In this article, we will take a detailed look at the 13 Cheap Penny Stocks to Buy According to Hedge Funds.
Stocks are roaring as investors celebrate the Fed’s latest announcement saying it’s ready to begin cutting interest rates next year. While the Fed’s decision has caused a lot of stir among the market skeptics who question the motives behind the sudden pivot and warn against the possible implications of this move, the bulls believe now is the time to pile into stocks as they don’t see the rally stopping anytime soon. Oppenheimer’s John Stoltzfus, who is very optimistic on the stock market and believes the S&P 500 could touch 5,200 in 2024, said in a program on CNBC that the stock market rally of 2023 would continue in 2024 and it would not be limited to just the mega-cap tech stocks or the Magnificent Seven group, which includes companies like Meta Platforms Inc (NASDAQ:META), NVIDIA Corp (NASDAQ:NVDA) and Amazon.com Inc (NASDAQ:AMZN). The analyst also said that he does not believe the Fed would cut rates in the first quarter.
Wise investors have time and again said that bear markets provide an opportunity for long-term investors to buy and hold because after all bear markets do not tend to last long. A report by Mawer Investment provides an interest data point proving this:
“What people don’t realize, though, is that most downturns are reasonably minor and short lived. Since 1945, for example, the S&P 500 Composite Index has experienced, on average, declines of 5% or more three times a year, declines of 10% or more once a year, and declines of 15% or more once every four years. The length of those downturns ranged, on average, from about a month and a half, to four months, to nine months, respectively. True “bear markets”— when the S&P 500 declines 20% or more from its previous high—have occurred 14 times since 1946, and have lasted, on average, about a year.”
Photo by Ruben Sukatendel on Unsplash
Methodology
For this article we first used a stock screener to identify penny stocks (trading under $5) with PE ratios of less than 15. From this dataset we picked 13 stocks with the highest number of hedge fund investors.
13. Banco Bradesco SA (NYSE:BBD)
Number of Hedge Fund Investors: 15
Banco Bradesco SA (NYSE:BBD) is a cheap penny stock with a high dividend yield (over 5%). The Brazilian financial services company Banco Bradesco SA talked about its guidance and other important business updates during Q3 earnings call and said:
“Even considering that we grew during the quarter and we have not yet recovered in all portfolios by the same pace. It is a fact that lower origination and lower rates mix are still squeezing the client NII. We believe that we will get to normalized origination levels throughout the third quarter and throughout the year ’24. At this moment, we are operating below the guidance range.
All our reviews and reevaluation of credit models and policies have shown important results. The new credit vintages are still performing 50% better than the 2021 vintages. And we continue to monitor these delinquency ratios in the short run and the volumes. The new vintages already account for 57% of the individual’s portfolio in the retail banking segment. The quarter’s ALL was BRL9.2 billion. For credit provision expense it was 10.9% lower than the previous quarter, so this lowered the cost of risk to 4.2%. The year’s guidance range goes from BRL36.5 billion to BRL39.5 billion. At this time we are expecting to end the year close to the top as we indicated previously. Despite the improvement, we are still operating with a high level of cost of risk because this is a long-tailed process.”
Read the entire earnings call transcript here.
A total of 15 hedge funds in Insider Monkey’s database of 910 hedge funds shows that 15 funds had stakes in Banco Bradesco SA. The most significant stakeholder of Banco Bradesco SA was Ken Fisher’s Fisher Asset Management which owns an $111 million stake in Banco Bradesco SA.
12. Sibanye Stillwater Ltd (NYSE:SBSW)
Number of Hedge Fund Investors: 16
With a dividend yield of about 7% and a PE ratio of 4.6, Sibanye Stillwater Ltd (NYSE:SBSW) ranks 12th in our list of the cheap penny stocks to buy according to hedge funds.
Out of the 910 hedge funds in Insider Monkey’s database, 16 hedge funds had stakes in Sibanye Stillwater Ltd. The most significant stakeholder of Sibanye Stillwater Ltd was Cliff Asness’s AQR Capital Management which owns a $31 million stake in Sibanye Stillwater Ltd.
11. VAALCO Energy, Inc (NYSE:EGY)
Number of Hedge Fund Investors: 16
VAALCO Energy, Inc (NYSE:EGY) is among the most popular penny stocks among the elite hedge funds tracked by Insider Monkey. The stock has a PE ratio under 15 and a dividend yield of 5.75%. During the third quarter VAALCO Energy, Inc’s adjusted EPS in the period came in at $0.07, missing estimates by $0.07. Revenue in the quarter jumped about 49% year over year to $116.27 million.
As of the end of the third quarter of 2023, 16 hedge funds out of the 910 funds in Insider Monkey’s database had stakes in VAALCO Energy, Inc..
10. Origin Materials Inc (NASDAQ:ORGN)
Number of Hedge Fund Investors: 16
Carbon-negative materials company Origin Materials Inc (NASDAQ:ORGN) ranks 10th in our list of the cheap penny stocks to buy according to smart money investors. In November, Origin Materials Inc announced a restructuring and said it would cost about $2.7 million in charges in connection with a roughly 30% workforce reduction.
A total of 13 hedge funds tracked by Insider Monkey had stakes in Origin Materials Inc.
9. Nokia Oyj (NYSE:NOK)
Number of Hedge Fund Investors: 17
Nokia Oyj (NYSE:NOK) has been a popular but rather disappointing stock for investors over the past few years. Nokia Oyj shares have lost about 45% over the past five years. But analysts are hopeful that the 5G revolution would boost the stock. Back in October, Nokia Oyj maintained its FY23 outlook despite industry weakness and said it would lay off 14,000 employees by the end of 2026.
A total of 17 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in Nokia Oyj. The most significant stakeholder of the firm during this period was Richard S. Pzena’s Pzena Investment Management which had a $160 million stake in Nokia Oyj.
Among some other stocks poised to benefit from the 5G revolution are Meta Platforms Inc, NVIDIA Corp and Amazon.com Inc.
Artisan International Value Fund made the following comment about Nokia Oyj in its second quarter 2023 investor letter:
“Nokia Oyj (NYSE:NOK) is the world’s third-largest provider of telecommunications equipment. The company sells its products to service providers, such as AT&T and Vodaphone. While we have held the stock, new management has simultaneously improved competitiveness and reduced costs—a remarkable achievement that has resulted in improved growth and profitability. Despite that, the share price has declined, and the valuation multiple has shrunk below 10X forward earnings. The reason is that telecommunications operators are cutting back on investment. Higher interest rates, inflation and competition are eating into customer cash flows, resulting in less capital spending. For now, Nokia will experience reduced demand. At some point, the ever-increasing need for wire and wireless bandwidth will force service providers to increase investment. In addition, Nokia’s market share is improving due to geopolitical changes and improved market competitiveness. The share price declined by 15% during the quarter.”
8. Overseas Shipholding Group Inc. (NYSE:OSG)
Number of Hedge Fund Investors: 17
Oil tanker company Overseas Shipholding Group Inc. (NYSE:OSG) is one of the undervalued penny stocks popular among hedge funds. Last month Overseas Shipholding Group Inc. posted Q3 results. GAAP EPS in the quarter came in at $0.22. Revenue fell 6.2% year over year to $115.44 million.
Of the 910 hedge funds in Insider Monkey’s database, 17 had stakes in Overseas Shipholding Group Inc.. The biggest stakeholder of Overseas Shipholding Group Inc. was Stephen C. Freidheim’s Cyrus Capital Partners which owns a $31 million stake in Overseas Shipholding Group Inc..
7. B2Gold Corp (NYSE:BTG)
Number of Hedge Fund Investors: 19
Canadian mining company B2Gold Corp (NYSE:BTG) ranks 7th in our list of the undervalued penny stocks popular among hedge funds.
As of the end of the third quarter of 2023, 19 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in B2Gold Corp. The biggest stakeholder of B2Gold Corp was John Overdeck and David Siegel’s Two Sigma Advisors which owns a $34 million stake in B2Gold Corp.
Unlike Meta Platforms Inc, NVIDIA Corp and Amazon.com Inc, B2Gold is a small stock with risks involved.
6. W&T Offshore, Inc. (NYSE:WTI)
Number of Hedge Fund Investors: 19
W&T Offshore, Inc. in the third quarter of 2023 earned $0.01 per share, missing estimates by $0.04. Revenue in the quarter fell by 46.6% year over year, still beating estimates by $3.52 million.
5. Qurate Retail Inc Series A (NASDAQ:QRTEA)
Number of Hedge Fund Investors: 19
Qurate Retail Inc Series A (NASDAQ:QRTEA) ranks 5th in our list of the cheap penny stocks to buy according to hedge funds. The stock’s PE ratio as of December 14 stands at 4.85.
Qurate Retail Inc Series A during its Q3 earnings call talked about its expectations from the 2023 holiday season and other business updates:
“In September, QVC refreshed as Monday night fashion line-up featuring Logo by Lori Goldstein, the relaunch of PM Style with Banestrand and new shows accessorized with Sean and Sean on style. Each show was developed to deliver a strong fashion point of view and include special sets and fresh production elements. At HSN, we were pleased to launch new brands and offers including C. Wonder by Christian Siriano, Birkenstock for the first time as a today’s special Sharp flexstile hair tool and Sofia Vergara’s Toti beauty line. Now, let me touch on QX customers. On a quarterly basis, total count declined 8% in the third quarter, partially offset by a 6% increase and average spend per customer, resulting in an overall 3% decline in revenue. The rate of declining count moderated in Q3 from the low double-digit declines in the first 2 quarters of 2023.
We’re seeing the biggest churn from the low end of our customer file. On Slide 8 of our earnings presentation, you can see we are stabilizing the trailing 12-month count near $8.2 million, down only modestly from $8.3 million at the end of the second quarter. Please note that while our press release discloses customer count on a trailing 12-month basis, this is a lag-on indicator and does not reflect the progress in Q3. The increase in average spend was driven by our existing and best customers and reflects our higher quality product assortment. The average dollar spend for each of these cohorts was the highest of any quarter in 2023. We are taking a variety of actions to attract new customers, retain customers and reactivate former customers.”
Read the full earnings call transcript here.
A total of 19 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Qurate Retail Inc Series A. The biggest stakeholder of Qurate Retail Inc Series A was Bob Peck and Andy Raab’s FPR Partners which owns an $18 million stake in Qurate Retail Inc Series A.
Weitz Investment Partners III Opportunity Fund made the following comment about Qurate Retail, Inc. in its third 2023 investor letter:
“Qurate Retail, Inc. (NASDAQ:QRTEA) continues to make full dividend payments on our preferred shares, but tangible signs of operating improvement remain elusive. In the coming quarters, management’s “Project Athens” plan (a multi-year turnaround plan designed to stabilize Qurate’s core business and expand its leadership in video streaming commerce) is projected to deliver cost savings and margin expansion opportunities that we will evaluate closely.”
4. Community Health Systems Inc (NYSE:CYH)
Number of Hedge Fund Investors: 20
Hospital healthcare services company Community Health Systems Inc (NYSE:CYH) is a Fortune 500 company whose stock was trading at around $2.63 as of December 14.
In November, Community Health Systems Inc’s director Wayne Smith bought 1 million shares of Community Health Systems Inc at $2.11 per share, worth about $2.1 million.
3. Destination XL Group Inc (NASDAQ:DXLG)
Number of Hedge Fund Investors: 21
Apparel company Destination XL Group Inc (NASDAQ:DXLG) shares were spotted in 21 hedge fund portfolios as of the end of the third quarter of 2023. The biggest stakeholder of Destination XL Group Inc during this period was Chuck Royce’s Royce & Associates which owns a $6.7 million stake in Destination XL Group Inc.
2. Baytex Energy Corp (TSE:BTE)
Number of Hedge Fund Investors: 24
Baytex Energy Corp (TSE:BTE) recently approved a budget of $1.2 billion to $1.3 billion in exploration and development spending for fiscal 2024.
A total of 24 hedge funds in the database of Insider Monkey had stakes in Baytex Energy Corp.
1. DISH Network Corp (NASDAQ:DISH)
Number of Hedge Fund Investors: 32
DISH Network Corp (NASDAQ:DISH) tops our list of the undervalued and cheap penny stocks popular among hedge funds. The stock has a PE ratio of about 2.37.
A total of 32 hedge funds in Insider Monkey’s database had stakes in DISH Network Corp.
Suggested Articles:
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- 10 Very Cheap Energy Stocks Ready To Explode
Disclosure. None. 13 Cheap Penny Stocks to Buy According to Hedge Funds was initially published on Insider Monkey.
