In this article, we will take a look at the 12 best penny stocks to buy under $1. To see more such companies, go directly to 5 Best Penny Stocks to Buy Under $1.
Investors are optimistic as we move into the third quarter earnings season. Hopes in the Wall Street are growing that we are headed to conclude 2023 on a positive note, despite all the recession calls and warnings that kept coming throughout the year. Talking to CNBC, NB Private Wealth's Shannon Saccocia said that it’s “possible” that the market would end 2023 in green amid strong economy, robust earnings and resilient consumer spending. However, the analyst noted that if the market surges to July highs, valuation could again become an issue. Neil Hennessy, Hennessy Funds chief market strategist, also talked to CNBC and said he’s bullish on stocks because companies are in a “very, very good shape” due to strong cash flows and fundamentals. The analyst is bullish on the market due to wage growth and low unemployment. He said back in the day when inflation used to surge consumers were able to give up on many things to decrease spending. But he believes the younger population of today has gotten used to easy money and they don’t like to pay anything for borrowing.
In this positive environment, small-cap stocks or even penny stocks are poised to perform well as investors like to flock to risky stocks when market conditions are better. In this backdrop we decided to take a look at some penny stocks that are most favored by hedge fund investors.
Other analysts, though, are not much optimistic about 2023 as they believe the real effects of rate hikes will be visible next year and many companies which began to see weaknesses in their businesses could collapse.
Biotech Penny Stocks
Since most of the stocks mentioned in this article are biotech penny stocks, it’d make sense to take a look at the biotech industry and its future outlook. A report by investment services firm FEG says that over the past few years R&D budgets in the healthcare and biotech industry have skyrocketed, resulting in several major breakthrough drugs. The report said that the number of “First-In-Class” in the industry accounted for just 15% of new approved drugs back in 2009. That figure skyrocketed to 40% as of 2018. The report also highlighted that major healthcare companies are preferring to buy smaller biotech companies instead of allocating billions of dollars for in-house research and development of new products.
The report also talked about some important trends in the market. Importantly, the report noted how hedge funds, venture capitalists and mutual funds approach biotech investing:
“Early-stage venture capital (VC) funds tend to invest at the pre-clinic and Phase I stage of the process, while mid-stage VCs typically get involved in Phase I-III of clinical trials. Specialist biotech investors—most likely hedge funds—invest out of a smaller fund size and invest in smaller market cap businesses. The portfolio size of drugs/therapies can vary but tend to be more concentrated in number and tend to be within the clinical trial phase. Lastly, generalists and mutual funds dominate the investor base for larger cap ($10 billion+) companies, which often have a more diversified mix of assets and less early-stage risk, but commensurately lower returns.”
Photo by AlphaTradeZone Our Methodology
For this article we scanned Insider Monkey’s database of 910 hedge funds updated as of the end of the second quarter of 2023 and picked 12 stocks trading under $1 as of October 16 with the highest number of hedge fund investors. These are the best penny stocks under $1 to buy according to smart money investors.
12. Invitae Corporation (NYSE:NVTA)
Number of Hedge Fund Holders: 17
Invitae Corp shares have fallen about 73% over the past one year. But earlier this month Invitae Corporation (NYSE:NVTA) jumped after the FDA gave a go-ahead to Invitae Common Hereditary Cancers Panel, a test to identify cancer-related genes.
Insider Monkey’s database of 910 hedge funds shows that 17 hedge funds had stakes in Invitae Corporation (NYSE:NVTA). The biggest stakeholder of Invitae Corporation (NYSE:NVTA) was Catherine D. Wood’s ARK Investment Management which owns a $36 million stake in the company.
Invitae Corporation (NYSE:NVTA)’s management talked about its guidance and hereditary cancer updates in Q2 earnings call and said:
“Looking ahead to the second half, we continue to allocate our resources into key areas that will drive growth in 2023 and beyond. Let’s start with oncology. On a pro forma basis, our oncology revenue in the second quarter was $60 million compared to approximately $69 million a year ago.
As I said earlier, this was impacted primarily by headwinds in payer reimbursement for hereditary cancer testing and lower sales and fee for service. In hereditary cancer, guideline expansions and better outcomes are expected to further improve adoption among non-genetic expert providers and community oncology settings. Efforts to expand our call points and facilitate the usage of a hereditary cancer testing among these physicians and clinics are underway. This is where the majority of cancer patients are receiving their treatment support and represents the largest growth opportunity for hereditary cancer testing going forward. In Q2, we had a double-digit volume in our non-genetic expert oncology US channel. Switching gears to our minimal residual disease efforts.”
Read the full earnings call transcript here.
11. Nektar Therapeutics (NASDAQ:NKTR)
Number of Hedge Fund Holders: 17
Out of the 910 hedge funds tracked by Insider Monkey, 17 hedge funds had stakes in Nektar Therapeutics (NASDAQ:NKTR). The biggest hedge fund stakeholder of Nektar Therapeutics (NASDAQ:NKTR) was David Kroin’s Deep Track Capital which owns a $10 million stake in the company.
Nektar Therapeutics (NASDAQ:NKTR) recently said it was partnering with Cellular Biomedicine Group Inc. to examine a combination of its NKTR-255 and Cellular Biomedicine’s C-TIL051 for non-small cell lung cancer.
10. Jasper Therapeutics, Inc. (NASDAQ:JSPR)
Number of Hedge Fund Holders: 17
Jasper Therapeutics, Inc. (NASDAQ:JSPR) is one of the best penny stocks to buy under $1 according to hedge funds. As of the end of the second quarter of 2023, 17 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Jasper Therapeutics, Inc. (NASDAQ:JSPR). The biggest stakeholder of Jasper Therapeutics, Inc. (NASDAQ:JSPR) is Adam Morgan’s Velan Capital which owns a $15 million stake in the company. In August Jasper Therapeutics, Inc. (NASDAQ:JSPR) posted second quarter results. GAAP EPS in the quarter came in at -$0.15, meeting estimates. Cash and cash equivalents as of the end of June was $115.8 million, compared to $38.3 million as of the end of 2022.
9. Amarin Corporation plc (NASDAQ:AMRN)
Number of Hedge Fund Holders: 19
Irish-American biopharmaceutical company Amarin Corporation plc (NASDAQ:AMRN) ranks 9th in our list of the best penny stocks to buy under $1. Amarin Corporation plc (NASDAQ:AMRN) makes treatments for cardiovascular diseases.
A total of 19 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Amarin Corporation plc (NASDAQ:AMRN) as of the end of the second quarter. The biggest stake in Amarin Corporation plc (NASDAQ:AMRN) belongs to Derrick Tang’s Kynam Capital which owns a $14.3 million stake in the company.
In an earnings call in May, Amarin Corporation plc (NASDAQ:AMRN) talked about its guidance and future business plans and said:
“Absent any additional market disruption, we expect prescription levels to modestly decline for the remainder of the year and beginning in Q2, a decrease in our net selling price as we work to retain key customers to the brand. We have continued to make progress against our cost reduction program. We are on track to exceed $100 million cost savings target we announced in mid-2022 and are currently evaluating additional potential savings.
For the full year 2023, we now expect operating expenses to be between $270 million to $285 million compared with the previous guidance of $290 million to $305 million. The lower-than-anticipated expenses are as a result of additional initiatives taken across the organization to reduce costs, along with the timing of our European investment where we committed to invest carefully in Europe, linked with the timing of reimbursement decisions. We have taken steps to strengthen and streamline the company operationally and cost reduction efforts are ongoing. We announced another renegotiated supply agreement this quarter, making significant progress in lowering our future commitments. With these initiatives and the relatively stable trends in the U.S., we believe our current available cash and resources, including U.S. profitability are adequate to support our continued operations, including European launch activities.”
8. Chimerix, Inc. (NASDAQ:CMRX)
Number of Hedge Fund Holders: 19
Chimerix, Inc. (NASDAQ:CMRX) makes treatments against deadly diseases. Chimerix, Inc. (NASDAQ:CMRX) ranks 8th in our list of the best penny stocks under $1 to buy according to hedge funds. As of the end of the second quarter of 2023, 19 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in Chimerix, Inc. (NASDAQ:CMRX). The most significant stakeholder of Chimerix, Inc. (NASDAQ:CMRX) during this period was Steven Boyd’s Armistice Capital which owns a $3.8 million stake in the company.
Chimerix, Inc. (NASDAQ:CMRX) posted its second quarter results in August. GAAP EPS in the period came in at -$0.21, beating estimates by $0.03. Revenue in the period fell 93.2% on a YoY basis to come in at $0.03 million, missing estimates by $0.24 million.
7. Gossamer Bio, Inc. (NASDAQ:GOSS)
Number of Hedge Fund Holders: 20
California-based Gossamer Bio, Inc. (NASDAQ:GOSS) makes treatments for diseases related to oncology, immunology and inflammation. In August Gossamer Bio, Inc. (NASDAQ:GOSS) posted second quarter results. GAAP EPS in the quarter came in at -$0.45 beating estimates by $0.04.
Out of the 910 hedge funds tracked by Insider Monkey, 20 hedge funds reported owning stakes in Gossamer Bio, Inc. (NASDAQ:GOSS) as of the end of the second quarter. The most significant stakeholder of Gossamer Bio, Inc. (NASDAQ:GOSS) was Lei Zhang’s Hillhouse Capital Management which owns a $6 million stake in the company.
6. Kezar Life Sciences, Inc. (NASDAQ:KZR)
Number of Hedge Fund Holders: 21
Kezar Life Sciences, Inc. (NASDAQ:KZR) is working on treatments for immune-mediated diseases and cancer. Earlier this month Kezar Life Sciences, Inc. (NASDAQ:KZR) said it would appoint a new CEO and cut its workforce by 41%.
Kezar Life Sciences, Inc. (NASDAQ:KZR) said the restructuring would fund its PALIZADE mid-stage trial in lupus nephritis. Out of the 910 hedge funds tracked by Insider Monkey, 21 hedge funds had stakes in Kezar Life Sciences, Inc. (NASDAQ:KZR). Aaron Cowen’s Suvretta Capital Management had a $17.6 million stake in Kezar Life Sciences, Inc. (NASDAQ:KZR).
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Disclosure: None. 12 Best Penny Stocks to Buy Under $1 is originally published on Insider Monkey.
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