The overall market optimism helped by expectations that the Fed might start cutting interest rates in 2024 is helping riskier assets and equities, including small-cap stocks, penny stocks and cryptocurrencies. The Russell 2000 Index, one of the most watched small-cap indices in the US, is up by about 7% in 2023 through December 6.
Throughout this year the Street's attention has been focused on major tech stocks like NVIDIA Corporation (NASDAQ:NVDA), Microsoft Corporation (NASDAQ:MSFT) and Apple Inc. (NASDAQ:AAPL). But now analysts are looking towards smaller companies for long-term gains as recession clouds begin to recede. Even major financial institutions are starting to turn positive on small-cap stocks. Goldman Sachs’ managing director of ETFs Brendan McCarthy recently told CNBC that the firm has launched a small-cap product.
The ETF, called the Goldman Sachs Small Cap Core Equity ETF, is already up by about 7.6% over the past one month.
Amy Zhang, Executive Vice President and Portfolio Manager at Alger, recently said in a program on CNBC that 2024 would be a comeback year for small-cap growth stocks. The analyst said small-cap growth stocks have been suffering a bear market for the last three years but the next year could bring a positive change for the sector.
For this article we first used a stock screener to identify stocks trading under $5 which have gained over 50% over the past one month. From the resultant dataset we picked 13 penny stocks with the highest number of hedge fund investors. We gauged hedge fund sentiment using Insider Monkey's database of 910 hedge funds updated as of the end of September 30, 2023.
Olaplex Holdings Inc. (NASDAQ:OLPX) ranks 13th in our list of the hot penny stocks to buy according to hedge funds. The stock has gained a whopping 88% over the past one month. Olaplex Holdings Inc. (NASDAQ:OLPX) in November posted strong Q3 results. Adjusted EPS in the period came in at $0.05, beating estimates by $0.02. Revenue in the period fell about 30% year over year to $123.6 million, beating estimates by $7.91 million. For the full year 2023, Olaplex Holdings Inc. (NASDAQ:OLPX) expects its net sales in the range of $450 million to $460 million, versus the consensus estimate of $448.27 million.
During its Q3 earnings call, the Olaplex Holdings Inc.’s (NASDAQ:OLPX) management talked about guidance:
“For fiscal year 2023 we now expect net sales in the range of $450 million to $460 millionversus our previously reported range of $445 million to $465 million. Adjusted EBITDA in the range of $166 million to $174 million compared to our previously reported range of $161 million to $176 million and adjusted net income in the range of $100 million to $108 million versus our previously reported range of $96 million to $108 million. For the year, we assume adjusted gross margins in the range of 70.5% to 71%.
Read the full earnings call transcript here.
Number of Hedge Funds: 14
Aldeyra Therapeutics Inc. (NASDAQ:ALDX) shares have gained about 45% over the past one month. Last month, AbbVie (NYSE:ABBV) said it signed an exclusive option agreement with Aldeyra Therapeutics Inc. (NASDAQ:ALDX) for the latter's dry eye disease candidate, reproxalap.
The deal gives AbbVie the right to acquire a co-exclusive license in the US and an exclusive license outside the US to develop, manufacture and commercialize the drug.
As of the end of the third quarter of 2023, 14 hedge funds tracked by Insider Monkey were long ALDX. The biggest stakeholder of Aldeyra Therapeutics Inc. (NASDAQ:ALDX) was Joseph Edelman’s Perceptive Advisors which owns a $76 million stake in Aldeyra Therapeutics Inc. (NASDAQ:ALDX).
In addition to major companies like NVIDIA Corporation (NASDAQ:NVDA), Microsoft Corporation (NASDAQ:MSFT) and Apple Inc. (NASDAQ:AAPL), hedge funds are also piling into small companies like ALDX.
Number of Hedge Funds: 14
Kinnate Biopharma Inc. (NASDAQ:KNTE) shares have gained about 79% over the past one month. Last month Kinnate Biopharma Inc. (NASDAQ:KNTE) posted Q3 results. GAAP EPS in the period came in at -$0.65, beating estimates by $0.04. In September Kinnate Biopharma Inc. (NASDAQ:KNTE) cut its workforce by 70% and ended three drug programs. At the time Kinnate Biopharma Inc. (NASDAQ:KNTE) said it had $204.3 million in cash as of the end of June. Kinnate Biopharma Inc. (NASDAQ:KNTE) said these funds could fund its operations until the second quarter of 2026.
As of the end of the third quarter of 2023, 14 hedge funds tracked by Insider Monkey had stakes in Kinnate Biopharma Inc. (NASDAQ:KNTE). The biggest stakeholder of the firm was Samuel Isaly’s OrbiMed Advisors which owns an $11 million stake in Kinnate Biopharma Inc. (NASDAQ:KNTE).
Number of Hedge Funds: 14
Swedish food company Oatly Group AB (NASDAQ:OTLY) – ADR ranks 10th in our list of the hot penny stocks to buy according to hedge funds. In November Oatly Group AB (NASDAQ:OTLY) posted Q3 results. GAAP EPS in the period came in at -$0.07, beating estimates by $0.05. Revenue in the quarter jumped 2.5% year over year to $187.6 million, missing estimates by $5.66 million.
As of the end of the third quarter of 2023, 14 hedge funds reported owning stakes in Oatly Group AB (NASDAQ:OTLY) , as per Insider Monkey’s database of 910 hedge funds.
Oatly Group AB (NASDAQ:OTLY) talked about its guidance in Q3 earnings call:
"We are modifying our 2023 guidance to reflect an acceleration of our strategic actions, in particular the diversification of our Americas foodservice business and the strategic reset in Asia. We now expect our constant currency revenue growth to be near the low end of our prior range of 7% to 12%, and our fourth quarter gross margin to be in the mid-20s compared to our prior expectation of high-20s. Finally, we believe we remain on track to achieve profitable growth in 2024. On slide six, you can see that the profitability of the business continued to improve in the third quarter. Our reported gross profit included approximately $6 million of one-off costs related to our Asia strategy reset. It is primarily inventory write-offs and co-packer penalties.
Read the full earnings call transcript here.
Here is what ClearBridge Investments Mid Cap Growth Strategy has to say about Oatly Group AB (NASDAQ:OTLY) in its Q4 2021 investor letter:
“We also closed out three names as we constantly seek ways to improve the Strategy’s overall growth profile. Oatly is a leader in dairy alternative oat-milk products benefiting from long-term secular growth of the category. That growth, however, is contingent on its ability to scale up manufacturing and we sold the position due to increased risk that global supply chain constraints would limit such efforts.”
Number of Hedge Funds: 15
IT and cybersecurity company Telos Corp (NASDAQ:TLS) ranks 9th in our list of the hot penny stocks to buy according to hedge funds. The stock has gained about 41% over the past one month. Last month, Telos Corp (NASDAQ:TLS) posted third quarter results. Adjusted EPS in the period came in at -$0.07, beating estimates by $0.07. Revenue in the quarter fell about 43.1% year over year to $36.19 million, beating estimates by $4.22 million.
A total of 15 hedge funds in our database of 910 hedge funds had stakes in Telos Group. The biggest stake in Telos Corp (NASDAQ:TLS) belongs to Mike Masters’s Masters Capital Management which owns a $7.2 million stake.
Number of Hedge Funds: 17
Biopharma company Altimmune Inc (NASDAQ:ALT) makes treatments for obesity and liver diseases. Earlier this month, JMP Securities said that Altimmune’s Phase 2 data for candidate pemvidutide showed that it performed better in terms of weight loss than Novo Nordisk’s (NVO) semaglutide.
Altimmune Inc (NASDAQ:ALT) in its Q3 earnings call talked in detail about its potential weight loss drug:
A pre-specified interim analysis was performed when 160 subjects completed 24 weeks of treatment. Weight losses of 10.7% at the 2.4 milligram dose and 9.4% at the 1.8 milligram dose were achieved compared to a 1.0 weight loss in subjects receiving placebo.
Read the full earnings call transcript here.
A total of 17 hedge funds in Insider Monkey’s database of 910 hedge funds had stakes in Altimmune Inc (NASDAQ:ALT).
Number of Hedge Funds: 17
Packaging materials company Ranpak Holdings Corp (NYSE:PACK) ranks 7th in our list of the hot penny stocks to buy according to hedge funds. In October Ranpak Holdings Corp (NYSE:PACK) posted third quarter results. GAAP EPS in the period came in at -$0.04, beating estimates by $0.03. Revenue jumped about 6.4% year over year to $82.8 million, missing estimates by $1.45 million.
As of the end of the third quarter of 2023, 17 hedge funds tracked by Insider Monkey had stakes in Ranpak Holdings Corp (NYSE:PACK). The biggest stakeholder of Ranpak Holdings Corp (NYSE:PACK) during this period was Jonathan Soros’s JS Capital which owns a $166 million stake in Ranpak Holdings Corp (NYSE:PACK).
Unlike NVIDIA Corporation (NASDAQ:NVDA), Microsoft Corporation (NASDAQ:MSFT) and Apple Inc. (NASDAQ:AAPL), which are mature companies, PACK is a penny stock that have long-term growth catalysts.
Number of Hedge Funds: 18
Heron Therapeutics Inc. (NASDAQ:HTRX) shares have gained about 102% over the past one month. Last month Heron Therapeutics Inc. (NASDAQ:HTRX) posted Q3 results. EPS in the period came in at -$0.17, beating estimates by $0.14. Revenue in the quarter jumped 18.3% year over year to $31.43 million, missing estimates by $0.4 million. Heron Therapeutics Inc. (NASDAQ:HTRX) also said it was increasing its full-year 2023 net product sales guidance for the oncology care franchise to a range of $104 million to $106 million from a prior range of $99 million to $103 million.
Heron’s chief development officer William Forbes bought 50,000 shares in the company at $0.94 apiece on Nov. 16.
A total of 18 hedge funds out of the 910 hedge funds tracked by Insider Monkey reported having stakes in Heron.
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Disclosure: None. 13 Hot Penny Stocks To Buy According to Hedge Funds is originally published on Insider Monkey.
