We recently compiled a list of the 10 Best Penny Stocks To Buy According to the Media. In this article, we are going to take a look at where SmartRent, Inc (NYSE:SMRT) stands against the other penny stocks.
Penny stocks are those that trade below the price of $5. These stocks represent companies with smaller market capitalization, high risk, and high volatility. Risk-tolerant investors find potential for above-average returns in penny stocks, however, investing in these stocks requires caution and care.
Expected Trends for Small Cap Stocks
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 prove to be good for many small-cap companies. The Russell 2000 index jumped 3.5% higher on the 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.
Retzler agrees with Fundstrat’s Tom Lee’s, who sees the Russell 2000 gaining 40% by the end of summer. He believes that the liquidity of small cap companies gives them an edge as it does not take a lot of money to push the stock prices higher, and some expansions by these companies followed by lower interest rates can prove to be good for Russell 2000 companies. We have discussed Tom Lee’s views on how favorable current market conditions are for small-cap companies in 10 Best NASDAQ Penny Stocks To Invest In.
Moreover, Ryan Detrick, who is the Chief Market Strategist at Carson Group also presented his bullish thesis for small and mid-cap companies. He believes that small and mid-cap are going to lead the market in the second half of the year. While addressing the earnings capability of these companies, Detrick said small-cap companies will outperform large-cap companies in 2025 and 2026. As per estimates, S&P 600’s earnings were 4.1% in 2024, whereas S&P 500 earnings were 12.7%. However, moving forward analysts expect S&P 600’s earnings to be at 17.7% in 2025, surpassing estimates of 14.2% for the S&P 500. Detrick believes small-cap stocks now look cheap, economic conditions are favorable, and any interest rate cuts that come along the way will further benefit them.
Now that we’ve discussed what experts think about small caps, let’s now look at the 10 best penny stocks to buy according to financial media.
Our Methodology
To compile our list of the best penny stocks to buy according to media, we aggregated 50 plus penny stocks from financial media websites on the internet. We then selected the top 10 penny stocks that were the most widely held by hedge funds, as of Q1 2024. The list is in ascending order of the number of hedge funds holders in each stock.
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 builder wearing a hard hat admiring a newly constructed smart home.
SmartRent, Inc (NYSE:SMRT)
Number of Hedge Fund Holders: 17
SmartRent, Inc. (NYSE:SMRT) is a real estate technology company that specializes in the development of home automation through hardware and cloud-based software solutions. The technology solutions designed by the company provide a single point of control for all devices within a property. For instance, land and business owners can control thermostats, doorbells, security cameras, Wi-Fi and other installed devices on their property through a single interface. The package provided by the company includes training, installation and post-installation support services.
SmartRent, Inc (NYSE:SMRT) is one of hedge funds’ favorite penny stocks as it was held by 17 hedge funds in Q1 2024 with total stakes amounting to $91.528 million. What sets SmartRent apart from its competitors is its focus on the integrated, brand-agnostic approach to automation technologies, meaning that the hardware and SaaS solutions provided by SmartRent are designed to work seamlessly with a range of third-party smart devices rather than relying solely on proprietary devices. This flexibility allows the company to increase its market share in terms of the customers it serves. Moreover, its SaaS segment has also shown remarkable growth in the first quarter, growing 32% year over year on the back of more deployed units and cross-selling.
The financial situation of the company has also improved considerably as of the first quarter of 2024. The company’s revenue grew by 13.66% year over year to reach $50.5 million in the first quarter. Growth in the revenue was mainly attributed to its strong recurring revenue from SaaS products, which contributed $12 million to the revenue during the same time. The company also posted a positive adjusted EBITDA for the second consecutive quarter, amounting to almost $400,000 and surpassing the company’s guidance. Moreover, the full-year guidance remains unchanged at $260 million to $290 million in revenue.
Should you invest in SMRT? Here’s the conclusion:
For risk-tolerant investors, SMRT can be a good stock to invest in given its potential for growth and its improving financials. Management not only expects to reach profitability during 2024, but it has also been expanding its SaaS operations strategically. The company deployed around 750,000 units during the first quarter, a 24% year-over-year increase. With $205 million in cash and cash equivalents as of Q1 2024, SmartRent, Inc (NYSE:SMRT) has room for growth in the future.
Overall SMRT ranks 9th on our list of the best penny stocks to buy according to the media. You can visit 10 Best Penny Stocks To Buy According to the Media to see the other penny stocks that are on hedge funds’ radar. While we acknowledge the potential of SMRT 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 an AI stock that is more promising than SMRT 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.
