In this article, we discuss the 12 penny stocks with the biggest upside.
Even though the United States economy has been rattled by recession fears in the past few months, there are reasons to be optimistic about the near-term future of the market. Recent data suggests that employment growth remains strong, and many measures of economic activity are growing, even if more slowly than last year. Oil and food prices have been falling at the wholesale level. The major concern remains inflation and lowering energy prices are helping offset some of the impact it is having on the economy.
Further, the monetary policy tightening has raised the cost of capital for companies and has slowed down earnings growth momentum. However, businesses are now beginning to bounce back. The benchmark S&P 500 racked up a second consecutive month of gains in November, as investors became ever more positive that the Federal Reserve would deliver a smaller rate hike in December. The index gained 5.4% in the month, including a 3.1% rally in the final session, after a sustained period of losses.
Prominent stocks like Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB) are all benefiting as a result, even though they are not out of the woods just yet. Investors eager to get back to investing in stocks would be much better served by exploring options in the penny stock universe, a sector of the market that offers explosive growth potential at cheap prices. In an uncertain market, these bets carry lower levels of risk.
Our Methodology
The companies that have upcoming growth catalysts and were priced under $5 per share, as of December 20, were selected for the list. Special importance was assigned to outlining the basic business fundamentals and analyst ratings for each firm to provide readers with some context so they can make more informed investment choices. Data from around 900 elite hedge funds tracked by Insider Monkey in the third quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
Photo by Sharon McCutcheon on Unsplash
Penny Stocks With Biggest Upside
12. XWELL, Inc. (NASDAQ:XWEL)
Number of Hedge Fund Holders: N/A
Share Price as of December 20: $0.40
XWELL, Inc. (NASDAQ:XWEL) is a health and wellness services company that provides spa services at airports. On November 2, Xwell Inc announced the opening of Treat at Salt Lake City International Airport with a ribbon-cutting ceremony. Treat is an upscale health and wellness center for people on the go. As the pandemic recedes and international travel resumes on a large scale, the health and wellness centers of the company are expected to witness increased foot traffic, especially from China. The firm posted over $10 million in revenue in Q3.
11. American Resources Corporation (NASDAQ:AREC)
Number of Hedge Fund Holders: 4
Share Price as of December 20: $1.18
American Resources Corporation (NASDAQ:AREC) engages in the extraction, processing, transportation, distribution, and sale of metallurgical coal to the steel industries. The stock has been soaring since the company announced that the board of directors had approved a stock buyback program worth $10 million. Under the program, the firm is authorized to repurchase shares through the open market, in privately-negotiated transactions, or otherwise in accordance with applicable federal securities laws. The share repurchase authorization will expire in September 2023.
At the end of the third quarter of 2022, 4 hedge funds in the database of Insider Monkey held stakes worth $2.7 million in American Resources Corporation (NASDAQ:AREC), compared to 2 in the preceding quarter worth $681,000.
10. Sunworks, Inc. (NASDAQ:SUNW)
Number of Hedge Fund Holders: 5
Share Price as of December 20: $1.92
Sunworks, Inc. (NASDAQ:SUNW) provides photovoltaic and battery-based power and storage systems for the agricultural, commercial, industrial, public works, and residential markets in the United States. On October 23, Sunworks revealed that it is advancing its commitment to sustainable practices with the launch of a nationwide, long-term recycling program in contract with Zeep Technology, an asset disposal firm. The agreement between the company emerged after Sunworks recycled 293 decommissioned panels in 2021 and recognized the need to formalize the program.
At the end of the third quarter of 2022, 5 hedge funds in the database of Insider Monkey held stakes worth $2.5 million in Sunworks, Inc. (NASDAQ:SUNW), compared to 3 the preceding quarter worth $1.8 million.
9. HOOKIPA Pharma Inc. (NASDAQ:HOOK)
Number of Hedge Fund Holders: 8
Share Price as of December 20: $0.78
HOOKIPA Pharma Inc. (NASDAQ:HOOK) is a clinical-stage biopharmaceutical company that develops immunotherapeutics targeting infectious diseases and cancers based on its proprietary arenavirus platform. The stock has climbed since late October after Roche, a pharmaceutical company, signed a license agreement with HOOKIPA to develop immunotherapy HB-700 for KRAS-mutated cancers and a second undisclosed novel arenaviral immunotherapy. Under the agreement, HOOKIPA will receive $25 million upfront.
At the end of the third quarter of 2022, 8 hedge funds in the database of Insider Monkey held stakes worth $23.5 million in HOOKIPA Pharma Inc. (NASDAQ:HOOK), compared to 9 in the previous quarter worth $29.4 million.
8. Meta Materials Inc. (NASDAQ:MMAT)
Number of Hedge Fund Holders: 9
Share Price as of December 20: $1.30
Meta Materials Inc. (NASDAQ:MMAT) invents, designs, develops, and manufactures various functional materials and nanocomposites. The company recently approved the oil and gas spinoff of the firm, named Next Bridge Hydrocarbons, that has an estimated market capitalization of more than $1 billion. On December 7, FINRA approved the exchange of the company’s Series A preferred shares for common shares of the spinoff company. As the spinoff raises money, it is expected to pay back $20 million in loans to the parent firm.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Millennium Management is a leading shareholder in Meta Materials Inc. (NASDAQ:MMAT) with 3.2 million shares worth more than $2 million.
In its Q4 2021 investor letter, Singular Research, an asset management firm, highlighted a few stocks and Meta Materials Inc. (NASDAQ:MMAT) was one of them. Here is what the fund said:
“To combat rising inflation, the Fed and Jerome Powell announced they would double the pace of purchasing Treasuries and mortgage-backed securities, and that they are expecting three rate hikes in 2022. As a result of these comments, markets were jittery, making December the most volatile month in 2021. Oil prices rose 14 percent and 10-year yields ended the month moderately higher. Looking ahead, inflation warning signs persist, and many are left to wonder just how much 2022 interest rate hikes have already been priced into markets. Meta Materials Inc. (NASDAQ:MMAT) was also a poor performer as the firm is the defendant in several class-action lawsuits for issuing materially misleading business information to the public.”
7. Skillz Inc. (NYSE:SKLZ)
Number of Hedge Fund Holders: 10
Share Price as of December 20: $0.63
Skillz Inc. (NYSE:SKLZ) operates a mobile games platform that connects players in fair, fun, and meaningful competition. On October 12, Citi analyst Jason Bazinet maintained a Neutral rating on Skillz Inc. (NYSE:SKLZ) stock and lowered the price target to 95c from $1.50, noting that the only change in the target price reflects updated probabilities related to the company’s ability to generate free cash flow.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Wild Cat Capital Management is a leading shareholder in Skillz Inc. (NYSE:SKLZ) with 21.6 million shares worth more than $22 million.
6. Uranium Energy Corp. (NYSE:UEC)
Number of Hedge Fund Holders: 11
Share Price as of December 20: $3.17
Uranium Energy Corp. (NYSE:UEC) engages in the exploration, pre-extraction, extraction, and processing of uranium and titanium concentrates in the United States, Canada, and Paraguay. Uranium Energy shares have climbed, along with other uranium mining companies like Denison and Cameco, after recent reports that Germany will extend the life of all three of its nuclear power plants until mid-April 2023 in the face of an unprecedented energy crisis.
On October 19, H.C. Wainwright analyst Heiko Ihle maintained a Buy rating on Uranium Energy Corp. (NYSE:UEC) stock and raised the price target to $8.25 from $7.25.
At the end of the third quarter of 2022, 11 hedge funds in the database of Insider Monkey held stakes worth $24.5 million in Uranium Energy Corp. (NYSE:UEC), compared to 8 in the previous quarter worth $32.2 million.
In contrast to Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:FB), Uranium Energy Corp. (NYSE:UEC) is one of the cheaper stocks with the biggest upside potential.
5. Denison Mines Corp. (NYSE:DNN)
Number of Hedge Fund Holders: 12
Share Price as of December 20: $1.10
Denison Mines Corp. (NYSE:DNN) engages in the acquisition, exploration, development, extraction, processing, selling off, and investing of uranium properties in Canada. The stock has soared since the company released results from a long-term core leach metallurgic testing to support the feasibility study underway for the Phoenix in-situ recovery uranium mining operation. This operation was proposed for the Wheeler River project.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Sprott Asset Management is a leading shareholder in Denison Mines Corp. (NYSE:DNN) with 3.3 million shares worth more than $3.8 million.
4. Arbutus Biopharma Corporation (NASDAQ:ABUS)
Number of Hedge Fund Holders: 14
Share Price as of December 20: $2.42
Arbutus Biopharma Corporation (NASDAQ:ABUS) is a biopharmaceutical company that develops novel therapeutics for chronic Hepatitis B virus (HBV) infection, SARS-CoV-2, and other viruses in the United States. The firm recently posted earnings for the third quarter of 2022. The total revenue of the company grew 78.1% to $5.95 million. Arbutus said that the increase was mainly due to $2.3 million of revenue recognition from its license agreement with Qilu based on employee labor hours expended by the company during the third quarter of 2022.
On November 10, investment advisory H.C. Wainwright maintained a Buy rating on Arbutus Biopharma Corporation (NASDAQ:ABUS) stock and lowered the price target to $6 from $7.50. Analyst Ed Arce issued the ratings update.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Two Seas Capital is a leading shareholder in Arbutus Biopharma Corporation (NASDAQ:ABUS) with 5.6 million shares worth more than $10.8 million.
3. Ardelyx, Inc. (NASDAQ:ARDX)
Number of Hedge Fund Holders: 19
Share Price as of December 20: $1.76
Ardelyx, Inc. (NASDAQ:ARDX) is a biopharmaceutical company that discovers, develops, and commercializes medicines to treat gastrointestinal and cardiorenal therapeutic areas in the United States and internationally. On November 17, Piper Sandler analyst Christopher Raymond upgraded Ardelyx, Inc. (NASDAQ:ARDX) to Overweight from Neutral with a price target of $8, up from $3, noting that the FDA advisory committee gave a surprisingly positive vote of 9-4 in favor of tenapanor as monotherapy and 10-2 as combo therapy for the control of serum phosphorus in dialysis-dependent chronic kidney disease.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Deep Track Capital is a leading shareholder in Ardelyx, Inc. (NASDAQ:ARDX) with 14.9 million shares worth more than $17.7 million.
2. Nokia Oyj (NYSE:NOK)
Number of Hedge Fund Holders: 24
Share Price as of December 20: $4.60
Nokia Oyj (NYSE:NOK) provides mobile, fixed, and cloud network solutions worldwide. On December 12, Nokia unveiled that Telefónica Germany and Nokia have aggregated sub-6 GHz spectrum frequencies in an industry-first two-component carrier uplink Carrier Aggregation trial on 5G Standalone. On November 9, Deutsche Bank analyst Robert Sanders Nokia Oyj maintained a Buy rating on Nokia Oyj (NYSE:NOK) stock and lowered the price target to EUR 5.50 from EUR 6.
Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in Berkshire Hathaway Inc. (NYSE: BRK-A) with 20.3 million shares worth more than $86.7 million.
In its Q3 2022 investor letter, Horos Asset Management, an asset management firm, highlighted a few stocks and Nokia Oyj (NYSE:NOK) was one of them. Here is what the fund said:
“Two clear examples of value traps that I remember with particular anger include Nokia (NYSE:NOK). Two companies suffered a rapid technological disruption in their business model and did not know or were not able to reinvent themselves in time. In the case of Nokia, we were dealing with the undisputed leader in cell phone sales. The company had an (apparently) ultra-solid balance sheet and enviable operating margins. However, the arrival of the smartphone brought a radical change to the industry, to which Nokia did not know how to adapt. In a short period, players such as Apple and Samsung wiped the Finnish giant off the map.”
1. Opendoor Technologies Inc. (NASDAQ:OPEN)
Number of Hedge Fund Holders: 41
Share Price as of December 20: $1.33
Opendoor Technologies Inc. (NASDAQ:OPEN) operates a digital platform for residential real estate in the United States. On August 4, Opendoor Technologies declared a partnership with Zillow Group, a Seattle-based real estate giant, which will allow home sellers on Zillow’s platform to request an instant cash offer from Opendoor. The transaction of purchase is facilitated by Opendoor.
On October 25, JMPcurities analyst Nicholas Jones maintained an Outperform rating on Opendoor Technologies Inc. (NASDAQ:OPEN) stock and lowered the price target to $4.50 from $9, noting that valuations in the sector have compressed materially as stocks with exposure to residential real estate have seen sharp multiple compression on fears around the increasing probability of a 2023 recession, rising interest rates, and low affordability.
At the end of the third quarter of 2022, 41 hedge funds in the database of Insider Monkey held stakes worth $396.4 million in Opendoor Technologies Inc. (NASDAQ:OPEN), compared to 39 in the preceding quarter worth $861.7 million.
In its Q4 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Opendoor Technologies Inc. (NASDAQ:OPEN) was one of them. Here is what the fund said:
“The Fund invests in secular growth and innovative businesses across all market capitalizations, with the bulk of the portfolio landing in the large-cap zone. The Fund is categorized as US Large Growth by Morningstar. As of the end of the fourth quarter, the largest market cap holding in the Fund was $2.5 trillion and the smallest was $791 million. The median market cap of the Fund was $27.5 billion. The Fund had $1.7 billion of assets under management. The Fund had investments in 63 securities. The Fund’s top 10 positions accounted for 45.4% of net assets. Fund inflows were positive for 2021. We sold Opendoor Technologies Inc. because we identified issues relating to our long-term theses in the company, and we decided to exit the positions to fund other purchases.”
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Disclosure. None. 12 Penny Stocks With Biggest Upside is originally published on Insider Monkey.
