We recently published a list of 15 Best Penny Stocks to Buy According to Billionaires. In this article, we are going to take a look at where Ambev S.A. (NYSE:ABEV) stands against other best penny stocks to buy according to billionaires.
Can Small-Cap Stocks Overtake Large-Caps in 2025?
On February 14, Morningstar released a report on its outlook for small-cap stocks in 2025. The research highlighted the potential for small-cap stocks to outperform in 2025, driven by favorable macroeconomic conditions, valuation discounts, and sector-specific opportunities.
The report noted that small-cap companies are more sensitive to short-term interest rate movements due to their capital structure. When central banks cut rates, debt servicing costs for these firms decrease, improving their financial position and potentially leading to better performance. Historically, interest-rate cuts have been associated with positive returns in the small-cap segment. Quoting an example of Australia, the report highlighted that the Reserve Bank of Australia (RBA) has recently shifted to a dovish stance, with interest-rate cuts expected in 2025. This anticipated reduction of up to 0.75% by year-end could renew investor interest in Australian small caps.
Moreover, currently, small-cap stocks are trading at significant discounts compared to large-cap counterparts. As per the report, such valuation gaps have historically preceded strong price appreciation for small caps, especially when market sentiment improves. If we look internationally the small and mid-cap equities are trading at a Price/Earnings ratio of 16.4x compared to 19.2x for the MSCI World Index. Morningstar believes that If small and mid-cap valuations revert to their historical premium over the broader market, they could trade at a P/E of 20.2x. Therefore, projections indicate that small caps are set to experience higher earnings growth than large caps in 2025, offering robust returns for investors seeking growth opportunities. In addition, the report noted that the global reshoring trend, where multinational corporations bring supply chains back to domestic markets, is also expected to benefit small caps operating locally. This shift could also spur mergers and acquisitions, as larger firms seek smaller businesses to capitalize on reshoring benefits.
Lastly, periods of heightened market concentration have historically led to outperformance by small caps. The current market climate suggests that this trend might continue, rewarding investors who focus on smaller, agile companies.
Our Methodology
To curate the list of 15 best penny stocks to buy according to billionaires we used the Finviz stock screener and Insider Monkey’s Q4 2024 billionaires database. Using the screener we aggregated a list of penny stocks (trading below $5) and sorted the list by market capitalization. Next, we ranked the stocks in ascending order of the number of billionaire investors. Additionally, we have also added the hedge fund sentiment around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close-up of bottles of whisky and other alcoholic beverages from a winery.
Ambev S.A. (NYSE:ABEV)
Price: $2.30
Number of Hedge Fund Holders: 22
Number of Billionaire Investors: 9
Total Value of Billionaire Holdings: $480,645,533
Ambev S.A. (NYSE:ABEV) is a Brazilian multinational beverage company focused on beer production and non-alcoholic beverages. It is one of the largest brewers in Latin America by sales volume and owns two of the world’s top 10 beer brands including Skol and Brahma. The company operates in 18 countries in the Americas.
Ambev S.A. (NYSE:ABEV) demonstrated resilient financial performance in Q4 2024 despite operational challenges. Its total volumes were offset by soft demand in Argentina and adverse weather in Brazil, which impacted production. This resulted in total volumes falling by 3.2% year-over-year. However, regardless the company grew its net revenue by 35.2% year-over-year driven by pricing strategies and premiumization efforts.
In addition, the Adjusted net profit also grew by 7.5% during the same time supported by Normalized EBITDA growth of 9.7% and improved financial results. Ambev S.A. (NYSE:ABEV) consolidated EBITDA has grown by 37% over five years, underscoring its ability to navigate macroeconomic headwinds while expanding margins. It is one of the best penny stocks to buy according to billionaires.
Overall, ABEV ranks 4th on our list of best penny stocks to buy according to billionaires. While we acknowledge the potential of ABEV as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ABEV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires
Disclosure: None. This article is originally published at Insider Monkey.
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