In this piece, we will take a look at the ten most successful penny stocks that made it big. If you want to skip our primer on penny stocks and need to jump ahead to the top five stocks in this list, then take a look at 5 Most Successful Penny Stocks That Made It Big.
The world of investing is full of tricks and opportunities, and the massive success of a handful of firms on the stock market has made their founders and investors billionaires. The market is responsible for producing some of the richest individuals in history, such as the founder of Microsoft Corporation (NASDAQ:MSFT) Mr. Bill Gates, and the electric vehicle billionaire Mr. Elon Musk. At the same time, it has also caused others painful losses.
These fantastic gains continue to draw large amounts of attention from retail investors in particular, and one segment that catches a lot of this interest is the penny stock sector. Defined as those stocks that trade at less than $5 per share by the Securities and Exchange Commission (SEC), droves of investors flock to these stocks as the low share price presents an attractive entry point and even small gains can result in large profits.
When evaluating a penny stock, some metrics take precedence over others. Mostly these stocks either belong to firms will small market shares and revenues or those that are struggling. These factors require careful stock picking, and a look at the balance sheet and the cash flow statement can provide useful tools to sift out any potential problems. For example, through the Debt Ratio, which analyses a firm's total debt with its total assets, an investor can determine if a company is overly leveraged and has taken on too much debt. Too much debt not only ends up burdening the income statement in the form of interest payments, but it also affects payouts to shareholders in case a firm ceases to be a going concern since debt holders get the first priority for payments.
Another ratio, which is especially useful for a penny stock, is the price to cash flow ratio. A firm's cash flow is the amount that is left for investors after its expenses are deducted, and when the share price is divided by the cash flow per share, an estimate of the 'market premium' for the share price can be determined. The usefulness of this metric lies in the fact that if a company has sound fundamentals, then it might see its share price jump in the future if there is little premium to it at the time of investment.
Today's piece focuses on some of the most successful penny stocks in history, and these firms have seen their share prices jump exponentially since they were first listed. Among these, the top performers are Advanced Micro Devices, Inc. (NASDAQ:AMD), Amazon.com, Inc. (NASDAQ:AMZN), and Tesla, Inc. (NASDAQ:TSLA).
Our Methodology
We took a look at the countless companies that have made it big on the stock market and then found out the share price at which they had started to trade or the lowest share price in their trading history, after accounting for stock splits. These companies once traded as penny stocks but have now grown to become major players in the market. The companies are then ranked through hedge fund holdings courtesy of Insider Monkey's Q2 2022 survey of 895 hedge funds.
10. GameStop Corp. (NYSE:GME)
Number of Hedge Fund Holders: 17
Share Price Gain To Date: 892%
GameStop Corp. (NYSE:GME) is an American video game retailer that sells consoles, accessories, pre owned systems, and games. The firm is headquartered in Grapevine, Texas.
GameStop Corp. (NYSE:GME) came to the center of the investing world in 2021 when the firm's shares popped on the stock market through the combined efforts of retail investors that were looking to drive out hedge funds betting against the company. While the shares have dropped since then, they are still up by 892% since they first started trading on the stock market at a price of $2.49. Stronger changes might be afoot at the company too since the renowned activist investor Carl Icahn is rumored to be interested in its affairs.
Jefferies kept its $26 share price target for GameStop Corp. (NYSE:GME) in October 2022, as it balanced a weaker spending outlook with improving supply chains. By the end of this year's second quarter, 17 out of the 895 hedge funds polled by Insider Monkey had invested in the company.
Out of these, Kenneth Mario Garschina's Mason Capital Management is GameStop Corp. (NYSE:GME)'s largest investor. It owns 518,445 shares that are worth $19 million.
Bireme Capital mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
Amazingly, GameStop Corp. (NYSE:GME) is one of our only short positions to not fall in 2022. The stock trades at an $11.5b market cap, exceeding its pre-pandemic peak by billions of dollars. This is despite the fact that revenue is down 30% from the peak, gross margins are down 1500 bps, and the company has generated a negative free cash outflow of $700m in the last four quarters (we had to double check that number because it is so high).
GameStop Corp. (NYSE:GME) is a penny stock that made it big, joining others such as Amazon.com, Inc. (NASDAQ:AMZN), Advanced Micro Devices, Inc. (NASDAQ:AMD), and Tesla, Inc. (NASDAQ:TSLA).
9. Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 46
Share Price Gain To Date: 923%
Ford Motor Company (NYSE:F) is one of the most renowned car companies in the world that is named after its founder, the legendary Henry Ford. Credited with having invented the modern day automobile, the company sells a wide variety of vehicles such as trucks, cars, and electric vehicles.
Ford Motor Company (NYSE:F)'s shares started to trade at a mere $1.23 in 1982, and since then they have appreciated by a whopping 923%. The company's sales in China grew by 11% sequentially in its third quarter even as the Asian giant continued to navigate the effects of a zero-covid policy. The firm's electric vehicle sales also tripled in September.
By the end of this year's second quarter, 46 out of the 895 hedge funds polled by Insider Monkey had invested in Ford Motor Company (NYSE:F).
D.E. Shaw's D E Shaw is Ford Motor Company (NYSE:F)'s largest investor. It owns 23 million shares that are worth $257 million.
8. Monster Beverage Corporation (NASDAQ:MNST)
Number of Hedge Fund Holders: 46
Share Price Gain To Date: 69,000%
Monster Beverage Corporation (NASDAQ:MNST) is an energy drink company that is headquartered in Corona, California, the United States. In addition to energy drinks, the firm also sells iced teas, lemonades, co*cktails, and coffee drinks.
Ever since Monster Beverage Corporation (NASDAQ:MNST) listed its shares for 13 cents in 1985, they have been on an upward trajectory. The latest reading for the share price sits at $90, indicating that it has appreciated by a staggering 69,000%. Insider Monkey's June quarter of 2022 survey covering 895 hedge fund portfolios revealed that 46 had bought a stake in the company.
Monster Beverage Corporation (NASDAQ:MNST)'s second quarter fiscal results revealed that the firm had posted 13.2% growth, which marked more than thirty quarters of consecutive revenue growth. No wonder the company is Morgan Stanley's favorite stock for this earnings season, with a price target of $109.
Monster Beverage Corporation (NASDAQ:MNST)'s largest investor is Jim Simons' Renaissance Technologies which owns 5.6 million shares that are worth $524 million.
Carillon Tower Advisors commented on the firm's recent performance in its Q2 2022 letter, outlining that:
“Monster Beverage Corporation (NASDAQ:MNST) develops and sells energy drinks and concentrates. The company’s shares outperformed, driven by an impressive earnings report highlighted by better than expected organic growth. Management also gave guidance that indicated a potential bottom in gross margins, as well as upcoming price increases that helped give investors confidence in its growth outlook.”
7. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 69
Share Price Gain To Date: 3,800%
Micron Technology, Inc. (NASDAQ:MU) is one of the oldest semiconductor firms in the world that is responsible for designing and selling memory and storage devices. These include DRAM, NAND, and NOR products. The company is headquartered in Boise, Idaho, the United States.
Micron Technology, Inc. (NASDAQ:MU) is one of the strongest spenders in the memory industry, with the firm targeting future growth in the form of heavy capital expenditure. The firm's average capital expenditure of its revenue stood at 37% over the past three years, and by the end of this year, it will have grown to 39%. Micron Technology, Inc. (NASDAQ:MU) is also investing in leading edge extreme ultraviolet lithography systems to manufacture the latest memory products.
Micron Technology, Inc. (NASDAQ:MU)'s shares started trading in 1984 at a mere price tag of $1.41. Since then they have appreciated by a remarkable 3,800%. As part of their second quarter of 2022 investments, 69 out of the 895 hedge funds polled by Insider Monkey had invested in the company.
Micron Technology, Inc. (NASDAQ:MU)'s largest investor in our database is David Goel and Paul Ferri's Matrix Capital Management which owns four million shares that are worth $221 million.
Claret Asset Management mentioned the company in its Q3 2022 investor letter. Here is what the fund said:
“Inflation is still higher than interest rates… not an incentive to save for most people. Either inflation must come down or interest rates have to go up further. Or both. And probably both. Now that they are taking the punch bowl away and the party is over, what happens next? For whatever reason, the stock market seems to always precede the economic reality: Micron reached a high of $98.45 on January 5th, 2022 and is trading at $50.00 today.”
6. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 71
Share Price Gain To Date: 21,000%
QUALCOMM Incorporated (NASDAQ:QCOM) is one of the largest semiconductor companies in the world. The firm designs and sells semiconductors for smartphones, virtual reality headsets, Internet of Things (IoT) gadgets, and cars. It is headquartered in San Diego, California, the United States.
QUALCOMM Incorporated (NASDAQ:QCOM)'s shares are up by a massive 21,000% since they started trading in 1991. As if this weren't enough, HSBC still believes that the stock has a long way to go, as it set a $180 share price target for the company in October 2022. The bank stressed that the company is a leader in the modem and connectivity space.
Insider Monkey's Q2 2022 survey that covered 895 hedge funds outlined that 71 had bought QUALCOMM Incorporated (NASDAQ:QCOM)'s shares.
Out of these, Panayotis Takis Sparaggis's Alkeon Capital Management is QUALCOMM Incorporated (NASDAQ:QCOM)'s largest investor. It owns 4.2 million shares that are worth $541 million.
Amazon.com, Inc. (NASDAQ:AMZN), Tesla, Inc. (NASDAQ:TSLA), and Advanced Micro Devices, Inc. (NASDAQ:AMD) are met by QUALCOMM Incorporated (NASDAQ:QCOM) in our list of penny stocks that made it big.
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Disclosure: None.10 Most Successful Penny Stocks That Made It Big is originally published on Insider Monkey.
