In this article, we cover 10 Must-Buy Penny Stocks to Invest In.
According to the LSEG 2025 Mid-Year Outlook, small-cap earnings are projected to grow 40.8% in 2025, compared to 8.8% for the S&P 500. The report attributes this divergence to smaller firms’ lower reliance on international revenue (32% vs. 38% for large caps), greater flexibility in adapting to tariffs and supply chain disruptions, and stronger ties to domestic demand and policy support.
Within the small-cap space, many of the most overlooked opportunities lie in penny stocks (companies trading under $5 per share). According to FTSE Russell, the average market cap in the Russell 2000 is around $1 billion, but many constituents fall into the penny stock category. Erik Norland, Chief Economist at CME Group, argues that conditions are favorable for small caps to outperform, noting that the S&P 500 trades at five times book value compared to just two times for the Russell 2000. “So it could be that small-cap stocks are undervalued and getting ready for a rebound,” he said.
Lisa Shalett, Chief Investment Officer at Morgan Stanley Wealth Management, recently pointed out that while the “Mag 7” tech giants delivered 26% earnings growth in Q2 2025, the remaining 493 S&P 500 companies managed just 1%. She cautioned that large caps face risks from margin compression and stagflation, while urging investors to rotate into quality small caps with pricing power and domestic exposure. Her team recommends steering clear of unprofitable tech but selectively adding smaller companies with solid fundamentals.
Against this backdrop, we turn our focus to 10 penny stocks whose year-to-date performance indicates they are positioned for significant upside.
Our Methodology
To identify the 10 Must-Buy Penny Stocks to Invest In, we screened for companies trading under $5 per share with strong year-to-date (YTD) returns as of August 31, 2025. We also assessed institutional sentiment using hedge fund holdings data from Insider Monkey’s Q2 2025 database of 13F filings. The final list highlights the 10 penny stocks that combine notable recent performance with hedge fund interest. For clarity and consistency, the stocks are ranked in ascending order based on YTD returns.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Must-Buy Penny Stocks to Invest In
10. Lightwave Logic Inc. (NASDAQ:LWLG)
Year-To-Date Returns: 55.56%
Share Price: $3.36
Number of Hedge Fund Holders: 17
Lightwave Logic Inc. (NASDAQ:LWLG) is one of the must-buy penny stocks to invest in. On August 20, the company appointed Dr. Sundar Ramamurthy to its Technical Advisory Board. With 30+ years in materials science and semiconductors, he brings deep expertise from leading roles at Applied Materials and a strong record in product commercialization and global partnerships.
“We are very excited to welcome Sundar… his expertise in materials science and commercialization is highly relevant,” said CEO Yves LeMaitre. Dr. Ramamurthy added, “It is a privilege to join Lightwave Logic at such an exciting time. EO polymers are gaining relevance in enabling higher data transmission speeds while meeting power constraints.” He will support the company’s push toward broader adoption of its polymer platform.
Lightwave Logic Inc. (NASDAQ:LWLG) is a U.S. tech firm developing electro-optic polymers for ultra-fast, energy-efficient data transmission. Its platform supports next-gen photonic devices in telecom, data centers, and AI, with a focus on scaling for global impact.
9. Lloyds Banking Group PLC (NYSE:LYG)
Year-To-Date Returns: 60.00%
Share Price: $4.32
Number of Hedge Fund Holders: 13
Lloyds Banking Group PLC (NYSE:LYG) is one of the must-buy penny stocks to invest in. On August 19, the company announced that it will begin allowing its customers to deposit cash at over 30,000 PayPoint locations across the UK. The service is scheduled to begin operation on August 26, 2025. Customers will use the Lloyds mobile app to generate a barcode for cash deposit, usable at PayPoint locations such as convenience stores, newsagents, and supermarkets.
Customers can deposit up to £300 per day in cash, with a monthly limit of £600. The deposited funds are expected to appear in their accounts within minutes. The Lloyds-PayPoint partnership is intended to provide more convenience and access for customers. This partnership makes Lloyds Banking Group the first high street bank to utilize PayPoint’s BankLocal service.
This new service follows Lloyds’ announcement of plans to close an additional 55 bank branches, bringing the total number of planned closures to almost 300 by 2026. This is part of a broader corporate restructuring to reduce costs and encourage the use of digital banking.
Lloyds Banking Group PLC (NYSE:LYG) is a financial services company. It provides retail and commercial banking, insurance, and wealth management services primarily in the United Kingdom. The company operates well-known brands, including Lloyds Bank, Halifax, and Bank of Scotland, serving millions of customers through a nationwide branch network and digital banking platforms.
8. Rimini Street, Inc. (NASDAQ:RMNI)
Year-To-Date Returns: 71.15%
Share Price: $4.33
Number of Hedge Fund Holders: 12
Rimini Street, Inc. (NASDAQ:RMNI) is one of the must-buy penny stocks to invest in. On August 22, the company announced a strategic partnership with American Digital to deliver enterprise software support for Oracle, SAP, and VMware systems running on HPE infrastructure.
The collaboration aims to help North American organizations reduce software maintenance costs by up to 90% while avoiding expensive upgrades.
“Sinking costs into endless upgrades will leave organizations behind competitors and waste limited resources,” said Rimini Street CEO Seth Ravin.
The partnership enables clients to integrate AI, workflow automation, and digital connectivity into existing systems while maintaining compliance and security. Bob Panos, President of American Digital, added that the initiative offers “immediate, measurable cost savings” with tailored support solutions.
Rimini Street, Inc. (NASDAQ:RMNI) is a Russell 2000 company offering third-party support and managed services for enterprise software, including Oracle, SAP, and VMware.
7. Gaotu Techedu Inc. (NYSE:GOTU)
Year-To-Date Returns: 79.72%
Share Price: $3.90
Number of Hedge Fund Holders: 12
Gaotu Techedu Inc. (NYSE:GOTU) is one of the must-buy penny stocks to invest in. On August 26, the company reported second-quarter revenue of RMB1.39 billion ($215.5 million), beating analyst expectations of RMB1.24 billion and marking a 37.6% year-over-year increase. Gross billings rose 36.2% to RMB2.25 billion, driving the revenue surge. Despite the strong top-line performance, the company posted a loss of RMB0.88 per share, slightly below forecasts.
CEO Larry Xiangdong Chen attributed the company’s growth to innovation and AI, noting strong momentum in core operations. Non-GAAP net loss dropped 50.5% to RMB206.8 million, while operating cash inflow rose 52.5% to RMB588.8 million, signaling healthier finances.
Looking ahead, Gaotu expects Q3 revenue between RMB1.558 billion and RMB1.578 billion, representing up to 30.6% growth year-over-year. The company ended the quarter with a strong cash position of RMB3.82 billion, supporting its expansion and product development goals.
Gaotu Techedu Inc. (NYSE:GOTU) is a leading Chinese education technology firm offering academic and non-academic tutoring, college and adult education, and AI-powered learning tools. Its services span from primary school to adult learners, delivered through online platforms, mobile apps, and smart devices. The company is recognized for its data-driven approach and comprehensive curriculum encompassing traditional subjects and professional certifications.
6. Robo.ai Inc. (NASDAQ:AIIO)
Year-To-Date Returns: 86.21%
Share Price: $1.62
Number of Hedge Fund Holders: 2
Robo.ai Inc. (NASDAQ:AIIO) is one of the must-buy penny stocks to invest in. On August 27, Robo.ai Inc. announced the appointment of Mr. Xuan Yan as Chief Legal and Compliance Officer, Corporate Secretary, and President of Americas. Reporting directly to CEO Benjamin Zhai, Yan’s appointment marks a strategic move to accelerate the company’s transformation and global expansion.
Mr. Yan brings over 30 years of leadership experience from technology giants such as Microsoft, Oracle, and Qualcomm. His multifaceted career spans legal, compliance, and executive roles across Asia Pacific, Europe, and the Americas. In addition to overseeing legal affairs, Yan will lead business development and investor relations in the Americas.
CEO Zhai remarked, “His deep understanding of corporate governance and global business strengthens Robo.ai’s key operating foundations.”
Yan’s career includes executive roles in both U.S. and Chinese firms, board positions at Las Vegas Sands and Alibaba Health, and advisory roles with major private equity firms in Asia and Europe. A Juris Doctor graduate from Duke University, he has also taught corporate management and geopolitics at leading universities.
“Mr. Yan’s ability to bridge diverse markets and win stakeholder support will be a valuable asset,” Zhai added.
Robo.ai Inc. (NASDAQ:AIIO), based in the UAE, is a global smart tech firm focused on smart mobility, advanced manufacturing, and blockchain. It drives innovation and digital transformation through cutting-edge tech and strategic leadership.
5. Compass Therapeutics, Inc. (NASDAQ:CMPX)
Year-To-Date Returns: 149.29%
Share Price: $3.49
Number of Hedge Fund Holders: 15
Compass Therapeutics, Inc. (NASDAQ:CMPX) is one of the must-buy penny stocks to invest in. On August 18, Piper Sandler reiterated its Overweight rating and $12.00 price target for Compass Therapeutics, citing strong performance and promising clinical developments. The stock has surged 131% over the past year, reflecting investor confidence in the company’s oncology pipeline.
The COMPANION-002 trial’s secondary endpoint analysis is delayed to Q1 2026 due to slower survival events in second-line biliary tract cancer. Piper Sandler sees this as a possible positive, noting that nearly 50% crossover to treatment may boost tovecimig’s survival data.
Compass expects full CTX-8371 data in Q4 2025, boosting its pipeline momentum. Backed by a solid balance sheet and progressing trials, the company is well-positioned for ongoing growth in oncology.
Compass Therapeutics, Inc. (NASDAQ:CMPX) is a U.S.-based clinical-stage biopharmaceutical company focused on oncology. It develops antibody-based therapies, with lead candidates like tovecimig—a bispecific antibody targeting DLL4 and VEGF pathways—aimed at treating aggressive cancers.
4. FuboTV Inc. (NYSE:FUBO)
Year-To-Date Returns: 150.35%
Share Price: $3.53
Number of Hedge Fund Holders: 13
FuboTV Inc. (NYSE:FUBO) is one of the must-buy penny stocks to invest in. On August 28, the company announced the launch of Fubo Sports, a standalone sports streaming service set to debut on September 2.
Priced at $55.99 per month, with a first-month introductory rate of $45.99, the service will offer over 20 sports and broadcast networks, including ESPN, NFL Network, CBS Sports Network, and local ABC, CBS, and FOX stations. Select channels will stream in 4K, and the package includes ESPN’s Unlimited plan with ESPN+ access. Subscribers get unlimited DVR, on-demand content, and Family Share, plus personalized viewing with features like Multiview, Catch Up to Live, Game Highlights, and Timeline Markers.
“At Fubo, we have always believed a streaming service must provide consumers with multiple, flexible and more affordable content options,” said David Gandler, co-founder and CEO.
Fubo Sports will complement the company’s existing plans—Pro, Elite, with Sports Plus, and Latino, bringing its total offering to over 400 live channels. The initial rollout will target select markets, with broader expansion planned for the coming months.
FuboTV Inc. (NYSE: FUBO) operates a live TV streaming platform that offers sports, news, and entertainment across the U.S. and internationally. The service is accessible via SmartTVs, mobile devices, tablets, and computers, and is currently available in the United States, Canada, Spain, and France.
3. Americas Gold and Silver Corporation (NYSE:USAS)
Year-To-Date Returns: 178.57%
Share Price: $2.73
Number of Hedge Fund Holders: 7
Americas Gold and Silver Corporation (NYSE:USAS) is one of the must-buy penny stocks to invest in. On August 22, Americas Gold and Silver Corporation announced promising exploration results at the Galena Complex, revealing a high-grade copper-silver-antimony extension of the 149 Vein.
Drilling from the 4300 Level uncovered intercepts as rich as 24,913 g/t silver and 16.9% copper over 0.21 meters, with nearly 120 meters of vertical continuity above current mining levels. The 149 Vein, already delivering consistent high-grade mill feed, is now under review for long-hole open stoping. This discovery supports the company’s strategy to enhance feed quality and operational efficiency, with over 4,800 meters drilled so far out of a planned 18,100 meters.
The company also completed its planned share consolidation on August 26, 2025, converting every 2.5 pre-consolidation shares into one. CEO Paul Andre Huet stated the move reinforces the capital structure, protects shareholder value, and enhances access to institutional investors.
Building on prior success at Karora Resources, the leadership sees this step as a strategic foundation for future growth and continued development of high-potential assets.
Americas Gold and Silver Corporation (NYSE:USAS) is a precious metals mining company. It operates a portfolio of assets in North America, including the Galena Complex in Idaho, the Cosalá Operations in Mexico, and the Relief Canyon mine in Nevada. The company produces silver, zinc, lead, and gold.
2. Precigen, Inc. (NASDAQ:PGEN)
Year-To-Date Returns: 317.59%
Share Price: $4.51
Number of Hedge Fund Holders: 12
Precigen, Inc. (NASDAQ:PGEN) is one of the must-buy penny stocks to invest in. On August 19, Cantor Fitzgerald reaffirmed its “Overweight” rating on Precigen stock. The firm expressed growing confidence in Precigen’s upcoming launch of Papzimeos, the company’s newly approved product, following recent discussions with the company. Papzimeos received full FDA approval as the first and only therapy for adults with recurrent respiratory papillomatosis (RRP), marking a major milestone for Precigen. Precigen set the wholesale acquisition cost for a full treatment cycle of the drug at $460,000.
The analysts’ thesis highlights Papzimeos as a significant revenue opportunity due to its unique position as the only FDA-approved RRP treatment and the company’s strategic preparations for its commercial launch. As such, Cantor Fitzgerald updated its financial model, estimating Precigen’s equity value at approximately $1.7-1.8 billion, which is about 3.3 times the projected peak sales for the company’s products, based on a discounted cash flow analysis.
Precigen, Inc. (NASDAQ:PGEN) is a biotech firm focused on gene and cell therapies for cancer, autoimmune conditions, and rare diseases. Using synthetic biology, its pipeline features innovative platforms—UltraCAR-T, ActoBiotics, and AdenoVerse—aimed at delivering precise, long-lasting, and cost-effective treatments.
1. Avino Silver & Gold Mines Ltd. (NYSE:ASM)
Year-To-Date Returns: 360.82%
Share Price: $4.47
Number of Hedge Fund Holders: 6
Avino Silver & Gold Mines Ltd. (NYSE:ASM) is one of the must-buy penny stocks to invest in. On August 25, 2025, Avino Silver & Gold Mines Ltd. announced the acquisition of 100% ownership of its La Preciosa project in Mexico by purchasing and extinguishing all outstanding royalty and contingent payment obligations from Deterra Royalties Limited.
The $22 million transaction includes a $13.25 million upfront payment and a deferred $8.75 million due in one year, already accounted for in the existing agreement. This move restores full control of the asset, optimizes financial structure, and enhances project economics ahead of production.
President and CEO David Wolfin highlighted the strategic value of eliminating royalty burdens, calling it a rare opportunity to boost project returns and shareholder value. With La Preciosa now materially unencumbered, Avino expects lower operating costs and stronger NAV per share. The company’s robust balance sheet, supported by strong cash flows from its current operations, enabled this accretive investment. The transaction also marks the end of a multi-party royalty trail that began with Coeur Mining and passed through Trident Royalties before reaching Deterra.
Avino Silver & Gold Mines Ltd. (NYSE:ASM) is a mining and exploration company. It primarily operates the Avino Mine in Durango, Mexico, which produces silver, gold, and copper through underground mining and processing facilities. The company has a long operating history at the site. It continues to focus on expanding resources and production capacity to strengthen its position as a mid-tier precious metals producer.
While we acknowledge the potential of Avino Silver & Gold Mines Ltd. (NYSE:ASM) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than ASM and that has 100x upside potential, check out our report about this cheapest AI stock.
READ NEXT: 6 Best Railroad Stocks to Buy Right Now and 11 Best Very Cheap Stocks to Buy According to Hedge Funds.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email below.
Hedge Fund Resource Center