10 Best Penny Stocks Under $1 According to Hedge Funds

In this article, we will be taking a look at the 10 Best Penny Stocks Under $1 According to Hedge Funds.

Penny stocks often draw renewed investor interest when risk appetite improves, and smaller companies begin participating in broader market rallies. These stocks can experience sharp moves when expectations are low, liquidity conditions strengthen, or companies show early signs of an earnings recovery. Franklin Templeton believes that “2026 could be the year that small-caps reassert themselves,” adding that “both small-cap quality and value are poised for meaningful rebounds in 2026.” The broader small-cap outlook also supports this view. Alliance Bernstein noted that “small-cap earnings could be widely underestimated by the market” and expects earnings growth for smaller companies to outpace that of large-cap firms in 2026. Similarly, T. Rowe Price argued that the small-cap rebound “has not been driven by sentiment alone” because “fundamentals also have turned,” with earnings trends improving rapidly since late 2025.

The argument for carefully monitoring penny stocks linked to strengthening fundamentals, obvious catalysts, analyst support, or developing growth themes has been reinforced by this context. Finding companies that might profit from a stronger earnings cycle and a change in market opinion toward smaller businesses is the potential, rather than just purchasing cheap stocks.

However, worries about the economy as a whole still exist. On May 4, Gregory Daco, Chief Economist at EY-Parthenon, said on CNBC’s “Squawk Box” that the US economy’s robust nominal growth is being driven by inflation rather than real economic expansion. He asserted that the main forces behind growth are investments in artificial intelligence, increasing asset values, and wealthy consumer spending. Daco said that even while these forces have kept the economy moving forward, the foundation is becoming fragile, especially as middle-class and lower-class consumers continue to face growing expenses. Recent data shows growing economic hardship as consumer spending rose by 2% while real disposable income only increased by 0.4% annually.

With that in mind, let’s take a look at the best penny stocks.

Our Methodology 

For our methodology, we screened stocks trading below $1 as of the May 12 closing price, with positive upside potential. From this universe, we selected 10 stocks based on the most recent developments and news flow, and then ranked them in ascending order according to their total number of hedge fund holders as of Q4 2025, as tracked by the Insider Monkey database.

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 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).

Here is our list of the 10 Best Penny Stocks Under $1 According to Hedge Funds.

10. Medicus Pharma Ltd. (NASDAQ:MDCXW)

Number of Hedge Fund Holders: 3 

Stock Price as of Last Close of May 12: $0.31 

Medicus Pharma Ltd. (NASDAQ:MDCXW) is one of the best penny stocks on this list.

TheFly reported on May 14 that MDCXW announced its financial results for the three months ended March 31, 2026, along with a detailed corporate update across its development programs. The corporation reported progress in its Teverelix program, including FDA clearance to proceed with a Phase 2b dose-optimization study in advanced prostate cancer and submission of additional protocols targeting urinary retention in benign prostatic hyperplasia.

The company’s strategic updates included expanded financing capacity through ATM arrangements and continued evaluation of partnerships and acquisitions. Financial results showed cash and cash equivalents of $6.4 million, operating expenses of $8.6 million, and a net loss of $9.0 million, alongside higher R&D spending. The company reiterated ongoing capital access and multiple anticipated clinical milestones for 2026.

Other than that, earlier on May 6, Medicus Pharma Ltd. (NASDAQ:MDCXW) reported updated findings from an expanded Phase 2 SKNJCT-003 analysis evaluating a doxorubicin microneedle array for nodular basal cell carcinoma. The dataset included 69 participants and showed a clear dose-dependent response, with the highest dose group demonstrating the strongest histological and clinical clearance outcomes by day 57 compared with the control.

Safety results indicated a favorable tolerability profile, with no treatment-related serious adverse events or evidence of systemic toxicity. The company stated that these findings further support a potential registrational pathway and upcoming discussions with regulators regarding the late-stage development strategy.

Medicus Pharma Ltd. (NASDAQ:MDCXW) is a clinical-stage biotechnology company based in Toronto and Pennsylvania. It develops and advances therapies for high-need diseases, with a focus on oncology and prostate cancer.

9. MicroVision, Inc. (NASDAQ:MVIS) 

Number of Hedge Fund Holders: 4 

Stock Price as of Last Close of May 12: $0.70 

MicroVision, Inc. (NASDAQ:MVIS) is one of the best penny stocks on this list.

TheFly reported on May 7 that MVIS announced a memorandum of understanding with Avular Innovations B.V. to jointly advance next-generation autonomous systems for civil infrastructure and commercial use. The collaboration combines MicroVision’s solid-state lidar technology, designed for energy efficiency and high performance, with Avular’s modular drone platforms and integration capabilities.

The goal is to develop scalable autonomous solutions capable of operating in complex environments, including GPS-denied conditions. Planned capabilities include autonomous mission execution, high-resolution 3D mapping, obstacle detection in dense settings, and safe operations during launch and landing in unknown locations. The partnership is intended to accelerate the deployment of advanced drone systems across the United States and Europe for applications such as infrastructure monitoring, traffic management, emergency response, and facility security.

Separately, earlier on May 5, MicroVision, Inc. (NASDAQ:MVIS) showcased its Tri-Lidar Architecture through a live on-road demonstration at the ACT Expo in Las Vegas, marking an important step in its sensor integration strategy. The system combines the MOVIA S short-range lidar with the newly integrated HALO long-range lidar to create a unified perception platform.

This setup delivers continuous 360-degree environmental awareness and real-time data fusion through MVIS’s software stack, producing a high-resolution point cloud for object detection, classification, and tracking. The demonstration also highlighted the successful integration of recently acquired long-range lidar assets, validating the company’s progress toward a scalable, software-enabled autonomous sensing solution designed for real-world deployment.

MicroVision, Inc. (NASDAQ:MVIS) is a technology company based in Redmond that develops LiDAR sensors and perception software for autonomous driving and advanced driver-assistance systems (ADAS).

8. Faraday Future Intelligent Electric Inc. (NASDAQ:FFAI)

Number of Hedge Fund Holders: 5 

Stock Price as of Last Close of May 12: $0.41 

Faraday Future Intelligent Electric Inc. (NASDAQ:FFAI) is among the best penny stocks under $1.

TheFly reported that FFAI reported Q1 2026 results on May 14, 2026, with Embodied AI robotics generating initial sales revenue and early gross profitability. The company shipped 68 EAI robots as of April 30, 2026, and targets 200 units in the first shipment quarter and over 1,500 units in 2026. Revenue rose to $512,000 from $316,000, nearly matching full-year 2025 revenue of $536,000, with ecosystem revenue at 26%. Stockholders’ equity increased 148% to $19.2 million, net loss from operations improved to $35.9 million, down 18%; G&A declined 33% to $9.2 million, and operating cash outflow rose 55% to $31.5 million. The company continues scaling its AI-driven ecosystem strategy across robotics, data systems, and platform development.

Apart from that, earlier this month, on May 8, Faraday Future Intelligent Electric Inc. (NASDAQ:FFAI) announced the execution of a memorandum of understanding to form a strategic partnership between its AI-Robotics division and Boston International Business School. The collaboration is intended to establish the BIBS–FF AI Robotics Institute, with a joint focus on advancing education and development in robotics and artificial intelligence.

The signing and launch event took place in Omaha during the Berkshire Hathaway annual shareholders meeting. The agreement remains non-binding at this stage, and final definitive contracts are still subject to negotiation and approval by the Faraday Future board of directors. The initiative reflects the company’s broader effort to expand its AI robotics ecosystem through academic and institutional partnerships while supporting long-term development of its technology platform and related applications.

Faraday Future Intelligent Electric Inc. (NASDAQ:FFAI) is a California-based intelligent mobility company headquartered in Gardena. It began as an EV startup and now focuses on AI-driven mobility and robotics, including embodied AI and automotive robotics.

7. Datavault AI Inc. (NASDAQ:DVLT)

Number of Hedge Fund Holders: 5 

Stock Price as of Last Close of May 12: $0.56 

Datavault AI Inc. (NASDAQ:DVLT) is one of the best penny stocks to invest in.

TheFly reported on May 7 that DVLT announced that management has begun evaluating a potential dividend spin-out of its Acoustic Sciences business into a separate publicly traded company. The proposed new entity, expected to be named “API Media,” would combine operations including ADIO, WiSA, Event Citadel, and API Media. The company has reserved the NASDAQ ticker “ADIO” for the planned listing.

The transaction is still in the assessment and planning stage and would require board approval, final agreements, regulatory clearance, and completion of closing conditions before proceeding. DVLT has engaged Houlihan Lokey as financial advisor and Paul Hastings LLP as legal counsel, while also reviewing additional investment banking partners to support the process. The move reflects early-stage structuring work around a potential separation aimed at unlocking value from its Acoustic Sciences segment.

Additionally, in a separate move, it was reported on May 1 that Datavault AI Inc. (NASDAQ:DVLT) and CyberCatch Holdings have entered into a binding letter of intent outlining a planned all-stock acquisition of CyberCatch by Datavault AI. The transaction is structured as a court-approved plan of arrangement, under which Datavault AI would acquire 100% of CyberCatch’s issued and outstanding shares in exchange for approximately 49.9 million newly issued Datavault AI common shares.

The deal implies an aggregate valuation of about C$136.8 million for CyberCatch equity. Following completion, CyberCatch is expected to operate as a subsidiary of DVLT, with leadership integration and defined ownership distribution between existing shareholders. The agreement remains subject to negotiation of a definitive contract, due diligence, board and shareholder approvals, court approval, and regulatory clearances from relevant exchanges, along with other standard closing conditions.

Datavault AI Inc. (NASDAQ:DVLT) is an AI and data infrastructure company based in Philadelphia. It focuses on Web3 data monetization and high-performance computing software.

6. Cycurion, Inc. (NASDAQ:CYCU)

Number of Hedge Fund Holders: 6 

Stock Price as of Last Close of May 12: $0.92 

Cycurion, Inc. (NASDAQ:CYCU) is among the best penny stocks to invest in.

CYCU reported first-quarter 2026 financial results on May 14, highlighting major operational and margin improvements as part of its ongoing business transformation. The company stated that gross margins nearly doubled during the quarter while operating expenses declined significantly.

Cycurion, Inc. (NASDAQ:CYCU) also executed binding agreements to acquire Halo Privacy and HavenX, transactions expected to contribute about $7 million in annualized contracted revenue at roughly 55% gross margin after closing. Combined with the company’s existing backlog projected to generate approximately $15 million to $17 million in annual revenue, the acquisitions are expected to increase near-term contracted revenue visibility to around $21 million to $22 million over one year. Management said the company continues shifting away from lower-margin legacy operations while expanding investment into its AI-focused cybersecurity platforms and long-term profitability strategy.

In a recent development, TheFly reported on May 7 that CYCU announced that it has signed a binding agreement to acquire Halo Privacy, including its HavenX digital investigations operations, as part of its broader cybersecurity expansion strategy. The company expects the transaction to close within approximately 45 days, with the required audit process already underway ahead of completion.

Through the acquisition, CYCU plans to integrate Halo Privacy’s Halo Link technology and HavenX’s investigative capabilities with its existing cybersecurity infrastructure. The combination is intended to strengthen the company’s privacy protection, digital defense, and intelligence offerings across commercial and government markets. Management stated that the expanded platform will support more advanced security solutions while leveraging expertise from professionals with extensive national security and cybersecurity experience.

Cycurion, Inc. (NASDAQ:CYCU) is a cybersecurity and IT solutions company based in McLean. It provides network security, cloud management, and AI-driven threat detection services for businesses, healthcare organizations, and government agencies.

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