We recently compiled a list of the 12 Best Multibagger Penny Stocks to Buy Now. In this article, we are going to take a look at where Hyliion Holdings Corp. (NYSE:HYLN) stands against the other stocks.
Investors in the United States and abroad are girding themselves for a turbulent week amid a looming tariff war. President Trump imposed tariffs on imports from Mexico, China, and Canada on February 1—these are the country’s largest trading partners. Goods crossing the border from Mexico and Canada will attract a 25% duty and 10% for those from China. Washington’s justification for this policy action is that it will address trade imbalances, illegal immigration, and drug trafficking.
The problem is that such policy direction doesn’t often sit well with investors. Soon after the tariff announcement, major stock indexes saw significant drops. The S&P 500 is down 0.5% after registering an impressive run since Trump’s inauguration. The Nasdaq has shaved off 0.28%, while the Dow is down 0.75% from the previous close.
In other words, the tariffs are bad news for the US stock market. Experts, such as Jeremy Siegel, believe that we are likely to see more uncertainty and heightened volatility as a result. “Tariffs are the only negative aspect of Trump’s economic agenda. They can lead to higher prices for consumers and potential disruptions in the supply chain. This creates uncertainty and volatility in the stock market,” he told CNBC’s Closing Bell.
Periods of uncertainty often do not favor small caps, according to BlackRock’s Christopher DiPrimio and Travis Cooke. They write, “As a result of some of this more cyclical sector exposure, the Russell 2000 has lagged the S&P 500, especially during periods of market volatility and increased uncertainty.” This is also evident in the latest drops. The Russell 2000 dropped more than major stock indices in the past few hours after the activation of Trump’s tariffs.
Small-cap companies typically derive a larger portion of their revenue domestically. And when uncertainties arise from events like a tariff war, these companies are insulated from external shocks. As such, the potential for higher earnings will make small-cap stocks increasingly attractive to investors.
That aside, small-cap valuations are now attractive. Small-cap stocks are currently trading at attractive valuations, with price/earnings (P/E) ratios slightly above their long-run average of 16.7 times (excluding companies with negative earnings) but still more than 30% below large-cap indices.
Geoff Dailey and colleagues at BNP Paribas Asset Management offer an apt summary of the multibagger potential of US small caps. They write that “The outlook for US small-capitalization stocks is better now than it has been for several years. The main reasons include the US interest rate cutting cycle (small caps tend to benefit), currently attractive valuations, the reshoring trend, and (expected) merger & acquisition activity.”
Beyond these factors, the current market environment offers unique opportunities for penny stock investors. Corporate earnings are showing resilience despite economic headwinds, with companies in the Russell 2000 reporting better-than-expected results. Recent data shows that approximately 58.6% of the companies in the Russell 2000 have reported earnings above analyst expectations for Q4 2024. Besides that, the outlook for 2025 suggests that M&A activity in the small-cap space will pick up momentum. This combination creates a compelling setup for small cap stock investments in 2025.
Our Methodology
For this article, we used a stock screener to first identify stocks priced under $5 that have posted huge gains over the past year (at least 100%). From the obtained dataset, we selected penny stocks with the highest percentage gains in stock performance over the past year (as of February 5). The list is ranked based on stock performance, from lowest to highest.
At Insider Monkey, we are obsessed with 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A technician wearing a safety suit and goggles working on a battery pack for an electric vehicle.
Hyliion Holdings Corp. (NYSE:HYLN)
Stock Performance Over Last Year: 120.39%
Number of Hedge Fund Holders: 8
Share Price as of February 5: $2.27
Hyliion Holdings Corp. (NYSE:HYLN) develops sustainable electricity-producing technology through its innovative KARNO generator system. The company provides distributed power generators that can operate on over 20 different fuel sources.
Hyliion Holdings Corp. (NYSE:HYLN) has secured significant milestones, including a $16 million contract from the US Navy’s Office of Naval Research and customer commitments exceeding its 2025 KARNO generator production capacity. Its advanced M Line manufacturing system from Colibrium Additive represents a major production capability upgrade, enabling 2-4 times more parts per machine than current printers.
Hyliion Holdings Corp. (NYSE:HYLN) has made substantial progress in commercialization, with initial KARNO deliveries expected by year-end and revenue guidance in the low double-digit millions for 2025. The company has $237.5 million in cash and investments, a strong order pipeline, and break-even gross margins targeted by late 2025. In this light, Hyliion looks ready to capitalize on the growing demand for sustainable power generation solutions.
Overall HYLN ranks 10th on our list of the best multibagger penny stocks to buy now. While we acknowledge the potential of HYLN 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 timeframe. If you are looking for an AI stock that is more promising than HYLN 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 Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.