In this article, we will look at the 8 Cheap Penny Stocks to Buy Right Now. Let’s look at where Banco Santander, S.A. (SAN) stands against other cheap penny stocks.
The economy of the United States has stabilized, with inflation continuously cooling down and the risk of recession overruled. The Federal Reserve cut interest rates on September 18, slashing them by half a point as a start to its first easing cycle in four years. The Federal Reserve statement said:
“The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”
However, Fed Chair Jerome Powell announced on September 30 that the recent aggressive half-percentage point interest rate cuts should not be interpreted as a sign that future rate cuts would also be as aggressive. Instead, they are likely to be smaller. Talking to the National Association for Business Economics, he said:
“Looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral stance. But we are not on any preset course. The risks are two-sided, and we will continue to make our decisions meeting by meeting.”
Powell expressed confidence in the country’s economic strength, claiming that inflation is expected to continue cooling. He also indicated that if the economic data shows consistency in the coming days, two more rate cuts would likely materialize in 2024. These, however, are expected to come in smaller quarter percentage point increments. This trend goes against market expectations for more aggressive cuts and easing.
During a Q&A session after his speech in Nashville, Tennessee, he said that:
“This is not a committee that feels like it’s in a hurry to cut rates quickly. If the economy performs as expected, that would mean two more rate cuts this year, a total of 50 [basis points] more.”
Sustainable Growth Expected in Small Caps Amidst Market Shifts
On July 26, Nathan Moser, Managing Director and Senior Portfolio Manager at Impax Asset Management, discussed some long-term possibilities for small-cap stocks on Schwab Network. Talking about the recent changes in small stocks, he discussed the positive shift and noted that the recent rise in small caps appears more sustainable after years of struggle. This trend is primarily driven by strong inflows into ETFs and passive investment vehicles.
Despite short-term volatility, Mooser believes the market’s current move could last for years. He thus encouraged buying on market dips, while highlighting the need to focus on profitable, high-quality companies due to the potential risks typically associated with lower-quality stocks in small caps.
Our Methodology
We first consulted stock screeners from Finviz and Yahoo Finance to create an initial list of 15 publicly traded penny stocks with forward P/E ratios of less than 15 as of October 1, 2024. From this list, we selected the 8 stocks with the highest number of hedge funds holders as of Q2 2024, and used that as our ranking metric. The stocks we identified are profitable, have positive EPS growth, and are expected to remain profitable in the future as well.
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).
8 Cheap Penny Stocks to Buy Right Now
Banco Santander, S.A. (NYSE:SAN)
Share Price: $4.81
Forward P/E: 6.31
EPS Growth This Year: 14.50%
Number of Hedge Fund Holders: 9
Banco Santander (NYSE:SAN) is a Spain-based company that operates as a retail and commercial bank. Its segments are scattered across Continental Europe, the United Kingdom, Latin America, and the United States.
Banco Santander’s (NYSE:SAN) Q2 marked a record quarter, showing the strength of its strategy and the resilience of its business model. Profit grew by 20% compared to Q2 2023, reaching €3.2 billion. This result came even after the impact of €450 million of one-time charges, net of taxes and minorities. Profit in the first half of 2024 reached €6.1 billion, growing at a record rate of 16%. This was supported by strong cost of revenue growth in all regions and global businesses.
The company is continually accelerating its H1 transformation to become more automated, simpler, and integrated. As a result of these initiatives, its efficiency ratio improved by 261 basis points to 41.6%, its best in 15 years. In addition, the bank’s strict capital discipline, solid credit quality, and strong balance sheet with a sound capital ratio have allowed it to achieve profitable growth and shareholder value creation, with TNAV plus dividend per share growing 12%.
Its global businesses are continually pushing profitability, delivering 87 basis points in efficiency gains. Its proprietary and global tech capabilities have generated 71 basis points in efficiencies so far. The company drives these strong results by offering customers optimal user experience and products. It also holds operational leverage from its global platforms and common tech, which is reflected in the performance of its global businesses. Its retail and consumer businesses efficiency ratio improved by 480 basis points and 270 basis points, respectively, highlighting its strong operational model. The company is also leveraging its expertise to grow in the US and expand its reach. Banco Santander (NYSE:SAN) ranks fifth on our list of the cheap penny stocks to buy right now.
Overall, SAN ranks fifth among the 8 cheap penny stocks to buy right now. While we acknowledge the potential of SAN 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 SAN 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.