We recently compiled a list of the 10 Best Fundamentally Strong Penny Stocks to Invest In. In this article, we are going to take a look at where Reit 1 Ltd (OTC:RETDF) stands against the other fundamentally strong penny stocks.
As per Royce Investment Partners, small caps saw a rebound in Q3, exhibiting a strong advance on both an absolute and relative basis. As per the investment management firm, the Russell 2000 Index saw an increase of ~9.3% in Q3 2024, surpassing the large-cap Russell 1000 Index (which rose ~6.1%) and the mega-cap Russell Top 50 Index (which increased ~4.2%). The investment firm believes that small caps see a long road back to the top, with large caps holding a commanding lead through the initial 9 months of 2024.
On a YTD basis, the Russell 2000 saw an increase of ~11.2% compared to the respective gains of ~21.2% and ~27.3% for the Russell 1000 and Russell Top 50, in the third quarter of 2024. The investment firm said a confluence of factors might support small-caps in sustaining market leadership. The still-growing US economy, together with a more typical interest rate environment, might support small-cap leadership.
Investment Themes in the US
As per Russell Investments, the US equity-market leadership reversed during Q3 2024, with small-cap stocks surpassing the returns delivered by their large-cap counterparts. Also, the value factor outperformed the growth factor. This means there was a significant pivot from the first 2 quarters of 2024, during which market returns were dominated by the US large-cap growth stocks— the Magnificent 7, to be precise.
Russell Investments highlighted that, from Q2 2024 to Q3 2024, there was a moderate change in the US average daily turnover, with $578.8 billion in Q3 2024 as compared to $581.5 billion in Q2 2024. Q3 2024 saw a shift in investor focus from high-flying tech stocks to more traditional sectors. Small-cap and value stocks surpassed the performance of large-cap and growth stocks, thanks to the broader market rotation. Moreover, utility stocks saw significant traction due to higher investments in energy infrastructure in a bid to support the elevated demand from AI and data centers.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Expectations for 2025
Wall Street experts believe that the shifts in monetary policy, sectoral innovation and developments, a favorable interest rate environment, and supportive regulatory environment are expected to fuel growth in small and emerging stocks over the next year.
As per Francis Gannon, Co-Chief Investment Officer, and Managing Director of Royce Investment Partners, earnings form the foundation for long-term performance. This means that earnings tend to support the broader market over the long term. He noted that the Russell 2000 saw a near-record number of companies having no earnings, with a total of ~44.6% (as of September end). Despite this, the earnings growth for the small-cap companies that have them has been estimated to be higher than large-cap ones in 2025.
Chuck Royce, Founder and Senior Advisor at Royce Investment Partners, believes that the lower rates are expected to help the M&A activity. The potential buyers have been waiting for the US Fed to act before they go ahead with acquisitions. He believes that many small-caps want to get merged. Therefore, there are expectations of more strategic buyouts moving forward.
Our Methodology
To list the 10 Best Fundamentally Strong Penny Stocks to Invest In, we used Finviz and Yahoo screeners to extract stocks trading under $5. Next, we selected the companies that have reliable 3-year revenue and 3-year net income growth rates. Finally, the stocks were arranged in ascending order of their hedge fund holdings, as of Q2 2024.
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).
Aerial view of a large urban cityscape showcasing a major real estate development.
Reit 1 Ltd (OTC:RETDF)
Stock Price as of 4 November: $4.16
3-Year Revenue Growth: ~8.2%
3-Year Net Income Growth: ~13.5%
Average Upside Potential: 87%
Number of Hedge Fund Holders: N/A
Reit 1 Ltd (OTC:RETDF) is engaged in the acquisition, management, and lease of real estate property. It holds real estate for commercial and industrial use mainly in the central region of Israel.
Reit 1 Ltd (OTC:RETDF) concluded Q2 2024 with a double-digit improvement in its main operational parameters, the NOI and the real FFO. The company was able to maintain high occupancy rates and saw an improvement in the occupancy rate in the area The offices, that increased to ~91.6% as compared to about 90% in the previous quarter of the year. Reit 1 Ltd (OTC:RETDF)’s strong results were mainly aided by the strength of the fund’s asset portfolio.
Wall Street analysts opine that the company’s growth is expected to be aided by the increased diversification primarily in industrial and logistics facilities. Reit 1 Ltd (OTC:RETDF)’s growth strategy revolves around geographic and sectoral diversification, development opportunities, and refurbishment and upgradation of existing properties.
Reit 1 Ltd (OTC:RETDF), in its presentation dated 30th June 2024, upgraded its 2024 NOI forecast from ILS 452 million – ILS 462 million to ILS 469 million – ILS 474 million. Also, it has upwardly revised its 2024 adjusted FFO from ILS 303 million- ILS 313 million to ILS 324 million – ILS 329 million. Reit 1 Ltd (OTC:RETDF) continues to develop and improve its property portfolio while, at the same time, remaining focused on increasing its sectoral and geographic diversification.
In H1 2025, Reit 1 Ltd (OTC:RETDF) expects to finish the construction of the logistics property in the house Shemesh. The company continues to market and improve the leading employment park in Ra’anana.
As per Wall Street, the shares of Reit 1 Ltd (OTC:RETDF) have average target price of $7.80.
Overall RETDF ranks 8th on our list of the best fundamentally strong penny stocks to invest in. While we acknowledge the potential of RETDF as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than RETDF 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.