13 Best NASDAQ Penny Stocks To Invest In
In this article, we discuss 13 best NASDAQ penny stocks to invest in. If you want to skip our discussion on the stock market, head directly to 5 Best NASDAQ Penny Stocks To Invest In.
Usually, when a bear market reaches its lowest point, like the United States stock market experienced in October 2022, it typically takes about a year of selling for retail investors to realize that they should be investing instead. Case in point, in November 2023, long-term flows into mutual funds and ETFs turned positive, according to Morgan Stanley’s latest report. The market is upbeat this year, as Wall Street expects the Federal Reserve to achieve a soft landing for the US economy in 2024, with slower growth but no recession, leading to potential interest rate cuts. Analysts predict improved corporate earnings growth for S&P 500 companies, with forecasts for the index's performance in 2024 ranging from 8% to 9%, slightly below its historical average.
Artificial intelligence remains a key investing theme for the year. The stock market concluded 2023 with strong performances, particularly in the NASDAQ composite, rebounding from the significant losses in 2022. The S&P 500 posted a robust 24.2% gain in 2023, more than double its historical average. While the market's first week in January this year experienced losses, historical precedent suggests optimism for the stock market in 2024 following a year with a 20%-plus annual gain. Key themes influencing stock performance include fluctuating Treasury yields, economic indicators, the impact of generative artificial intelligence, and the November election.
The fourth-quarter earnings season has begun with S&P 500 companies reporting a 1.4% year-over-year decline in earnings per share, potentially marking the fourth consecutive annual earnings decline in the past five quarters, according to Forbes. The communication services sector stood out with the highest earnings growth at 40.4%, while the energy sector experienced a 31.4% year-over-year drop, impacting overall growth. Analysts expect a rebound in earnings for the first half of 2024, projecting a 4.6% increase in the first quarter and a 9.4% growth in the second quarter. Despite stagnant fourth-quarter numbers, investors appear optimistic about strong earnings growth in 2024, although concerns about the already priced-in growth, particularly in the technology sector, have been raised. The S&P 500's forward price-to-earnings ratio is currently 20, above its 10-year average, leading to questions about the sustainability of the current market levels. Analysts anticipate further gains over the next 12 months, with a consensus S&P 500 price target suggesting an 8% upside from current levels.
Investors looking to enter the stock market but not willing to spend exorbitant amounts of money can pick up penny stocks to test the waters. Some of the best penny stocks include Sirius XM Holdings Inc. (NASDAQ:SIRI), Peloton Interactive, Inc. (NASDAQ:PTON), and Plug Power Inc. (NASDAQ:PLUG).
Our Methodology
We used a stock screener and chose the top penny stocks – priced under $5 as of February 11 – listed on the NASDAQ exchange based on overall hedge fund sentiment toward each stock. We have assessed the hedge fund sentiment from Insider Monkey’s database of 910 elite hedge funds tracked as of the end of the third quarter of 2023. The list is arranged in ascending order of the number of hedge fund holders in each firm. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
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Best NASDAQ Penny Stocks To Invest In
13. MannKind Corporation (NASDAQ:MNKD)
Number of Hedge Fund Holders: 17
Share Price as of February 11: $3.51
MannKind Corporation (NASDAQ:MNKD) is a biopharmaceutical company based in the United States, specializing in the development and commercialization of inhaled therapeutic products for endocrine and orphan lung diseases. On January 2, MannKind Corporation (NASDAQ:MNKD) entered into a royalty purchase deal with Sagard Healthcare, selling a 1% royalty stake in net sales of Tyvaso DPI (treprostinil) inhalation powder. In exchange, MannKind stands to receive up to $200 million. The original license agreement with United Therapeutics in 2018 entitles MannKind to a 10% royalty on Tyvaso DPI net sales, with certain reductions.
According to Insider Monkey’s third quarter database, MannKind Corporation (NASDAQ:MNKD) was part of 17 hedge fund portfolios, compared to 19 funds in the prior quarter. Seth Rosen’s Nitorum Capital is the leading stakeholder of the company, with 10.4 million shares worth $43.2 million.
Like Sirius XM Holdings Inc. (NASDAQ:SIRI), Peloton Interactive, Inc. (NASDAQ:PTON), and Plug Power Inc. (NASDAQ:PLUG), MannKind Corporation (NASDAQ:MNKD) is one of the best penny stocks to invest in.
12. Tilray Brands, Inc. (NASDAQ:TLRY)
Number of Hedge Fund Holders: 17
Share Price as of February 11: $1.88
Tilray Brands, Inc. (NASDAQ:TLRY) is involved in the research, cultivation, processing, and distribution of medical cannabis products globally. The company operates through Cannabis Business, Distribution Business, Beverage Alcohol Business, and Wellness Business segments. It is one of the best penny stocks to invest in.
On February 7, Tilray Brands, Inc. (NASDAQ:TLRY) engaged in multiple debt-for-equity transactions, exchanging approximately 6.9 million units of common stock for convertible debt in private transactions with unrelated parties between January 10 and January 31. Tilray Brands, Inc. (NASDAQ:TLRY) conducted these transactions as part of a capital strategy, issuing shares worth $12.5 million in consideration of 5.25% convertible senior notes due on June 1, 2024. This marks Tilray's second capital transaction for the year, following its Q2 results in early January.
According to Insider Monkey’s third quarter database, 17 hedge funds were bullish on Tilray Brands, Inc. (NASDAQ:TLRY), compared to 15 funds in the last quarter. Sander Gerber’s Hudson Bay Capital Management is a prominent stakeholder of the company, with 16.18 million shares worth $38.6 million.
11. iQIYI, Inc. (NASDAQ:IQ)
Number of Hedge Fund Holders: 18
Share Price as of February 11: $3.39
Ranking 11th on our list of the best penny stocks is iQIYI, Inc. (NASDAQ:IQ), a Chinese company specializing in providing online entertainment video services. iQIYI’s offerings include online video, games, literature, animations, and other related products. On November 27, 2023, iQIYI, Inc. (NASDAQ:IQ) announced a partnership with GSC Movies in Malaysia and Clover Films in Singapore to enhance its offering of high-quality Chinese films for a global audience. This collaboration not only allows iQIYI to meet the demand for Chinese-language films among local viewers but also ensures timely access to the latest releases.
According to Insider Monkey’s third quarter database, 18 hedge funds held stakes in iQIYI, Inc. (NASDAQ:IQ), compared to 20 funds in the preceding quarter. Maple Rock Capital is the largest stakeholder of the company, with 4.10 million shares worth $19.4 million.
Ariel Global Fund made the following comment about IQIYI, Inc. (NASDAQ:IQ) in its Q2 2023 investor letter:
“Lastly, we established a new position in IQIYI, Inc. (NASDAQ:IQ), a leading long form online video entertainment service in China. Despite facing recent obstacles, including competition from short-form content platforms, iQIYI boasts a devoted user base, robust partnerships with major content providers and an extensive collection of original and licensed content. Our confidence in this investment is further strengthened by iQIYI’s implementation of a proprietary industrialized production system. This technology leverages data-driven approaches to effectively manage content creation, allocate budgets, and monitor production progress, facilitating sustainable growth and informed decision-making.”
10. Lucid Group, Inc. (NASDAQ:LCID)
Number of Hedge Fund Holders: 18
Share Price as of February 11: $3.52
Lucid Group, Inc. (NASDAQ:LCID) is a technology and automotive company focused on electric vehicle technologies. The company is involved in the design, engineering, and manufacturing of electric vehicles, EV powertrains, and battery systems. It is one of the best penny stocks to invest in. On January 29, Lucid Group, Inc. (NASDAQ:LCID) announced that it has secured a three-year deal with Ma'aden Rolling Co, a subsidiary of Saudi Arabia Mining Co, to provide premium aluminum panels for Lucid's manufacturing plants in the United States. The majority ownership of Lucid is held by Saudi Arabia's Public Investment Fund.
According to Insider Monkey’s third quarter database, 18 hedge funds were bullish on Lucid Group, Inc. (NASDAQ:LCID), same as the prior quarter.
9. Aurora Innovation, Inc. (NASDAQ:AUR)
Number of Hedge Fund Holders: 19
Share Price as of February 11: $3.32
Aurora Innovation, Inc. (NASDAQ:AUR) is a self-driving technology company based in Pittsburgh, Pennsylvania. The company is dedicated to the development of the Aurora Driver platform, which integrates a range of self-driving hardware, software, and data services. This platform is designed to be adaptable and interoperable across various vehicles, including passenger vehicles, light commercial vehicles, and trucks. It is one of the top penny stocks to invest in.
On January 5, Aurora Innovation, Inc. (NASDAQ:AUR) and Continental announced that they have finalized the design of the world's first scalable autonomous trucking system, part of the Aurora Driver platform. Continental plans to commence production of the hardware in 2027. This achievement came after less than a year of their exclusive partnership, aiming for high-volume manufacturing of autonomous trucking systems. The Aurora Driver is an SAE Level 4 autonomous driving system, and the four-year collaboration includes build and test phases in 2024-2025, with production and integration scheduled for 2026-2027. Thousands of trucks equipped with the Aurora Driver are expected to autonomously transport freight across the U.S. starting in 2027.
According to Insider Monkey’s third quarter database, 19 hedge funds were bullish on Aurora Innovation, Inc. (NASDAQ:AUR), compared to 17 funds in the earlier quarter.
8. Opendoor Technologies Inc. (NASDAQ:OPEN)
Number of Hedge Fund Holders: 20
Share Price as of February 11: $3.51
Opendoor Technologies Inc. (NASDAQ:OPEN) is an e-commerce platform specializing in residential real estate transactions. Opendoor also offers real estate brokerage, title insurance, settlement, escrow, property and casualty insurance, and construction services. It is one of the best penny stocks to watch.
On December 13, Opendoor Technologies Inc. (NASDAQ:OPEN) stock received an upgrade to Market Perform by investment firm KBW. The upgrade was based on the belief that the stock's fundamentals do not fully support its valuations. Despite the lack of clear downside catalysts, KBW's estimates for the stock are now higher than the consensus.
According to Insider Monkey’s third quarter database, 20 hedge funds were bullish on Opendoor Technologies Inc. (NASDAQ:OPEN), compared to 25 funds in the last quarter. Daniel Patrick Gibson’s Sylebra Capital Management is the largest stakeholder of the company, with 26 million shares worth $68.8 million.
Here is what Baron Opportunity Fund has to say about Opendoor Technologies Inc. (NASDAQ:OPEN) in its Q4 2021 investor letter:
“The Fund invests in secular growth and innovative businesses across all market capitalizations, with the bulk of the portfolio landing in the large-cap zone. The Fund is categorized as US Large Growth by Morningstar. As of the end of the fourth quarter, the largest market cap holding in the Fund was $2.5 trillion and the smallest was $791 million. The median market cap of the Fund was $27.5 billion.
The Fund had $1.7 billion of assets under management. The Fund had investments in 63 securities. The Fund’s top 10 positions accounted for 45.4% of net assets. Fund inflows were positive for 2021.We sold Opendoor Technologies Inc. because we identified issues relating to our long-term theses in the company, and we decided to exit the positions to fund other purchases.”
7. Taboola.com Ltd. (NASDAQ:TBLA)
Number of Hedge Fund Holders: 21
Share Price as of February 11: $4.82
Taboola.com Ltd. (NASDAQ:TBLA) operates an AI-based algorithmic engine platform globally, partnering with websites, devices, and mobile apps to provide recommendations for editorial content and advertisements on the open web. It is one of the best penny stocks to watch. On January 16, Taboola.com Ltd. (NASDAQ:TBLA) entered into a new agreement with Postmedia, where Postmedia will leverage Taboola's suite of products to expand its audience, enhance user engagement, and boost revenue. Taboola will be integrated into several Postmedia sites, including National Post, Financial Post, Vancouver Sun, and Toronto Sun.
According to Insider Monkey’s third quarter database, 21 hedge funds were long Taboola.com Ltd. (NASDAQ:TBLA), compared to 24 funds in the prior quarter. Josh Goldberg’s G2 Investment Partners Management is the leading stakeholder of the company, with 4.7 million shares worth $17.7 million.
6. Advantage Solutions Inc. (NASDAQ:ADV)
Number of Hedge Fund Holders: 24
Share Price as of February 11: $3.95
Advantage Solutions Inc. (NASDAQ:ADV) is a provider of outsourced solutions to consumer goods companies and retailers globally. The company’s Sales segment offers brand-centric services, including headquarter relationship management, analytics, insights, intelligence, administration, and brand-centric merchandising. The Marketing segment offers brand-centric services like shopper and consumer marketing, and brand experiential services, as well as retailer-centric services such as retail experiential, private label, digital marketing, and digital media and advertising.
On January 31, Advantage Solutions Inc. (NASDAQ:ADV) announced the sale of its food service businesses, including Waypoint, to Prospect Hill Growth Partners, for total proceeds of approximately $100 million. The company intends to use the majority of the proceeds to reduce debt. This strategic move aims to streamline the company's portfolio, allowing it to concentrate on its core retail businesses and enhance its financial position. The proceeds from the sale will be a combination of cash and an ongoing 7.5% stake in the combined entity.
According to Insider Monkey’s third quarter database, 24 hedge funds were long Advantage Solutions Inc. (NASDAQ:ADV), compared to 19 funds in the last quarter.
In addition to Sirius XM Holdings Inc. (NASDAQ:SIRI), Peloton Interactive, Inc. (NASDAQ:PTON), and Plug Power Inc. (NASDAQ:PLUG), Advantage Solutions Inc. (NASDAQ:ADV) ranks 6th on our list of the best penny stocks.
Curreen Capital made the following comment about Advantage Solutions Inc. (NASDAQ:ADV) in its Q3 2023 investor letter:
“Advantage Solutions Inc. (NASDAQ:ADV) works with brands and stores to sell products through stores. The company is one of the largest managers of in-store sampling programs in the U.S. (for example, would you like to try this new brand of: cheese/chips/dip/etc.) Advantage Solutions was a SPAC-merger completed in October 2020. Advantage Solutions is a capital light business that earns high returns on capital. It has a meaningful debt load, though the debt lacks onerous covenants and does not come due for several years. Advantage Solutions uses its free cash flow to repay debt and acquire smaller competitors. The company currently trades at an attractive upside-to-downside ratio.”
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Disclosure: None. 13 Best NASDAQ Penny Stocks To Invest In is originally published on Insider Monkey.