAND). Cambone’s comments were as follows:
“But there’s another company that, we believe, is BY FAR the best gold royalty investment you could make in the world right now. And that’s why this company gives you a realistic chance to make astonishing gains thanks to this incredible business model. It’s led by a man who grew the world’s largest silver royalty outfit into a multibillion-dollar company. This experienced team helped form a brand-new royalty company – which uses the same investor-friendly business model as Franco-Nevada and Royal Gold. They now own royalties on mines in Brazil, Turkey, Mongolia, Argentina, Canada, and the United States, just to name a few.”
According to Johnson, Sandstorm Gold Ltd. (NYSE:SAND) is definitely a gold penny stock that investors should pick up, especially because of its recent moves. In 2022, the company roughly doubled its size by acquiring Nomad Royalty and several other royalty assets. Through this acquisition, Sandstorm Gold Ltd. (NYSE:SAND) not only created a 50% dilution for its existing shareholders, but it also boosted its growth and paved the way for revenue growth in the future. Analysts also note that shares of Sandstorm Gold Ltd. (NYSE:SAND) have an upside potential of 34.4%.
Sandstorm Gold Ltd. (NYSE:SAND) had 20 hedge funds long its stock in the second quarter, with a total stake value of $74.8 million.
Overall SAND ranks 1st on our list of the penny stocks that will make you a millionaire. While we acknowledge the potential of SAND as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SAND 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.