We recently compiled a list of the 10 Best Quality Penny Stocks To Buy. In this article, we are going to take a look at where Mizuho Financial Group, Inc. (NYSE:MFG) stands against the other quality penny stocks.
Penny stocks are shares of small companies that usually trade for less than $5 per share. They are often found in smaller or newer businesses and tend to be more volatile and risky because they can rise or fall in value quickly.
Many penny stocks trade on smaller exchanges or over-the-counter (OTC) markets rather than major stock exchanges. While they can offer big rewards if a company grows, they also come with higher risks, as these companies may have unstable finances or less information available to investors.
Most penny stocks usually fall under the small-cap stocks category. However, that is not always the case. Some large companies with high market caps have low share prices due to several factors, even though they are well-established and stable. The most common reason is share dilution.
When a company issues a large number of shares, its share price can be low, even if the company is worth billions overall. We have some companies on our list that fall into the category. This does not necessarily mean the company is struggling or risky like typical penny stocks but the low share price is due to the way its shares are distributed rather than poor performance or instability.
Sustainable Growth Expected in Small Caps Amidst Market Shifts
On July 26, Nathan Moser, Managing Director and Senior Portfolio Manager at Impax Asset Management joined Schwab Network and discussed some long-term possibilities around small-cap stocks. He discussed the recent changes in small-cap stocks and highlighted the positive shift.
He noted that after years of struggles, the recent rise in small caps seems more sustainable, which is driven by strong inflows into ETFs and passive investment vehicles. Moser believes the market’s current move could last for years, despite some short-term volatility, and encouraged buying on any market dips.
Moser pointed out that sectors like regional banks, real estate, and housing have performed well, most likely because investors believe that the Federal Reserve may delay or avoid a recession. He said that the recent rise is just the beginning and compared it to the early stages of a baseball game, with more room for growth in the small-cap sector.
He said, “We’re in the first inning of this move, in my opinion.” However, he advised to keep focus on high-quality, profitable companies due to the risks associated with lower-quality stocks in small caps.
Our Methodology
For this article, we identified 30 quality penny stocks trading under $5, as of September 3. The stocks we identified are profitable, have real sales, and are expected to remain profitable in the future as well. We narrowed down the list to 10 stocks most widely held by institutional investors. We listed the stocks in ascending order of their hedge fund sentiment.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A portfolio manager scanning the stock market numbers projected on a large wall monitor.
One of the best quality penny stocks, Mizuho Financial Group, Inc. (NYSE:MFG) is a major player in Japan’s financial sector with a wide-ranging offering of services and a strong international presence. Operating through its key subsidiaries, Mizuho Bank, Mizuho Trust & Banking, and Mizuho Securities, the company delivers comprehensive financial solutions that include traditional banking, securities trading, asset management, and trust services.
In Q2, 12 hedge funds had investments in Mizuho Financial (NYSE:MFG), with positions worth $19.74 million. Alkeon Capital Management is the top investor in the company and has a stake worth $9.5 million, as of June 30.
In the first quarter of the fiscal year, the company reported an 18% increase in profit, largely due to the favorable shift away from negative interest rates. The change has improved profit margins on lending activities. It achieved a net profit of 289 billion JPY (1 Japanese Yen = US$ 0.0069 as of September 3), up from 245 billion JPY in the same quarter the previous year.
The positive performance was driven by an increase in the loan and deposit rate margin, which rose to 0.85% from 0.76% year-over-year.
The company has maintained its forecast for a record full-year profit of 750 billion JPY for the 12 months ending in March 2025. The outlook is supported by the bank’s strong financial foundation and ongoing improvements in its lending margins. The company’s substantial asset base, totaling 292 trillion JPY across its subsidiaries, reflects its financial strength and capacity for continued growth.
Mizuho Financial (NYSE:MFG) is also committed to returning value to shareholders, with a forecasted annual cash dividend per share of 115 JPY for the fiscal year 2024. It represents a 10 JPY increase from the previous year and marks the fourth consecutive year of rising dividends. The dividend growth is possible because of the company’s stable earnings and strong financial performance, which provide an attractive return for investors.
Overall MFG ranks 7th on our list of quality penny stocks to buy. While we acknowledge the potential of MFG 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 MFG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
