We recently compiled a list of the 7 Best Rising Penny Stocks To Invest In Now. In this article, we are going to take a look at where Butterfly Network, Inc. (NYSE:BFLY) stands against the other rising penny stocks.
Fed’s Rate Cut Sets the Stage for a Strong Q4
In an episode of Market Storylines on the Inside the Icehouse Podcast feed by Intercontinental Exchange, Jay Woods, Chief Global Strategist at Freedom Capital Markets, discussed Fed rate cuts and the Q4 outlook. Woods discussed the latest Fed rate cut and said that the market absorbed the rate cuts quite positively, with the S&P 500 reaching new all-time highs.
Woods mentioned that, historically, when markets hit new highs in September, the fourth quarter tends to perform well, especially in election years. As the fourth quarter approaches, he highlighted that sectors such as real estate, utilities, and industrials have led the market in the third quarter, while technology has lagged. However, it may rebound in Q4.
Woods also emphasized the importance of upcoming economic data, including the ISM manufacturing report, jobless claims, and the U.S. unemployment report, which will give insight into the labor market and the potential impact of the rate cuts.
Small and Mid-Cap Stocks Set for Major Gains
Ryan Dietrich, Chief Market Strategist at Carson Group, joined Yahoo Finance for an interview on September 29, where he expressed optimism about the stock market’s future. He believes the rate cut was necessary and should have been smaller earlier.
He mentioned that the labor market is showing signs of slowing, with initial jobless claims at a four-month low, and forward earnings for the S&P 500 improving. However, he does not foresee a recession.
Dietrich highlighted that historically, rate cuts near market highs have been followed by strong market performance, with an average annual return of around 14%. He thinks the broader market could see 12-15% gains in the next year, while small and mid-cap stocks might outperform with over 20% returns. His firm is especially focused on mid-cap stocks, which tend to perform well after rate cuts.
While the upcoming election may cause some volatility, especially in October, Dietrich remains confident that markets will stabilize afterward, as they usually react better once uncertainty passes. He expects a strong end-of-year rally and advises investors to remain diversified and take advantage of any market weakness.
Our Methodology
For this article, we used stock screeners to identify over 60 stocks under $5 with a 1-month share price gain of over 10%, as of September 30. The best rising penny stocks are listed in ascending order of their hedge fund sentiment, which was taken from Insider Monkey’s database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A doctor looking at a ultrasound system with a Compass software interface, demonstrating the sophistication of the device.
Butterfly Network, Inc. (NYSE:BFLY)
1-Month Stock Price Performance: 32.77%
Number of Hedge Fund Holders: 23
Butterfly Network, Inc. (NYSE:BFLY) is a digital health company that focuses on point-of-care ultrasound (POCUS) technology, which seeks to make medical imaging more accessible and affordable for healthcare providers. It ranks 3rd on our list of best rising penny stocks to invest in now.
The company’s flagship products, the Butterfly iQ and Butterfly iQ+, use unique Ultrasound-on-Chip technology, which allows for whole-body imaging with a single handheld probe that connects to mobile devices. Additionally, the Butterfly Blueprint serves as an integrated ultrasound platform, which improves clinical workflows within healthcare settings.
On September 10, Lake Street initiated coverage of Butterfly Network (NYSE:BFLY) with a Buy rating and a $3 price target. The company made waves in the market with the launch of its first-generation iQ handheld ultrasound probe, which received FDA clearance in 2017.
Priced at $1,999, this device was significantly more affordable than competing handheld POCUS probes at that time, costing up to 80% less. Although earlier models were sometimes criticized for image quality, the recent release of the iQ3 has changed perceptions. It achieves image quality that matches low-end cart systems, which has increased its credibility among medical specialists.
Butterfly Network (NYSE:BFLY) is on track for a strong performance in 2024, driven by the successful introduction of the iQ3. Following its strong first quarter to date, the company reported record revenue of $21.5 million in the second quarter, a year-over-year 16% increase. It also managed to significantly reduce its net loss by 45% and cut net cash used in operations by 62%.
Overall BFLY ranks 3rd on our list of the rising penny stocks to invest in now. While we acknowledge the potential of BFLY as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BFLY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.