In this article, we discuss 12 best NASDAQ penny stocks to buy. You can skip our detailed analysis of the stock market and returns of NASDAQ, and go directly to read 5 Best NASDAQ Penny Stocks to Buy. 

Since the start of 2023, the stock market has witnessed a significant shift in direction, marked by a noteworthy recovery in major indices. Most Wall Street investors believe that stocks have entered a new phase of a bull market, characterized by rising prices and positive market sentiment. Additionally, they express confidence that the U.S. economy will manage to avoid a recession in 2023, according to a survey conducted by CNBC Delivering Alpha in the last week of June.

The major stock exchanges concluded the first half of the year on a highly positive note, with the tech-heavy NASDAQ emerging as the frontrunner among them. The index returned 32.7% year-to-date, which marked its biggest increase during the first half of the year since 1983 when it rose by 37%. In addition to this, the combined value of companies in the Nasdaq 100 has surged by nearly $5 trillion this year so far, as reported by Fortune. One of the main reasons for this rally is a focus on artificial intelligence (AI) and generative AI chatbots. Fortune reported that the surge in AI-related investments is being compared to the dot-com bubble of 2000 when the market got influenced by a limited number of tech stocks before experiencing a crash. The market's strong interest in generative AI has overshadowed major concerns that could have negatively impacted sentiment this year. Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and NVIDIA Corporation (NASDAQ:NVDA) are reporting strong gains this year, after declining massively in 2022.

Historical data indicates that the second half of the year tends to be favorable for NASDAQ due to heightened economic activity. This period often sees increased consumer spending, business expansion, and overall economic growth, which can positively impact the performance of companies listed on the NASDAQ. According to a report by Forbes, from July 1 to December 31, NASDAQ has historically gained an average of 7.8%, compared to an average increase of 3.2% during the first six months of the year.

Also read: How to Play The AI Boom And NASDAQ Rally

Analysts also believe that the tech rally will continue for the foreseeable future and is not expected to end anytime soon. This suggests that there is ongoing optimism surrounding the performance and potential of technology companies. Bryn Talkington, a managing partner at Requisite Capital Management, spoke about tech stocks this year in his interview with CNBC’s “Closing Bell”. He said:

Similarly, Larry Adam, chief investment officer at Raymond James, also presented a bullish outlook for the tech sector in the second half of the year. In his interview with Bloomberg, he stated:

As analysts have a positive outlook on the future of tech stocks, we have compiled a list of some of the best penny stocks on NASDAQ.

Photo by Pascal Bernardon on Unsplash

Our Methodology:

For this article, we used a stock screener and filtered stocks listed on the NASDAQ exchange which were also priced under $5 on July 2. From that list, we picked 12 stocks with the highest number of hedge fund investors, tracked by Insider Monkey as of Q1 2023. The stocks are ranked in ascending order of hedge funds’ sentiment towards them.

12. Nikola Corporation (NASDAQ:NKLA)

Number of Hedge Fund Holders: 10

Share Price as of July 2: $1.38

Nikola Corporation (NASDAQ:NKLA) is an American company that focuses on the development of zero-emission heavy-duty vehicles and other clean energy transportation solutions. In the past month, the stock gained 146.4% following the Fed's decision of pausing interest rate hikes and the company's announcement to eliminate the workforce by 10% in an effort to cut costs. It is among the best penny stocks on our list.

In the first quarter of 2023, Nikola Corporation (NASDAQ:NKLA) reported revenue of $11.1 million, which showed a 488.4% growth from the same period last year. At the end of March 31, the company had over $121 million available in cash and cash equivalents and its total assets amounted to over $1.1 billion.

In March, Morgan Stanley initiated its coverage of Nikola Corporation (NASDAQ:NKLA) with a neutral rating and a $3 price target, highlighting the company's overall performance this year. Analysts are also bullish on major tech stocks such as Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and NVIDIA Corporation (NASDAQ:NVDA).

At the end of Q1 2023, 10 hedge funds tracked by Insider Monkey reported having stakes in Nikola Corporation (NASDAQ:NKLA), up from 9 in the previous quarter. These stakes have a total value of roughly $51.3 million. With over 36.8 million shares, Antara Capital was the company's leading stakeholder in Q1.

11. Cadiz Inc. (NASDAQ:CDZI)

Number of Hedge Fund Holders: 11

Share Price as of July 2: $4.06

Cadiz Inc. (NASDAQ:CDZI) is a California-based water supply company that specializes in sustainable projects through its land and water resources. Its parent company, ATEC, recently secured a contract worth $10 million from the Central Utah Water Conservancy District. The contract involves providing all the necessary wellhead filters for the Vineyard Wellfield Groundwater Polishing Project. Over the next year, ATEC will manufacture a total of 320 filters for this project at its facilities located in Hollister, California.

As of the close of Q1 2023, 11 hedge funds in Insider Monkey's database owned stakes in Cadiz Inc. (NASDAQ:CDZI), compared with 9 a quarter earlier. These stakes are collectively worth over $35.5 million. Among these hedge funds, Odey Asset Management Group was the company's leading stakeholder in Q1.

10. Tilray Brands, Inc. (NASDAQ:TLRY)

Number of Hedge Fund Holders: 14

Share Price as of July 2: $1.56

Tilray Brands, Inc. (NASDAQ:TLRY) is a New York-based pharmaceutical company that operates in the legal cannabis industry. While the company has a range of brands under its portfolio, its primary focus is on the production, cultivation, and distribution of cannabis products for medical and recreational use.

In its fiscal Q3 2023, Tilray Brands, Inc. (NASDAQ:TLRY) reported growth in its adjusted cannabis gross profit to $22.2 million, from $18 million in the prior-year quarter. The company's revenue for the quarter came in at $145.5 million, which fell by 4.1% from the same period last year.

In April, Cowen maintained its outperform rating on Tilray Brands, Inc. (NASDAQ:TLRY) with a $5 price target, following the company's quarterly earnings.

Tilray Brands, Inc. (NASDAQ:TLRY) was a part of 14 hedge fund portfolios in Q1 2023, as per Insider Monkey's database. The stakes owned by these funds have a collective value of over $10.2 million.

9. Brightcove Inc. (NASDAQ:BCOV)

Number of Hedge Fund Holders: 15

Share Price as of July 2: $4.01

Brightcove Inc. (NASDAQ:BCOV) is an American software company that provides cloud-based services for managing, publishing, and distributing digital content. The company specializes in online video platforms and offers a suite of products and services that cater to businesses and organizations of various sizes. It is one of the best penny stocks on our list.

In the first quarter of 2023, Brightcove Inc. (NASDAQ:BCOV) reported mixed earnings, with revenue of $49.1 million, down 8% from the same period last year. However, the company's operating cash flow for the quarter grew to $12.6 million, from $690,000 in the prior-year period. At the end of March 31, it had over $12.5 million available in cash and cash equivalents.

As of the close of Q1 2023, 15 hedge funds tracked by Insider Monkey owned stakes in Brightcove Inc. (NASDAQ:BCOV), compared with 17 in the previous quarter. These stakes have a total value of over $66.2 million. With roughly 7 million shares, Trigran Investments was the company's leading stakeholder in Q1.

8. Acumen Pharmaceuticals, Inc. (NASDAQ:ABOS)

Number of Hedge Fund Holders: 18

Share Price as of July 2: $4.81

Acumen Pharmaceuticals, Inc. (NASDAQ:ABOS) is a clinical-stage biopharmaceutical company, based in Virginia, US. In May, Cantor Fitzgerald presented a positive outlook for the company, following its first-quarter earnings. The firm initiated its coverage on the stock with an Overweight rating and a $13 price target.

Acumen Pharmaceuticals, Inc. (NASDAQ:ABOS) gained 14% on June 13 after announcing its plan to share the topline results of its Phase 1 trial for the Alzheimer's drug candidate ACU193 at a medical event in July. The trial, called INTERCEPT-AD, is being conducted in the United States and aims to assess the effectiveness of its drug in 65 patients with early-stage Alzheimer's disease (AD).

At the end of March 31, 18 hedge funds in Insider Monkey's database held stakes in Acumen Pharmaceuticals, Inc. (NASDAQ:ABOS), worth collectively $75 million roughly. RA Capital Management was the company's largest shareholder in Q1.

7. Cerus Corporation (NASDAQ:CERS)

Number of Hedge Fund Holders: 19

Share Price as of July 2: $2.46

Cerus Corporation (NASDAQ:CERS) is next on our list of the best penny stocks that are listed on NASDAQ. The California-based multinational biotech company develops and offers a treatment system designed to reduce pathogens in human blood products for use in the healthcare industry.

In the first quarter of 2023, Cerus Corporation (NASDAQ:CERS) reported revenue of $38.4 million, which beat Street estimates by $1.47 million. The company ended the quarter with over $94.7 million available in cash and cash equivalents. It generated $8.5 million in operating cash flow during the quarter.

According to Insider Monkey's database of Q1 2023, 19 hedge funds owned stakes in Cerus Corporation (NASDAQ:CERS). The collective value of these stakes is over $165.3 million. Cathie Wood's ARK Investment Management was the company's leading stakeholder in Q1.

6. Amarin Corporation plc (NASDAQ:AMRN)

Number of Hedge Fund Holders: 19

Share Price as of July 2: $1.19

An Irish-American biopharmaceutical company, Amarin Corporation plc (NASDAQ:AMRN) ranks sixth on our list of the best penny stocks to buy. The company's market cap is relatively small in comparison to Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and NVIDIA Corporation (NASDAQ:NVDA) but its performance has remained stable. In the first quarter of 2023, the company posted an EPS of $0.02, which surpassed analysts' estimates by $0.03. At the end of March 31, it had over $191.4 million available in cash and cash equivalents and its total assets came in at $860.1 million.

The number of hedge funds tracked by Insider Monkey owning stakes in Amarin Corporation plc (NASDAQ:AMRN) grew to 19 in Q1 2023, from 15 a quarter earlier. These stakes are collectively valued at over $88.1 million. Ken Griffin's Citadel Investment Group was one of the company's leading stakeholders in Q1.

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Disclosure. None. 12 Best NASDAQ Penny Stocks to Buy is originally published on Insider Monkey.