In this article, we will explore the 7 Penny Stocks That Aren’t Scams: Best Cheap Stocks to Buy.

Small-cap companies drew significant attention at the start of the year, as expectations grew that they would outperform larger peers due to falling interest rates and economic growth. Building on this optimism, strategists at Bank of America, JPMorgan, BTIG LLC, and Polar Capital American forecast that small caps will extend their leadership into 2026.

Supporting this view, Dan Boston, head of the global small company team at Polar Capital America, said, “Small caps are a good place to be generally, and globally, in part because they’ve been overlooked for a long period of time. What we see going forward is small caps doing well vis-a-vis large caps.”

However, with the escalation of conflict in the Middle East, penny stocks and small-cap stocks have come under pressure, as depicted by the Russell 2000 index pulling back after an impressive start to the New Year. Nonetheless, small-cap stocks continue to outperform the overall market despite a significant pullback from all-time highs.

The S&P Small Cap 600 Index is up by 3.3% year to date, as the Russell 2000 index follows with about 1% gain. In contrast, the larger S&P 500 is down by about 4%, affirming renewed focus on small companies at the expense of large caps.

Small companies are increasingly outperforming their larger peers as investors take profits from big techs, given the concerns about high valuations. In addition, Jonathan Krinsky, managing director and chief market technician at BTIG, believes a more dovish US Federal Reserve under pressure to lower interest rates is also expected to offer support to small companies.

Bank of America’s Jill Carey Hall expects small companies to outperform large caps in 2026 on a combination of a “long-awaited profits rebound,” rate cuts, potentially lower tariffs, and shifting investor flows into the smaller names.

With that in mind, let’s take a look at some of the best cheap penny stocks to buy that aren’t scams.

Our Methodology

To compile our list of Penny Stocks That Aren’t Scams: Best Cheap Stocks to Buy, we used the Finviz screener to identify stocks trading between $1 and $5 per share, with a market capitalization above $200 million and an average daily trading volume of more than 500,000 shares. From this group, we focused on stocks with a forward P/E ratio below 15, positive revenue growth over the past five years, and an upside potential of at least 30%. We also considered institutional interest by reviewing hedge fund holdings data from Insider Monkey’s 13F database (Q4 2025). Finally, we ranked the stocks in ascending order based on their upside potential as of April 7, ensuring that each company met all of the above criteria.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research shows 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 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).

Penny Stocks That Aren’t Scams: Best Cheap Stocks to Buy

7. Frontier Group Holdings, Inc. (NASDAQ:ULCC)

Stock Upside Potential: 38.06%

Forward P/E: 13.95

Number of Hedge Fund Holders: 25

Frontier Group Holdings, Inc. (NASDAQ:ULCC) is one of the best cheap penny stocks to buy that aren’t scams. On March 18, Frontier Group Holdings, Inc. (NASDAQ:ULCC), a subsidiary of Frontier Airlines, deferred the delivery of 69 A320neo family aircraft. The aircraft are to be delivered between 2031 and 2033, from the previous schedule of between 2027 and 2030.

The pushback on delivery timelines comes as Frontier Group Holding’s debt has risen to $5.5 billion, with negative levered free cash flow of $624 million. Earlier, Frontier Group Holdings reached an agreement to terminate leases on 24 A320neo aircraft currently in operation.

The aircraft are to be returned in the second quarter and are expected to reduce the operating lease right-of-use assets and operating liabilities by about $400 million. The earlier return is also expected to result in non-cash charges of between $125 million and $175 million. The company is also poised to incur between $75 million and $95 million in early lease termination and return of aircraft and engines.

Frontier Group Holdings, Inc. (NASDAQ:ULCC) is a Denver-based holding company that operates Frontier Airlines, Inc., the largest ultra-low-cost carrier (ULCC) in the United States. It provides passenger airline services to leisure travelers across the U.S., Mexico, and the Caribbean, focusing on low fares, high-density seating, and fuel-efficient, all-Airbus A320neo family aircraft.

6. Clarivate Plc (NYSE:CLVT)

Stock Upside Potential: 39.52%

Forward P/E: 3.42

Number of Hedge Fund Holders: 21

Clarivate Plc (NYSE:CLVT) is one of the best cheap penny stocks to buy that aren’t scams. On March 10, Clarivate Plc (NYSE:CLVT) affirmed its commitment to extending proprietary intelligence into enterprise AI ecosystems.

The company is integrating its proprietary regulatory intelligence data under Cortellis Regulatory Intelligence (CRI) with Anthropic Claude’s AI reasoning capabilities. The integration will provide biopharma, biotech, MedTech, and clinical research organizations with intelligent, context-aware access to crucial regulatory data through artificial intelligence workflows.

In addition, Clarivate stands to extend its regulatory intelligence into the AI environments customers already use while also expanding ecosystems that inform critical decisions. The connection to Claude will offer customers an opportunity to build agents that combine CRI with Internal data and approved external sources.

The strategic integration with Claude aligns with Clarivate’s strategy of extending intelligence into AI ecosystems where critical decisions are made. It also paves the way for expanding the reach of trusted regulatory insights.

Clarivate Plc (NYSE:CLVT) is a global information services and analytics company that accelerates innovation by providing trusted insights, data, and software to organizations in research, intellectual property (IP), and life sciences. It owns prominent brands like Web of Science, Cortellis, and Derwent, helping clients manage patents, conduct academic research, and speed up drug development.

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