In this article, we will look at the 8 Penny Stocks with Biggest Upside Potential According to Analysts. Let’s look at where Sana Biotechnology, Inc. (SANA) stands against other penny stocks with the biggest upside potential.
Why Are Rate Cuts Good for Small Caps?
The Federal Reserve slashed interest rates by a half point in September, kickstarting its first easing campaign in four years. It was the first interest rate cut since the early days of the Covid-19 pandemic. Rate cuts are considered broadly supportive of stocks, provided the economy is not in recession. Since the risk of recession in the US economy has been overruled, small-cap stocks are likely to benefit more from the rate cuts than their large-cap peers due to easing monetary policy. This is primarily because they are thought to be more likely to hold floating-rate debt.
However, Oxford Economics analysts noted that small-cap stocks’ performance has given mixed signals since the previous interest rate cuts. At best, rate cuts have helped moderate small caps’ underperformance compared to large caps in the late tightening cycle stages.
But this time can be different. Analysts at Oxford expect small caps to be “outsized beneficiaries of the upcoming rate cuts…due to their relatively weak balance sheets.” Several factors are likely to alleviate the small caps’ balance sheet pressure, including easier economic conditions, resilient business and consumer spending, and reduced borrowing costs.
Generational Opportunity for Small to Mid-Cap Stocks
On October 4, Eduardo Lecubarri, managing director and global head of small and mid-cap equity strategy at J.P. Morgan, talked about the potential of investing in small to mid-cap stocks in an interview on CNBC. He breaks down the opportunities in the space, while shedding light on how to pick the right stocks in what he calls a “generational opportunity.” He says that we are living in a tricky world where the opportunity to invest lies in realizing the hidden value in the small and mid-cap sector and picking the right stocks instead of investing broadly.
He claims that times have changed, with small and mid-caps stocks going from being not the most suitable investment in previous years to paving the way for the biggest opportunity in the sector in the past 2-3 decades. He further elaborated and said that the opportunity of picking a small to mid-cap versus large-cap stock is bigger now than he has ever seen in the past 30 years. This generational opportunity, however, is not without its pitfalls for those who fail to make the right picks.
Pricing power and high-margin businesses can be suitable indicators of the right small to mid-cap stocks to invest in, according to Lecubarri. The need to find value and invest in stocks with achievable earnings growth expectations also holds pivotal value in making the right choices. While 2022 to 2023 was the time to stay away from small to mid-cap stocks, Eduardo Lecubarri says that times have changed with the stabilizing economy.
Our Methodology
For this article, we used stock screeners to identify around 30 penny stocks under $5 with a market cap over $500 million and with high analyst upside potential, as of 6 October, 2024. We also considered the number of hedge fund holders as of Q2 2024. The stocks are listed in ascending order of their upside potential.
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).
8 Penny Stocks with Biggest Upside Potential According to Analysts
Sana Biotechnology, Inc. (NASDAQ:SANA)
Share Price: $4.33
Upside Potential: 252.94%
Number of Hedge Fund Holders: 15
Sana Biotechnology (NASDAQ:SANA) is a biotechnology company that specializes in using engineering cells as medicines. It develops cell engineering programs that transform treatment across several therapeutic areas with treatment gaps, including diabetes, oncology, the central nervous system, and B-cell-mediated autoimmune disorders.
The company boasts a pipeline of clinical product candidates focused on creating transformative ex vivo therapies across several therapeutic areas, including SC255, SC262, SC291, UP421, SC 451, and C379. SC255 treats multiple myeloma and is a B-cell maturation antigen-directed allogeneic CAR T, while SC262 is a hyperimmune-modified CD22-directed allogeneic CAR T program. SC262 is initially used as a potential treatment for relapsed and/or refractory B-cell malignancies.
Sana Biotechnology (NASDAQ:SANA) is also applying its technology to donor-derived T cells for use as allogeneic cell therapies for hematologic malignancies. The hypoimmune platform deals with one of the primary challenges of allogeneic cell transplantation and holds the potential to affect a wide array of diseases. It has four ongoing trials and is making continual progress with them. It is accelerating investments to decrease its reliance on external manufacturing because of the ongoing geopolitical uncertainty, increase its clinical trial site footprint across the globe, and boost investments to develop its pivotal-ready supply chain.
It is committed to excellence, and is thus enrolling patients in the GLEAM trial for SC291 in B-cell mediated autoimmune diseases. The trial is expected to report initial clinical data in 2024. In addition, it is continuing to advance its hypoimmune technology in four trials across several indicators in oncology, type 1 diabetes, and B-cell-mediated autoimmune diseases.
The company is also enrolling patients in two oncology trials: VIVID for SC262 in relapsed/refractory B-cell malignancies and ARDENT for SC291 in B-cell malignancies. It is also expecting to report initial clinical data for its investigator-sponsored trial with hypoimmune-modified primary islet cells in 2024. Such continued initiatives give the company a competitive edge, positioning it as one of the best penny stocks with the biggest upside potential according to analysts.
Overall, SANA ranks THIRD among the 8 penny stocks with the biggest upside potential according to analysts. While we acknowledge the potential of SANA 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 SANA 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.
