In this article, we will take a look at the 13 cash-rich penny stocks hedge funds are buying. To see more such companies, go directly to 5 Cash-Rich Penny Stocks Hedge Funds Are Buying.
Amid the widespread stock market bloodbath we saw in 2022, investors are avoiding risky investment vehicles like micro-cap companies or penny stocks. However, as several analysts predict a possible market rebound near the end of 2023 or 2024, some experts believe now could be the right time to pile into risky stocks that have solid fundamentals or growth catalysts. A report by Oberweis Asset Management said that given the risks related to micro-cap investing, many small-cap fund managers have started to avoid investing in the sub-$1.5 billion spectrum. The report says that in 2011, an average small-cap manager allocated about 57% to their portfolio to companies with market caps below $1.5 billion. By 2021 that figure reached below 14%. The report also claimed that micro-cap managers generate higher returns than traditional small-cap managers over longer periods of time. The report also added that “contrary to popular belief,” volatility is not higher for micro-cap stocks when compared to small-cap stocks.
The report also said that allocating a certain percentage of your portfolios to micro-cap companies can increase risk-adjusted returns of your investments. That’s because micro-cap companies aren’t strongly related to US equities, foreign currencies, global market movements or bonds. Perhaps they are too small to be affected by macro movements. Investors can take advantage of this phenomenon and invest in solid penny stocks that have a potential to grow in the long run.
Another point the Oberweist report makes to support micro-cap investing is linked to the oversaturation in the large-cap space. The report says that all market analysts tend to talk about and research large-cap companies. This creates an opportunity for those investors who want to invest in undiscovered micro-cap companies that are still unknown. Here’s an interesting excerpt from the report:
“Most Wall Street analysts focus their research on larger companies that generate investment banking fees and trading commissions. On average, there are five times as many analysts covering large-cap companies compared to the average micro-cap. Nearly one-third of micro-caps are covered by only one sell-side analyst, and some aren’t covered at all. This lack of Wall Street research in the micro-cap arena means active managers who conduct their own fundamental research should have an information advantage which can help them generate above-market returns.”
Our Methodology
For this article, we scoured the large universe of penny stocks and first screened for penny stocks that are priced below $5 and have a price to free cash flow ratio under 5. Lower price to free cash flow ratio indicates that the company in question is in a strong position in terms of cash and has a strong ability to continue its operations. Price to free cash flow ratio is used to compare a company’s stock value to its cash management practices over time.
After applying the first check, we got a large list of penny stocks that are relatively stronger in terms of cash. We then checked hedge fund sentiment of these companies and picked the top 13 companies that have the highest number of hedge fund stakeholders. To gauge this data point, we used Insider Monkey’s database of 920 hedge funds.
The list is ranked in an ascending order of the operating cash flow (ttm) metrics of the companies. The currency of this metric is USD.
Cash Rich Penny Stocks Hedge Funds Are Buying
13. Barnwell Industries, Inc. (NYSE:BRN)
Operating Cashflow (TTM): 7.29M
Number of Hedge Fund Holders: 1
Barnwell Industries, Inc. (NYSE:BRN) is a Hawaii-based company that has oil and gas operations in the US and Canada. Over the past six months the stock has gained about 17% in value.
Barnwell is another cheap dividend stock in our list. Last month, Barnwell Industries, Inc. (NYSE:BRN) announced a $0.015/share dividend. Forward dividend yield at the time came in at 6.02%. The dividend was payable Jan. 11 to shareholders of record Dec. 27.
Barnwell Industries, Inc. (NYSE:BRN) also announced its fourth quarter results last month. The oil and gas company said its revenue in the quarter notched a whopping 80% growth.
Quant genius Jim Simons’ hedge fund is the only stakeholder in Barnwell Industries, Inc. (NYSE:BRN) according to Insider Monkey’s database. The fund has a $1.14 million stake in this penny stock.
12. American Shared Hospital Services (NYSE:AMS)
Operating Cashflow (TTM): 8.76M
Number of Hedge Fund Holders: 2
American Shared Hospital Services (NYSE:AMS) is a San Francisco-based radiosurgical and radiation therapy equipment provider. In November last year, American Shared Hospital Services (NYSE:AMS) posted its third quarter results. Revenue in the period jumped about 17.8% to total $4.83 million. Gross margins in the quarter jumped 33.4% to $1,957,000, as the gross margin percentage expanded 470 basis points to 40.5% of revenue compared to 35.8% for the third quarter of 2021. American Shared Hospital Services (NYSE:AMS) also said that its operating income in the period came in at $448,000, compared to just $186,000 in the comparable period last year. This shows a 141% increase in the figure.
Jim Simons’ Renaissance Technologies and John Overdeck and David Siegel’s Two Sigma Advisors own stakes in American Shared Hospital Services (NYSE:AMS) as of the end of the third quarter.
11. CareCloud, Inc. (NASDAQ:MTBC)
Operating Cashflow (TTM): 21.23M
Number of Hedge Fund Holders: 3
CareCloud, Inc. (NASDAQ:MTBC) is an IT company operating in the healthcare sector. While CareCloud, Inc. (NASDAQ:MTBC)’s third quarter results missed estimates, its management said it saw highest ever bookings in the period, thanks to strengths in CareCloud, Inc. (NASDAQ:MTBC) digital health solution Wellness. Recurring bookings in the period came in at $7.1 million, three times more than the figure posted in the comparable period last year.
As of the end of the third quarter, 3 hedge funds tracked by Insider Monkey reported having stakes in CareCloud, Inc. (NASDAQ:MTBC), compared to 6 funds in the previous quarter.
10. Fluent, Inc. (NYSE:FLNT)
Operating Cashflow (TTM): 26.49M
Number of Hedge Fund Holders: 8
Fluent, Inc. (NYSE:FLNT) is a US-based digital marketing and media company that helps marketers to reach consumers and expand their return on investments. In November, Fluent posted its third quarter results. Fluent, Inc. (NYSE:FLNT) said non-GAAP EPS came in at $0.06, beating estimates by $0.04. Revenue in the quarter jumped 3.7% to reach $89 million.
Of the 920 hedge funds tracked by Insider Monkey, 8 hedge funds reported having stakes in Fluent, Inc. (NYSE:FLNT). The total value of these stakes was $2.2 million. Notable hedge funds have stakes in Fluent, Inc. (NYSE:FLNT). These include Israel Englander’s Millennium Management, Jim Simons’ Renaissance Technologies and D E Shaw.
Fluent, Inc. (NYSE:FLNT) shares have gained about 12.6% over the past six months.
9. CorEnergy Infrastructure Trust, Inc. (NYSE:CORR)
Operating Cashflow (TTM): 31.74M
Number of Hedge Fund Holders: 4
Corenergy Infrastructure is a Kansas-based REIT. It ranks 9th in our list of cash-rich penny stocks hedge funds are buying. As of the end of the third quarter, 4 hedge funds tracked by Insider Monkey had stakes in CorEnergy Infrastructure Trust, Inc. (NYSE:CORR), compared to 3 funds in the previous quarter. Millennium Management of Israel Englander has a $115,000 stake in CorEnergy Infrastructure Trust, Inc. (NYSE:CORR). CORR is one of the best cheap dividend stocks in the market for those who are looking for high-yield plays in a budget. The stock has a dividend yield of 9% as of January 12. CorEnergy Infrastructure Trust (NYSE:CORR) in November declared a dividend of $0.05/share.
During the same month, CorEnergy Infrastructure Trust, Inc. (NYSE:CORR) posted its Q3 results, according to which its revenue fell 11% on a YoY basis. CorEnergy Infrastructure Trust, Inc. (NYSE:CORR)’s management said that its MoGas and Omega natural gas operations showed “steady performance” in the quarter.
8. PHX Minerals Inc. (NYSE:PHX)
Operating Cashflow (TTM): 37.53M
Number of Hedge Fund Holders: 7
PHX Minerals Inc. (NYSE:PHX) is a Texas-based natural gas and oil mineral company which owns about 75,000 leased mineral acres principally located in Oklahoma, Texas, Louisiana, North Dakota, and Arkansas.
At the end of the third quarter of last year, 7 hedge funds reported having stakes in PHX Minerals Inc. (NYSE:PHX), compared to 8 funds in the previous quarter.
PHX is also a solid dividend stock. Last month, PHX Minerals Inc. (NYSE:PHX) increased its quarterly dividend by about 12.5%.
7. comScore, Inc. (NASDAQ:SCOR)
Operating Cashflow (TTM): 47.51M
Number of Hedge Fund Holders: 18
As of the end of the third quarter, 18 hedge funds tracked by Insider Monkey had stakes in comScore, Inc. (NASDAQ:SCOR). The biggest stakeholder of comScore, Inc. (NASDAQ:SCOR) was Jim Tarantino and Chris Galvin’s Westerly Capital Management, which owns a $5.6 million stake in comScore, Inc. (NASDAQ:SCOR).
Last month, comScore, Inc. (NASDAQ:SCOR)’s stakeholder Pine Investor, which is affiliated with Cerberus Capital Management, disclosed that it now owns a 25.5% stake in comScore, Inc. (NASDAQ:SCOR).
6. Republic First Bancorp, Inc. (NASDAQ:FRBK)
Operating Cashflow (TTM): 52.48M
Number of Hedge Fund Holders: 6
Republic First Bancorp is a bank holding company. As of the end of the third quarter of 2022, 6 hedge funds in Insider Monkey’s database had stakes in Republic First Bancorp, Inc. (NASDAQ:FRBK), compared to 8 funds in the previous quarter. Israel Englander’s Millennium Management has a $1.3 million stake in Republic First Bancorp, Inc. (NASDAQ:FRBK).
Republic First Bancorp recently appointed Thomas Geisel as its new CEO.
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Disclosure: None. 13 Cash Rich Penny Stocks Hedge Funds Are Buying is originally published on Insider Monkey.
