10 Special Situation Penny Stocks With Near Term Catalysts
In this piece, we will take a look at ten special situation penny stocks to consider. If you want to skip our analysis of the stock market and the economy, head on over to 5 Special Situation Penny Stocks to Consider.
For the stock market these days, it's nothing but cheers. June has proven to be a good month for economic sentiment, in a breath of fresh air after the turmoil that has greeted both institutional and retail investors for the better part of the last three and a half years. The current market turmoil started as it became clear that the coronavirus pandemic was here to stay. This pandemic ushered in lockdowns which naturally stifled economic activity and led to the stock market dropping by 30% during the first half of 2020.
Then, just as it was looking as if the pandemic's economic disruption was coming to an end at the tail end of 2022 and the start of 2023, the Russian invasion of Ukraine and the Federal Reserve's aggressive interest rate hikes started to make their mark. The invasion stimulated an already out of control inflation, and supply chain shocks due to global disruption didn't bode well for businesses either. Inflation peaked in the developed world during the second half of 2022 and started to gradually come down. The effects of these were clear as 2023 kicked off and the market rallied with the technology sector leading the charge.
This momentum peaked in June when first the May jobs report from the Labor Department showed that while the number of jobs added to the economy increased, the overall unemployment rate also picked up. This presented mixed sentiment for investors, as the unemployment rate going up is a good development as it indicates a slowdown in the labor market. However, the growth in jobs was still some cause for concern as it signaled that perhaps the Federal Reserve might not stop increasing interest rates. However, just a short time later the Labor Department reported unemployment claims for the week ending on June 3rd had marked a new high since October 2021 when the coronavirus induced economic slowdown had disrupted the labor market.
To add the cherry on top, during the second week of June, more data from the Labor Department showed that inflation is finally slowing down in America. The data showed that monthly inflation in May stood at 0.1%, dropping from 0.4% in April for a sharp drop. The yearly figures stood at 4%, a big drop over June 2022's peak reading of 9.1%. The markets, naturally, were ecstatic, ecstasy that only grew after the Fed's June meeting even though it penciled in two additional 25 basis point interest rate hikes to ensure that inflation does not become a permanent feature of the economy.
Since we're all about good news today, it's also appearing as if macroeconomic matters might not be as major a part in influencing stock market sentiment as they are right now in the near term future. According to a model from Citigroup, the macro contribution to markets has already fallen to 71% in June from 83% in March, for a sharp drop that might accelerate in the future. Cumulatively, the fresh slew of data has led the S&P 500 to reverse all losses since the Fed started its interest rate hiking spree in March last year, and as a whole, the NASDAQ Composite is up 31% year to date, the Dow Jones Industrial Average is up 3.51% year to date, and the New York Stock Exchange (NYSE) has gained 4.02%.
At the same time, the current tough economic environment for businesses also creates a litany of new situations that firms find themselves in. These often include mergers, acquisitions, special dividends, and divestitures. A high rate and inflationary environment often make companies tighten their belts, and those with weak balance sheets often find that they have to either close up shop or team up with other firms to survive. Others, like Intel Corporation (NASDAQ:INTC) pay out massive dividends even at a time when profits are falling to ensure that investors are happy and the stock price doesn't take any beatings in the market. These situations often carry the potential of adding vigor to the stock price if investors determine that there is juice to the deal. On a side note, if you're interested in dividend paying stocks, you can check out 25 Best Stocks For Dividends.
Finally, it's worthwhile to top off our introduction with a take from the man of the hour, the Chairman of the Federal Reserve Mr. Jerome Powell. Chair Powell, in his latest remarks, commented on what you should expect from inflation in the near future as he outlined:
So and if you go back to the old the former SEP, the last SEP in March, you will see that growth moved up. These are not huge moves, but growth estimates moved up a bit. Unemployment estimates move down a bit, inflation estimates moved up a bit. And, you know, all three of those kind of point in the same direction, which is, you know, that perhaps more restraint will be necessary than we had thought at the last meeting. So although the level, frankly, is pretty good, level of 5.6 is pretty consistent, if you think about it, where the federal funds rate was trading before the bank incidents of early March. So but so we've kind of gone back to that. So your question is where is it? Where's the disinflation going to come from? And, you know, I don't think the story has really changed. We, the Committee has consistently said and believed that the process of getting inflation down is going to be a gradual one. It's going to take some time.
And I think you go back to the to the three-part framework for core PCE inflation, which is, we think, as good an indicator you can have for where inflation is going forward, you start with goods. With goods, we need to see continued healing in supply conditions, supply side conditions. They've definitely improved a substantial amount. But if you talk to people in business, they will say it's not back to where it was. So that's that's one thing. And that shouldn't enable goods prices to continue because inflation to continue to come down over time.
With these details in mind, let's take a look at some special situations penny stocks. If you want to see which penny stocks billionaires are buying, take a look at 10 Penny Stocks Billionaires Are Loading Up On.
Our Methodology
To compile our list of special situation penny stocks to buy, we first made a list of all penny stocks that are selling assets or undergoing mergers and acquisitions. Then, some additional firms were added to the list and all companies were ranked according to hedge fund sentiment as of the first quarter of this year. The final list of special situation penny stocks is as follows.
10 Special Situation Penny Stocks to Consider
1. Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI)
Number of Hedge Fund Investors In Q1 2023: 7
Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) is a biotechnology company headquartered in Boston, Massachusetts. The firm is currently being acquired by Assertio Holdings for a $248 million deal.
By the end of this year's first quarter, seven of the 943 hedge funds part of Insider Monkey's database had bought Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI)'s shares. The firm's largest investor is Steven Boyd's Armistice Capital with a $12.5 million stake.
2. Veritone, Inc. (NASDAQ:VERI)
Number of Hedge Fund Investors In Q1 2023: 7
Veritone, Inc. (NASDAQ:VERI) is a software company operating out of Denver, Colorado. The firm completed its acquisition of a software as a service (SaaS) firm in June 2023.
Seven of the 943 hedge funds polled by Insider Monkey for their March quarter of 2023 shareholdings had invested in Veritone, Inc. (NASDAQ:VERI). Out of these, the largest shareholder is D. E. Shaw's D E Shaw with a $3.4 million investment.
3. Gorilla Technology Group Inc. (NASDAQ:GRRR)
Number of Hedge Fund Investors In Q1 2023: 4
Gorilla Technology Group Inc. (NASDAQ:GRRR) is a British software company. The firm is based in London, United Kingdom. It provides a variety of services such as analytics, object recognition, and software and infrastructure security. Gorilla Technology Group Inc. (NASDAQ:GRRR) is currently in the process of acquiring a Thailand based Smart City company.
After sifting through 943 hedge funds for their Q1 2023 shareholdings, Insider Monkey discovered that four had held a stake in Gorilla Technology Group Inc. (NASDAQ:GRRR).
4. SeqLL Inc. (NASDAQ:SQL)
Number of Hedge Fund Investors In Q1 2023: 4
SeqLL Inc. (NASDAQ:SQL) is a healthcare firm based in Billerica, Massachusetts. The firm provides DNA and RNA sequencing technologies. The firm is slated to merge with a staffing firm in the third quarter of this year.
As of March 2023, four of the 943 hedge funds part of Insider Monkey's database had bought and invested in the firm. SeqLL Inc. (NASDAQ:SQL)'s largest hedge fund shareholder is Jim Simons' Renaissance Technologies with a $73,000 stake.
5. Society Pass Incorporated (NASDAQ:SOPA)
Number of Hedge Fund Investors In Q1 2023: 2
Society Pass Incorporated (NASDAQ:SOPA) is a Singaporean technology company that operates electronic commerce and financial technology platforms. It has been on an acquisition streak this year, having acquired Indonesian and Vietnamese travel and advertisement companies.
By the end of Q1 2023, two of the 943 hedge funds part of Insider Monkey's database had bought Society Pass Incorporated (NASDAQ:SOPA)'s shares.
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Disclosure: None. 10 Special Situation Penny Stocks to Consider is originally published on Insider Monkey.