The stock market’s optimism wave recently saw a break after latest data showed that the US labor market remains resilient despite consistent rate hikes to curb inflation. Investors are worried that we might be in for a long period of elevated rates and high inflation. But some believe any dips in the short-term should be seen as buying opportunities. Alexandra Wilson-Elizondo, deputy chief investment officer of multi-asset solutions at Goldman Sachs Asset Management, recently said in an interview with Yahoo Finance that any declines in the market should be an opportunity for investors to buy the dip or rebalance portfolios.
Goldman Sachs expects the Fed to start cutting interest rates in the second half of 2023. While JPMorgan and Morgan Stanley have released their 2024 outlook reports which do not paint a rosy picture for 2024, there’s no shortage of bullish views on the upcoming year. For example, Bank of America, which expects the S&P 500 to touch 5,000 in 2024, believes “we are past maximum macro uncertainty” and that the market has already absorbed a lot of uncertainty and negative news.
“Macro signals are muddled, but idiosyncratic alpha increased this year. We’re bullish not because we expect the Fed to cut, but because of what the Fed has accomplished. Companies have adapted (as they are wont to do) to higher rates and inflation,” Bank of America said.
A rebound in stocks in 2024 and 2025 is expected to trickle down to the broader market and favor small companies that have been taking a beating amid the market’s overall rotation to a few big names like NVIDIA Corporation (NASDAQ:NVDA), Microsoft Corporation (NASDAQ:MSFT) and Apple Inc. (NASDAQ:AAPL).
Photo by Ruben Sukatendel on Unsplash
Methodology
For this article we scanned Insider Monkey’s database of 910 hedge funds updated as of the third quarter of 2023 and picked 16 penny stocks (stocks trading under $5) with the highest number of hedge fund investors.
16. Lumen Technologies, Inc (NYSE:LUMN)
Number of Hedge Fund Investors: 24
Communications services company Lumen Technologies, Inc (NYSE:LUMN) is one of the best penny stocks to buy according to hedge funds. A lot of insider buying activity was observed at Lumen Technologies, Inc (NYSE:LUMN) last month. Lumen Technologies, Inc’s (NYSE:LUMN) CFO Christopher Stansbury bought 500,000 shares of Lumen Technologies, Inc (NYSE:LUMN) for a transaction value of $549,450. Lumen’s CEO Kathleen Johnson also bought one million shares of Lumen Technologies, Inc (NYSE:LUMN).
As of the end of the third quarter of 2023, 24 hedge funds tracked by Insider Monkey were long Lumen Technologies, Inc (NYSE:LUMN).
Longleaf Partners Fund made the following comment about Lumen Technologies, Inc. (NYSE:LUMN) in its Q2 2023 investor letter:
“We exited second-time holding Alphabet and long-term position Lumen Technologies, Inc. (NYSE:LUMN) in the quarter. We sold our remaining position in Lumen, after reducing our position in the first quarter when it became clearer the new management team under CEO Kate Johnson would not pursue a strategic path to monetizing Lumen’s consumer business. At their first analyst day in early June, new management presented disappointingly weak financial targets and significant further spending without a clear path to revenue growth. Throughout our holding period, we saw bond market pricing holding up and supporting our case for the strength of Lumen’s balance sheet, but in the second quarter, this reversed with bond prices becoming overly distressed. We lowered our appraisal as our outlook for the company deteriorated, leading to a full exit in the quarter. Lumen represented a permanent capital loss for the Fund, a significant opportunity cost for the portfolio and a disappointing long-term mistake. Lumen has reinforced the importance of limiting overweight positions in the portfolio, being cautious of leverage and value declines, and fully re-underwriting a case – and being willing to move on – when the people and/or underlying facts change.”
15. Taboola.com Limited (NASDAQ:TBLA)
Number of Hedge Fund Investors: 24
Online ads company Taboola.com Limited (NASDAQ:TBLA) shares have gained about 16% year to date through December 9. Last month Taboola.com Limited (NASDAQ:TBLA) entered a new deal with NBCUniversal News Group. The media group will continue using Taboola.com Limited’s (NASDAQ:TBLA) products across its platforms including CNBC, MSNBC and TODAY.
A total of 24 hedge funds tracked by Insider Monkey reported owning stakes in Taboola.com Limited (NASDAQ:TBLA). The most significant stake in Taboola.com Limited (NASDAQ:TBLA) is owned by Josh Goldberg’s G2 Investment Partners Management which owns a $17.8 million stake in Taboola.com Limited (NASDAQ:TBLA).
14. Adaptive Biotechnologies Corporation (NASDAQ:ADPT)
Number of Hedge Fund Investors: 24
Adaptive Biotechnologies Corporation (NASDAQ:ADPT) ranks 14th in our list of the best penny stocks to buy for 2024. In November Adaptive Biotechnologies Corporation (NASDAQ:ADPT) posted third quarter results. GAAP EPS in the period came in at -$0.35, missing estimates by $0.01. Revenue in the period fell 20.7% year over year to $37.92 million, missing estimates by $5.04 million.
As of the end of the third quarter of 2024, 24 hedge funds out of the 910 funds tracked by Insider Monkey reported owning stakes in Adaptive Biotechnologies Corporation (NASDAQ:ADPT).
13. Grab Holdings Limited (NASDAQ:GRAB)
Number of Hedge Fund Investors: 25
Ride-haling platform company Grab Holdings Limited (NASDAQ:GRAB) was spotted in 25 hedge fund portfolios as of the end of the third quarter of 2023. The biggest hedge fund stakeholder of Grab Holdings Limited (NASDAQ:GRAB) was Chase Coleman and Feroz Dewan’s Tiger Global Management LLC which owns a $182 million stake in Grab Holdings Limited (NASDAQ:GRAB).
In November, Grab Holdings Limited (NASDAQ:GRAB) posted third quarter results. EPS in the quarter came in at -$0.02, meeting estimates. Revenue jumped about 61% year over year to $615 million, beating estimates by $27.02 million.
Unlike NVIDIA Corporation (NASDAQ:NVDA), Microsoft Corporation (NASDAQ:MSFT) and Apple Inc. (NASDAQ:AAPL), GRAB is a small company which hedge funds like.
12. Opendoor Technologies Inc (NASDAQ:OPEN)
Number of Hedge Fund Investors: 25
Real estate platform company Opendoor Technologies Inc (NASDAQ:OPEN) ranks 12th in our list of the best penny stocks to buy for 2024 according to hedge funds. The stock has gained a whopping 232% year to date through December 9. Opendoor Technologies Inc (NASDAQ:OPEN) is expected to achieve free cash flow breakeven milestone by the first half of 2024.
A total of 25 hedge funds in Insider Monkey’s database had stakes in Opendoor Technologies Inc (NASDAQ:OPEN) as of the end of the third quarter of 2023.
Last month Opendoor Technologies Inc (NASDAQ:OPEN) posted Q3 results. GAAP EPS in the quarter came in at -$0.16, beating estimates by $0.05. Revenue totaled $980 million, missing estimates by $30 million.
11. AbCellera Biologics Inc. (NASDAQ:ABCL)
Number of Hedge Fund Investors: 25
Biotech firm AbCellera Biologics Inc. (NASDAQ:ABCL) ranks 11th in our list of the best penny stocks to buy for 2024 according to hedge fund. A total of 25 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in AbCellera Biologics Inc. (NASDAQ:ABCL) as of the end of the third quarter of 2023.
The biggest stakeholder of AbCellera Biologics Inc. (NASDAQ:ABCL) was Julian Baker and Felix Baker’s Baker Bros. Advisors which owns a $96 million stake in AbCellera Biologics Inc. (NASDAQ:ABCL).
AbCellera Biologics Inc.’s (NASDAQ:ABCL) CEO Carl Hansen talked about the industry situation and future plans in Q3 earnings call:
“I think you don’t have to be a biotech analyst to see that this is a bear market for biotech and has been for some time. So what that means is that there is absolutely a slowdown in the formation of new companies and financing new companies. The companies that are out are preserving capital. They are prioritizing programs. And all of that results in a smaller ocean of opportunities for partnering. So that said, we have, for the last two years, been consistently communicating that our focus is not on deal volume. Our focus is on finding strategic partnerships where strategic means one of two things. It either means that we found a company that is bringing a unique technology such as Prelude or a company that is bringing unique target insight and biology.
And that together with them, we have a great opportunity to make a therapeutic that we have conviction in and that we’re able to get a significant stake in that therapeutic. So that’s the first category of strategic. The second category is relationship building and setting up deeper engagements with some of the very large and well-enabled companies, companies like Regeneron, companies like Incyte. So examples from this quarter that line up with that. That means that we are looking at … [read the full earnings call transcript here]”
10. Qurate Retail, Inc (NASDAQ:QRTEA)
Number of Hedge Fund Investors: 25
Qurate Retail, Inc (NASDAQ:QRTEA) has taken a lot of beating this year, having lost about 41% year to date through December 9. This is a risky stock since there has been speculation that Qurate Retail, Inc (NASDAQ:QRTEA) could file for bankruptcy in the next 12 months. However, 25 hedge funds tracked by Insider Monkey had stakes in the retailer as of the end of the third quarter of 2023.
In November, Qurate Retail, Inc (NASDAQ:QRTEA) CAO/PFO Brian Wendling sold 20,000 shares of Qurate Retail, Inc (NASDAQ:QRTEA) for a transaction value of $17,852.
9. Nerdy, Inc (NYSE:NRDY)
Number of Hedge Fund Investors: 25
Online learning platform company Nerdy, Inc (NYSE:NRDY) ranks 9th in our list of the best penny stocks to buy for 2024 according to hedge funds. During the third quarter Nerdy, Inc’s (NYSE:NRDY) revenue increased by over 26.7% year over year to $40.3 million.
As of the end of the third quarter of 2023, 25 hedge funds tracked by Insider Monkey were long Nerdy, Inc (NYSE:NRDY).
8. Compass Inc. (NYSE:COMP)
Number of Hedge Fund Investors: 26
Residential real estate brokerage company Compass Inc. (NYSE:COMP) is one of the top penny stocks to buy and hold according to hedge funds. Out of the 910 funds tracked by Insider Monkey 26 hedge funds had stakes in Compass Inc. (NYSE:COMP).
Deutsche Bank recently started covering Compass Inc. (NYSE:COMP) shares with a Hold rating. The bank believes Compass Inc. (NYSE:COMP) is expected to be an “equal beneficiary in a housing market recovery, premium valuation and the overhang from the Sitzer/Burnett lawsuit that could disrupt broker commissions keeps us on the sidelines for now.”
7. Altice USA, Inc. (NYSE:ATUS)
Number of Hedge Fund Investors: 26
Altice USA, Inc. (NYSE:ATUS) last month reported its third quarter results, according to which adjusted EPS in the period came in at $0.15, beating estimates by $0.08. Revenue fell 2.9% year over year to $2.32 billion, surpassing estimates by $30 million.
6. Nuvation Bio Inc. (NYSE:NUVB)
Number of Hedge Fund Investors: 26
In November Nuvation Bio Inc. (NYSE:NUVB) posted third quarter results. GAAP EPS in the period came in at -$0.09, beating estimates by $0.02.
As of the end of the third quarter of 2023, 26 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Nuvation Bio Inc. (NYSE:NUVB). Amid expectations that growth stocks will perform well in 2024 and 2025, hedge funds are piling into small companies, in addition to amassing stakes in big companies like NVIDIA Corporation (NASDAQ:NVDA), Microsoft Corporation (NASDAQ:MSFT) and Apple Inc. (NASDAQ:AAPL).
5. Sabre Corp (NASDAQ:SABR)
Number of Hedge Fund Investors: 28
Sabre Corp (NASDAQ:SABR) shares have lost about 36% over the past one year. Yet it is one of the most popular penny stocks among the 910 hedge funds tracked by Insider Monkey since 28 funds had stakes in Sabre Corp (NASDAQ:SABR). The biggest stake in Sabre Corp (NASDAQ:SABR) belongs to Terry Smith’s Fundsmith LLP which owns an $101 million stake in Sabre Corp (NASDAQ:SABR).
4. Clear Channel Outdoor Holdings, Inc (NYSE:CCO)
Number of Hedge Fund Investors: 31
Advertising company Clear Channel Outdoor Holdings, Inc (NYSE:CCO) shares have gained about 60% year to date. The Clear Channel Outdoor Holdings, Inc (NYSE:CCO) stock recently jumped after billionaire Arturo Moreno reported a 6.8% stake in the out-of-home advertising company.
As of the end of the third quarter of 2023, 31 hedge funds had stakes in Clear Channel Outdoor Holdings, Inc (NYSE:CCO).
3. Vimeo, Inc (NASDAQ:VMEO)
Number of Hedge Fund Investors: 31
Video platform company Vimeo, Inc (NASDAQ:VMEO) shares recently surged after the Vimeo, Inc’s (NASDAQ:VMEO) Q3 results impressed the Street. Vimeo, Inc’s (NASDAQ:VMEO) revenue came in at $106.3 million, surpassing estimates of $101.2 million.
Jefferies reiterated a Buy rating on the stock after the results.
Longleaf Partners Small-Cap Fund made the following comment about Vimeo, Inc. (NASDAQ:VMEO) in its Q2 2023 investor letter:
“We exited Vimeo, Inc. (NASDAQ:VMEO) and long-term position Lumen in the quarter, both of which were disappointing investments that resulted in a permanent capital loss in the portfolio. At Vimeo we initially misjudged how much of a COVID beneficiary the business had been, and our sum of the parts valuation proved to be too generous for some of the underlying assets that were less differentiated than we originally believed.”
2. Dish Network Corporation (NASDAQ:DISH)
Number of Hedge Fund Investors: 33
Dish Network Corporation (NASDAQ:DISH) posted an extremely bad third quarter in November after which the stock plummeted. Net pay-TV subscribers decreased by about 64,000 in the third quarter, compared to a net increase of about 30,000 in the year-ago quarter.
A total of 33 hedge funds tracked by Insider Monkey had stakes in Dish Network Corporation (NASDAQ:DISH). The biggest stakeholder of Dish Network Corporation (NASDAQ:DISH) was Paul Marshall and Ian Wace’s Marshall Wace LLP which owns a $54 million stake in Dish Network Corporation (NASDAQ:DISH).
ClearBridge Large Cap Value Strategy made the following comment about DISH Network Corporation (NASDAQ:DISH) in its first quarter 2023 investor letter:
“DISH Network Corporation (NASDAQ:DISH) was lower for more idiosyncratic reasons. The pay-TV provider, with unique potential to become a viable fourth wireless carrier, continues to face challenges executing its wireless buildout in a higher rate environment where a leveraged balance sheet is a liability. We believe there is still value to be captured for Dish, but it is clearly taking longer to realize, and we are monitoring the stock closely.”
1. Farfetch Ltd. (NYSE:FTCH)
Number of Hedge Fund Investors: 42
Out of the 910 hedge funds in Insider Monkey’s database, 42 hedge funds had stakes in Farfetch Ltd. (NYSE:FTCH). Last month, Citi analyst Monique Pollard upped her rating for Farfetch Ltd. (NYSE:FTCH) stock to Neutral from Sell.
On the other hand, BTIG cut Farfetch (FTCH) to Neutral from Buy and said the stock has become “almost unanalyzable.”
Patient Capital Management made the following comment about Farfetch Limited (NYSE:FTCH) in its Q3 2023 investor letter:
“Farfetch Limited (NYSE:FTCH) was exited in the quarter following continued disappointment in cash flow generation combined with their ever -expanding debt balance. From this point, we see serious balance sheet risk for the first time, causing us to question if the company will be able to achieve their long-term plan. We took the opportunity to realize tax losses and will continue to re-evaluate the name. More details on FTCH below.
Farfetch Ltd (FTCH) was our largest detractor in the quarter as the company massively disappointed expectations, while increasing their debt load. The lack of results and dramatic change in the risk profile over the last year forced us to reconsider the viability of our long-term thesis. With the additional $600M in term loan debt drawn down over the last year and the constant delays in true free cash flow generation (operating cash flow (operating cash flow (OCF)-capital expenditure (CAPEX)) the risk profile of the company has drastically changed from when we first owned it. From a strategic standpoint, the company has made great progress signing new deals, bringing on new partners and proving the value of their offering but their operational performance and financial discipline has sorely disappointed. While the entry of Tim Stone as CFO in September will certainly help the company, we don’t have conviction it will be enough. Debt and interest expense ($100M/annually) have exploded. Limited cash on hand ($753M by year-end), continued cash burn, a risk of a recession and $1B in debt maturities due in 2027, make us concerned about the company’s ability to invest behind and deliver against their long-term targets. We used the opportunity to take tax losses while continuing to re-evaluate the situation.”
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Disclosure. None. 16 Best Penny Stocks To Buy For 2024 was initially published on Insider Monkey.
