In this article, we will take a look at the 10 best value penny stocks to buy. To see more such companies, go directly to 5 Best Value Penny Stocks To Buy.
Value stocks have suffered since the start of 2023 amid an overall market euphoria that has favored growth stocks. A report by GMO said that the rise of growth stocks in 2023 and the reversal of value was not completely unexpected since value vs growth has always been a bumpy ride. The report mentioned that the MSCI ACWI Growth index gained about 17.4% in 2023 through the end of May, while MSCI ACWI Value posted -1.4% in return during the year. GMO, whose Equity Dislocation Strategy is 100% long cheap Value stocks and 100% short expensive growth stocks, said that the information technology sector was the biggest contributor in the outperformance of growth stocks this year. The report said that investors were already ready to buy the dip on tech stocks amid depressed valuations caused by the market crash of 2022. Then the AI boom came and technology stocks rose to new highs.
“The average Value exposure to Information Technology was 8.9%, while the average Growth exposure was a much greater 29.9%. The 21.0% short relative underweight multiplied by the 25.0% Information Technology outperformance had an impact of -5.2% to the performance of Value minus Growth. Value’s biggest positive overweight is in Financials, a sector that has had a challenging start to the year as initially Silicon Valley Bank, and subsequently Signature Bank, Credit Suisse, and First Republic, imploded. Perhaps surprisingly, Financials sat right in the middle of the pack as far as sector performance went, but the 14.1% relative overweight to the -9.4% underperforming sector still had an impact of -1.3%.”
A 2019 report by T. Rowe Price takes a look at why and how broader markets make a rotation from growth to value stocks and what factors contribute to this rotation. The report at the time noted that growth stocks had been triumphant amid easy money policies, low inflation and rise of tech stocks. But the report had said that all of that could change if markets return to “rationality” and dominant tech stocks lose their traction in what T. Rowe called “changing of the guard.”
“The idea that today’s biggest companies—primarily U.S. technology companies—will continue to dominate the next decade should be met with caution. Seldom do the same companies, or even economies (such as Japan in the 1980s) manage to sustain such dominance.”
So far technology remains dominant but there are strong value plays that could grow in value in the future amid their long-term growth catalysts.
Image: Depositphotos
Methodology
For this article we first used a stock screener to identify stocks trading under $5 as of August 23 with PE ratios under 20. We then picked 10 of these stocks with the highest number of hedge fund investors. We gave preference to stocks from consumer staples, energy, financials, industrials, and materials sectors.
Best Value Penny Stocks To Buy
10. Banco Santander, S.A. (NYSE:SAN)
Number of Hedge Fund Holders: 16
Spanish financial services company Banco Santander, S.A. (NYSE:SAN) ranks 10th in our list of the best value penny stocks to buy now. Banco Santander, S.A. (NYSE:SAN) has gained about 56% in value over the past one year. Its PE ratio is still 5.91.
In July, Banco Santander, S.A. (NYSE:SAN) shares gained after the company posted strong Q2 results and said it’s “well on track” to achieving 2023 financial targets.
Insider Monkey’s database of 910 hedge funds shows that 16 hedge funds had stakes in Banco Santander, S.A. (NYSE:SAN) as of the end of the second quarter of 2023. The biggest stakeholder of Banco Santander, S.A. (NYSE:SAN) was John W. Rogers’s Ariel Investments which owns a $26 million stake in the company.
9. Nordic American Tankers Limited (NYSE:NAT)
Number of Hedge Fund Holders: 16
Nordic American Tankers Limited (NYSE:NAT)’s PE ratio as of August 22 stands at 9.55. Nordic American Tankers Limited (NYSE:NAT) has a 14% dividend yield. In May Nordic American Tankers Limited (NYSE:NAT) posted Q1 results. GAAP EPS in the quarter came in at $0.22 beating estimates by $0.05. Revenue in the period jumped 461% year over year to $87.1 million, beating estimates by $5.53 million.
As of the end of the second quarter of 2022, 16 hedge funds in Insider Monkey’s database of hedge funds had stakes in Nordic American Tankers Limited (NYSE:NAT).
8. Baytex Energy Corp. (NYSE:BTE)
Number of Hedge Fund Holders: 17
Canadian energy company Baytex Energy Corp. (NYSE:BTE) is one of the best value penny stocks to buy.
Out of the 910 hedge funds in Insider Monkey’s database, 17 hedge funds held stakes in Baytex Energy Corp. (NYSE:BTE). The most significant stakeholder of Baytex Energy Corp. (NYSE:BTE) during this period was Vince Maddi and Shawn Brennan’s SIR Capital Management which owns a $24 million stake in the company.
In June, Baytex Energy Corp. (NYSE:BTE) announced the completion of acquisition of Ranger Oil (NASDAQ:ROCC). According to the deal, Ranger Oil’s shareholders received 7.49 Baytex Energy Corp. (NYSE:BTE) shares plus $13.31 cash for each share of Ranger common stock.
7. B2Gold Corp. (NYSE:BTG)
Number of Hedge Fund Holders: 17
B2Gold Corp. (NYSE:BTG) is a Canadian gold mining company with mines in Mali, the Philippines, and Namibia.
Insider Monkey’s database of 910 hedge funds shows that 17 funds had stakes in B2Gold Corp. (NYSE:BTG) as of the end of the second quarter. Earlier in August B2Gold Corp. (NYSE:BTG) posted Q2 results. Adjusted EPS in the quarter came in at $0.07 in-line with estimates. Revenue in the quarter jumped 23.3% year over year to $470.85 million, beating estimates by $9.79 million. Total gold production in the period came in at 262,701 ounces.
B2Gold Corp. (NYSE:BTG) also features on Insider Monkey’s list of the most oversold penny stocks in August.
6. Overseas Shipholding Group, Inc. (NYSE:OSG)
Number of Hedge Fund Holders: 17
Oil tanker firm Overseas Shipholding Group, Inc. (NYSE:OSG) is one of the best value penny stocks to buy according to hedge funds. Overseas Shipholding Group, Inc. (NYSE:OSG) has gained 37% in value year to date through August 23. Overseas Shipholding Group, Inc. (NYSE:OSG)’s PE ratio stands at 7.48. In June, Overseas Shipholding Group, Inc. (NYSE:OSG) jumped to its six-year high after the company doubled its stock buyback program, adding $10 million to its authorization to raise the total value of its program to $20 million.
Insider Monkey’s database of 910 hedge funds tracked as of the end of the second quarter shows that 17 hedge funds were long Overseas Shipholding Group, Inc. (NYSE:OSG). The biggest stakeholder of Overseas Shipholding Group, Inc. (NYSE:OSG) was Stephen C. Freidheim’s Cyrus Capital Partners which owns a $30 million stake in the company.
Overseas Shipholding Group, Inc. (NYSE:OSG)’s management recently talked about their expectations for the full-year 2023 in a recent earnings call and said:
“We anticipate continuing strength in all important financial metrics and to sustain build in available cash balances over the next several quarters as profitable time charters at higher utilization rates are realized. As Dick noted, we do anticipate increased drydocking survey out of service days for the second half of this year. Nevertheless, with our success in securing improved terms on a number of vessel contracts, it gives us confidence in improving our guidance for full-year 2023 results from what we have presented last quarter. We now expect time charter equivalent earnings for the full-year of approximately $410 million. Attaining these top line results should generate adjusted EBITDA of about a $160 million for the full calendar year of 2023.
After deducting debt service and planned maintenance capital expenses, we anticipate that free cash flow for the full-year should be close to $70 million. To deliver on these results, our mission is firmly focused on execution and operational excellence, as well as the pursuit of growth opportunities in some of our specialized businesses. The extended contract coverage into 2024 also allows us to project with a reasonable degree of certainty, results that should be achieved from existing vessels for next year. Given what we know today, we expect time charter equivalent earnings for 2024 to exceed $430 million and an adjusted EBITDA to exceed $175 million for the full calendar year of 2024. Capital allocation and the future use of surplus cash flow is a regular topic of conversation with our Board.”
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Disclosure: None. 10 Best Value Penny Stocks To Buy is originally published on Insider Monkey.