In this article, we will take a look at the 10 best value penny stocks to buy.
Value stocks have suffered since the start of 2023 amid an overall market euphoria that has favored growth stocks. A report by GMO said that the rise of growth stocks in 2023 and the reversal of value was not completely unexpected since value vs growth has always been a bumpy ride. The report mentioned that the MSCI ACWI Growth index gained about 17.4% in 2023 through the end of May, while MSCI ACWI Value posted -1.4% in return during the same period. GMO, whose Equity Dislocation Strategy is 100% long cheap value stocks and 100% short expensive growth stocks, said that the information technology sector was the biggest contributor in the outperformance of growth stocks this year. The report said that investors were already ready to buy the dip on tech stocks amid depressed valuations caused by the market crash of 2022. Then the AI boom came and technology stocks rose to new highs.
“The average Value exposure to Information Technology was 8.9%, while the average Growth exposure was a much greater 29.9%. The 21.0% short relative underweight multiplied by the 25.0% Information Technology outperformance had an impact of -5.2% to the performance of Value minus Growth. Value’s biggest positive overweight is in Financials, a sector that has had a challenging start to the year as initially Silicon Valley Bank, and subsequently Signature Bank, Credit Suisse, and First Republic, imploded. Perhaps surprisingly, Financials sat right in the middle of the pack as far as sector performance went, but the 14.1% relative overweight to the -9.4% underperforming sector still had an impact of -1.3%,” the report added.
A 2019 report by T. Rowe Price takes a look at why and how broader markets make a rotation from growth to value stocks and what factors contribute to this rotation. The report at the time noted that growth stocks had been triumphant amid easy money policies, low inflation and rise of tech stocks. But the report had said that all of that could change if markets return to “rationality” and dominant tech stocks lose their traction in what T. Rowe called “changing of the guard.”
“The idea that today’s biggest companies—primarily U.S. technology companies—will continue to dominate the next decade should be met with caution. Seldom do the same companies, or even economies (such as Japan in the 1980s) manage to sustain such dominance.”
So far technology remains dominant but there are strong value plays that could grow in the future amid their long-term growth catalysts.
Image: Depositphotos
Methodology
For this article we first used a stock screener to identify stocks trading under $5 as of August 23 with PE ratios under 20. We then picked 10 of these stocks with the highest number of hedge fund investors. We gave preference to stocks from consumer staples, energy, financials, industrials, and materials sectors.
Best Value Penny Stocks To Buy
10. Banco Santander, S.A. (NYSE:SAN)
Number of Hedge Fund Holders: 16
Spanish financial services company Banco Santander, S.A. (NYSE:SAN) ranks 10th in our list of the best value penny stocks to buy now. Banco Santander, S.A. (NYSE:SAN) has gained about 56% in value over the past one year. Its PE ratio is still 5.91.
In July, Banco Santander, S.A. (NYSE:SAN) shares gained after the company posted strong Q2 results and said it’s “well on track” to achieving 2023 financial targets.
Insider Monkey’s database of 910 hedge funds shows that 16 hedge funds had stakes in Banco Santander, S.A. (NYSE:SAN) as of the end of the second quarter of 2023. The biggest stakeholder of Banco Santander, S.A. (NYSE:SAN) was John W. Rogers’s Ariel Investments which owns a $26 million stake in the company.
9. Nordic American Tankers Limited (NYSE:NAT)
Number of Hedge Fund Holders: 16
Nordic American Tankers Limited (NYSE:NAT)’s PE ratio as of August 22 stands at 9.55. Nordic American Tankers Limited (NYSE:NAT) has a 14% dividend yield. In May Nordic American Tankers Limited (NYSE:NAT) posted Q1 results. GAAP EPS in the quarter came in at $0.22 beating estimates by $0.05. Revenue in the period jumped 461% year over year to $87.1 million, beating estimates by $5.53 million.
As of the end of the second quarter of 2022, 16 hedge funds in Insider Monkey’s database of hedge funds had stakes in Nordic American Tankers Limited (NYSE:NAT).
8. Baytex Energy Corp. (NYSE:BTE)
Number of Hedge Fund Holders: 17
Canadian energy company Baytex Energy Corp. (NYSE:BTE) is one of the best value penny stocks to buy.
Out of the 910 hedge funds in Insider Monkey’s database, 17 hedge funds held stakes in Baytex Energy Corp. (NYSE:BTE). The most significant stakeholder of Baytex Energy Corp. (NYSE:BTE) during this period was Vince Maddi and Shawn Brennan’s SIR Capital Management which owns a $24 million stake in the company.
In June, Baytex Energy Corp. (NYSE:BTE) announced the completion of acquisition of Ranger Oil (NASDAQ:ROCC). According to the deal, Ranger Oil’s shareholders received 7.49 Baytex Energy Corp. (NYSE:BTE) shares plus $13.31 cash for each share of Ranger common stock.
7. B2Gold Corp. (NYSE:BTG)
Number of Hedge Fund Holders: 17
B2Gold Corp. (NYSE:BTG) is a Canadian gold mining company with mines in Mali, the Philippines, and Namibia.
Insider Monkey’s database of 910 hedge funds shows that 17 funds had stakes in B2Gold Corp. (NYSE:BTG) as of the end of the second quarter. Earlier in August B2Gold Corp. (NYSE:BTG) posted Q2 results. Adjusted EPS in the quarter came in at $0.07 in-line with estimates. Revenue in the quarter jumped 23.3% year over year to $470.85 million, beating estimates by $9.79 million. Total gold production in the period came in at 262,701 ounces.
B2Gold Corp. (NYSE:BTG) also features on Insider Monkey’s list of the most oversold penny stocks in August.
6. Overseas Shipholding Group, Inc. (NYSE:OSG)
Number of Hedge Fund Holders: 17
Oil tanker firm Overseas Shipholding Group, Inc. (NYSE:OSG) is one of the best value penny stocks to buy according to hedge funds. Overseas Shipholding Group, Inc. (NYSE:OSG) has gained 37% in value year to date through August 23. Overseas Shipholding Group, Inc. (NYSE:OSG)’s PE ratio stands at 7.48. In June, Overseas Shipholding Group, Inc. (NYSE:OSG) jumped to its six-year high after the company doubled its stock buyback program, adding $10 million to its authorization to raise the total value of its program to $20 million.
Insider Monkey’s database of 910 hedge funds tracked as of the end of the second quarter shows that 17 hedge funds were long Overseas Shipholding Group, Inc. (NYSE:OSG). The biggest stakeholder of Overseas Shipholding Group, Inc. (NYSE:OSG) was Stephen C. Freidheim’s Cyrus Capital Partners which owns a $30 million stake in the company.
Overseas Shipholding Group, Inc. (NYSE:OSG)’s management recently talked about their expectations for the full-year 2023 in a recent earnings call and said:
“We anticipate continuing strength in all important financial metrics and to sustain build in available cash balances over the next several quarters as profitable time charters at higher utilization rates are realized. As Dick noted, we do anticipate increased drydocking survey out of service days for the second half of this year. Nevertheless, with our success in securing improved terms on a number of vessel contracts, it gives us confidence in improving our guidance for full-year 2023 results from what we have presented last quarter. We now expect time charter equivalent earnings for the full-year of approximately $410 million. Attaining these top line results should generate adjusted EBITDA of about a $160 million for the full calendar year of 2023.
After deducting debt service and planned maintenance capital expenses, we anticipate that free cash flow for the full-year should be close to $70 million. To deliver on these results, our mission is firmly focused on execution and operational excellence, as well as the pursuit of growth opportunities in some of our specialized businesses. The extended contract coverage into 2024 also allows us to project with a reasonable degree of certainty, results that should be achieved from existing vessels for next year. Given what we know today, we expect time charter equivalent earnings for 2024 to exceed $430 million and an adjusted EBITDA to exceed $175 million for the full calendar year of 2024. Capital allocation and the future use of surplus cash flow is a regular topic of conversation with our Board.”
5. W&T Offshore, Inc. (NYSE:WTI)
Number of Hedge Fund Holders: 18
Texas-based energy company W&T Offshore, Inc. (NYSE:WTI) ranks 5th in our list of the best value penny stocks to buy according to hedge funds. W&T Offshore, Inc. (NYSE:WTI)’s PE ratio as of August 22 stands at 4.94.
As of the end of the second quarter of 2023, 18 hedge funds had stakes in W&T Offshore, Inc. (NYSE:WTI). The biggest stakeholder of W&T Offshore, Inc. (NYSE:WTI) was Joe Huber’s Huber Capital Management with an $8.6 million stake in the company.
W&T Offshore, Inc. (NYSE:WTI)’s management talked about their expectations for the third quarter in a recent earnings call. W&T Offshore, Inc. (NYSE:WTI)’s CEO Tracy Krohn said:
“For the third quarter, our guidance for lease operating expense is expected to be lower, so between $60 million and $67 million. We also continue to control our G&A costs. In the second quarter, cash G&A costs were $15.3 million, down 14% and $18 million in Q1 2023. For the third quarter, we are expecting cash G&A to increase modestly between $15.4 million and $17.3 million. We’ll continue to manage controllable costs to help maximize our margins. So turning to our balance sheet. During 2023, we’ve reduced total debt by almost $300 million from year end 2022. At the end of the second quarter, we had net debt of $231.9 million, which was total debt of $403.6 million, net of cash and cash equivalents of $171.6 million. As I mentioned previously, the large reduction in total debt was driven by issuing new 2026 senior second lien notes in January 2023 at par totaling $275 million in a private offering and using the proceeds along with a portion of our considerable cash position to retire all of our outstanding 2023 senior second lien notes.”
Kingdom Capital Advisors made the following comment about W&T Offshore, Inc. (NYSE:WTI) in its Q4 2022 investor letter:
“W&T Offshore, Inc. (NYSE:WTI) was our favorite trading vehicle, taking advantage of its volatile nature and gunslinging risk management department, to ride multiple >100% moves in the stock during 2022. WTI is a Gulf of Mexico E&P with a colorful CEO, no capital return plan, a valuable pile of reserves, and a slug of calls on the price of natural gas. We found this to be an exciting trade to express our belief in energy stocks, and a dangerous place to stay after sentiment peaks.”
4. Destination XL Group, Inc. (NASDAQ:DXLG)
Number of Hedge Fund Holders: 18
Destination XL Group, Inc. (NASDAQ:DXLG) sells clothes and shoes for big and tall men. In May Destination XL Group, Inc. (NASDAQ:DXLG) posted Q1 results. Adjusted EPS of Destination XL Group, Inc. (NASDAQ:DXLG) in the quarter came in at $0.11 missing estimates by $0.01. Revenue in the quarter fell 1.8% year over year to $125.44 million, surpassing estimates by $1.12 million. Comparable sales in the first quarter jumped 0.6% on a YoY basis.
As of the end of the second quarter of 223, 18 hedge funds out of the 910 funds in Insider Monkey’s database reported owning stakes in Destination XL Group, Inc. (NASDAQ:DXLG). The biggest stakeholder of Destination XL Group, Inc. (NASDAQ:DXLG) was Chuck Royce’s Royce & Associates which owns a $6.41 million stake in the company.
3. Assertio Holdings, Inc. (NASDAQ:ASRT)
Number of Hedge Fund Holders: 20
Specialty pharma company Assertio Holdings, Inc. (NASDAQ:ASRT) ranks 3rd in our list of the best value penny stocks to buy according to hedge funds. Earlier in August Assertio Holdings, Inc. (NASDAQ:ASRT) posted Q2 results. Adjusted EPS in the period came in at $0.19, missing estimates by $0.03. Revenue in the quarter jumped 16.7% year over year to $40.99 million, surpassing estimates by $1.16 million.
Out of the 910 hedge funds in Insider Monkey’s database, 20 hedge funds had stakes in Assertio Holdings, Inc. (NASDAQ:ASRT) as of the end of June.
2. Origin Materials, Inc. (NASDAQ:ORGN)
Number of Hedge Fund Holders: 21
Materials company Origin Materials, Inc. (NASDAQ:ORGN) ranks 2nd in our list of the best value penny stocks to buy according to hedge funds. A total of 21 hedge funds in Insider Monkey’s database of hedge funds held stakes in Origin Materials, Inc. (NASDAQ:ORGN) as of the end of the second quarter of 2023. Origin Materials, Inc. (NASDAQ:ORGN) recently plunged after the company announced to extend the timeline of its key project amid a “higher-cost capital project environment.”
Origin Materials, Inc. (NASDAQ:ORGN) has lost about 76% in value over the past 12 months. Earlier in August Origin Materials, Inc. (NASDAQ:ORGN) posted Q2 results. GAAP EPS in the quarter came in at -$0.05 beating estimates by $0.07.
1. Community Health Systems, Inc. (NYSE:CYH)
Number of Hedge Fund Holders: 22
Hospital healthcare services company Community Health Systems, Inc. (NYSE:CYH) is a Fortune 500 company. Community Health Systems, Inc. (NYSE:CYH) has gained about 3% over the past one year. This undervalued penny stock has a PE ratio of about 1.56.
A total of 22 hedge funds in Insider Monkey’s database of 910 hedge funds had stakes in Community Health Systems, Inc. (NYSE:CYH). The biggest stakeholder of Community Health Systems, Inc. (NYSE:CYH) during this period was Kamran Moghtaderi’s Eversept Partners which owns a $32 million stake in the company.
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Disclosure: None. 10 Best Value Penny Stocks To Buy is originally published on Insider Monkey.
