In this article, we will take a detailed look at 11 Best Fundamentally Strong Penny Stocks to Buy Now.
Fundamentally strong penny stocks can represent highly attractive investment opportunities, primarily because they tend to be underfollowed companies operating outside the radar of most institutional investors and prominent sell-side analysts. Due to limited coverage, these stocks often remain hidden gems with significant untapped potential, making them ideal candidates for investors seeking outsized returns through diligent research and stock picking. Unlike speculative penny stocks, those supported by solid financial fundamentals – such as solid revenue growth, positive profitability, manageable debt levels, and robust performance even during economic slowdowns – indicate higher quality and reduced downside risk. Research consistently suggests that investing in undervalued, fundamentally strong small-cap or micro-cap (which are usually penny stocks) companies can generate superior long-term performance, largely because the market eventually recognizes and appropriately values their underlying quality.
READ ALSO: 12 Best Fundamental Stocks to Buy Now
While fundamentally strong penny stocks can offer compelling upside, exposure to them should be carefully timed, as their performance tends to be cyclical and highly sensitive to broader market sentiment. Historically, penny stocks have outperformed during periods of economic recovery, early bull markets, and risk-on environments. In contrast, during times of heightened volatility, tightening monetary policy, or flight-to-safety phases, these stocks often underperform due to their perceived risk and lower liquidity. That’s exactly what has been happening in the last 2 months since the inauguration of the new US administration – the small cap sector (as proxied by ETFs) has reached a new 5-year low on a relative basis vs. the broad market in March 2025 as the Trump 2.0 tariff turmoil has caused significant declines in valuations. Even the Federal Reserve Chair Jerome Powell recognizes the unstable outlook as he used the word “uncertainty” 16 times in his press conference last week.
As the reputable Yardeni Research boutique has put it,
“Markets continue to suggest that economic growth outside of the US is increasingly likely to improve while downside risks to US growth are rising.”
As a result, US stock valuation multiples are falling closer to their international counterparts. We believe this evolution has created opportunities for the most courageous investors willing to take a contrarian stance – the stock valuations suggest weakness, all while economic indicators reveal that the backbone of the US economy is still strong. For reference, the labor market remains strong, with no meaningful spike in jobless claims, which reinforces our belief that consumers remain strong. Likewise, business activity (as proxied by PMI) remained elevated in March, and employment surged. With a healthy consumer and industrial sector, the odds are that the upcoming months will not bring any meaningful economic slowdown, which is now becoming increasingly anticipated by analysts.
With that being said, the key takeaway for readers is that small caps, and particularly penny stocks, could become favored again, as the new batch of economic indicators suggests a strong economy going forward. Moreover, the recent 10% correction in the US stock market valuations offers more affordable opportunities to seek entry points. In this context, we believe that fundamentally strong penny stocks should be preferred by investors, as their higher quality and resilience raise the odds that they will deliver a satisfactory performance and outperform the broad market.
A closeup of investor hands holding a small-cap investment security.
Our Methodology
To find fundamentally strong penny stocks we used Finviz to filter for stocks with a stock price below $5.00, with at least 10% revenue growth in the last 3 years. Then we manually selected companies with stable businesses, established product lines, and a demonstrated history of performing well even during economic slowdowns. Finally, we compare the list with our Q4 2024 proprietary database of hedge funds’ ownership and include in the article the top 11 stocks with the largest number of hedge funds that own the stock.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
11. Ring Energy, Inc. (NYSEAMERICAN:REI)
Number of Hedge Fund Holders: 11
Ring Energy, Inc. (NYSEAMERICAN:REI) is an independent oil and gas exploration and production company focused on the development of conventional and unconventional reserves in the Permian Basin of Texas and New Mexico. The company primarily targets low-cost, high-margin oil production from mature vertical wells and horizontal drilling in legacy fields, such as the Central Basin Platform and the Northwest Shelf. REI’s operations are centered on maximizing recovery and extending the life of proven assets through enhanced recovery techniques and disciplined capital deployment. Its revenue is predominantly derived from crude oil, with natural gas and NGLs as secondary products.
Ring Energy, Inc. (NYSEAMERICAN:REI) delivered a strong performance in Q4 2024, with total sales growing 8% over 2023 to reach a record 19,648 barrels of oil equivalent per day, while oil sales grew 6% to 13,283 barrels of oil per day. The company reduced YoY all-in cash operating costs on a per BOE basis by 2% and improved drilling efficiency by completing 13 more wells in 2024 than the prior year for slightly less capital. For 2024, REI spent $151.9 million on drilling and completing 21 horizontal wells and 22 vertical wells, along with various infrastructure upgrades. The company successfully reduced its debt by $40 million in 2024 and $70 million since the Founders’ acquisition in August 2023, exiting the year with $385 million in debt and approximately $217 million in liquidity.
Ring Energy, Inc. (NYSEAMERICAN:REI) grew proved reserves by 4.4 million barrels of oil equivalent to 134.2 million barrels, with a PV10 value of approximately $1.5 billion at year-end 2024. Looking ahead to 2025, management anticipates average annual sales of 21,000 barrels of oil equivalent per day and 13,900 barrels of oil per day, representing 7% and 5% increases respectively, with a capital spending midpoint of $154 million. The company’s strategy remains focused on maximizing free cash flow generation, maintaining disciplined capital spending, and allocating cash flow to debt reduction. With 11 hedge funds owning the stock, REI is one of the best fundamental stocks to buy now.
10. Paysign, Inc. (NASDAQ:PAYS)
Number of Hedge Fund Holders: 12
Paysign, Inc. (NASDAQ:PAYS) is a fintech company that provides payment solutions, card programs, and digital banking services. Its offerings include prepaid debit cards, payment processing, and integrated software platforms tailored for specific markets such as pharmaceutical co-pay assistance, clinical trials, donor compensation, and corporate incentives. PAYS’ platform enables clients to manage and distribute funds efficiently while offering end users access to card-based and mobile financial services. The company generates revenue through transaction fees, program management, and interchange income. PAYS ranked fourth on our recent list of 10 Oversold Software Stocks to Buy According to Analysts.
Paysign, Inc. (NASDAQ:PAYS) demonstrated strong financial performance in the latest reported Q3 2024, with total revenues reaching $15.3 million, representing a 23% increase compared to the same period in 2023 and a 6.5% increase from the prior quarter. The company’s adjusted EBITDA rose 20.6% to $2.8 million, with gross margins improving significantly to 55.5%, up 440 basis points from the previous year. The patient affordability business emerged as a major growth driver, with revenue growing 219% YoY to $3.3 million, and claims processed increasing by 430% compared to the same period last year. The company finished the quarter with 66 patient affordability programs and expects to onboard several programs from both new and existing clients, including a new cornerstone account from one of the world’s largest pharmaceutical companies.
Paysign, Inc. (NASDAQ:PAYS) maintains a strong financial position with $10.3 million in unrestricted cash and zero debt, despite using $360,000 for share repurchases during the quarter. Looking forward, management expects total revenues for the year to be between $56.5 million to $58.5 million, reflecting YoY growth of 20% to 24%, with full-year gross profit margins expected between 54% and 55%. With 12 hedge funds owning the stock, PAYS is one of the best fundamental stocks to buy now.
9. FutureFuel Corp. (NYSE:FF)
Number of Hedge Fund Holders: 14
FutureFuel Corp. (NYSE:FF) is a US-based manufacturer of diversified chemical products and biofuels. The company operates through two segments: Chemicals and Biofuels. The Chemicals segment produces custom and performance chemicals used in various applications such as agrochemicals, detergents, and polymers, serving both contract and proprietary customers. The Biofuels segment primarily focuses on the production and sale of biodiesel and related co-products, utilizing feedstocks such as vegetable oils and animal fats. FF’s operations are vertically integrated, with manufacturing facilities supporting both segments.
FutureFuel Corp. (NYSE:FF) experienced significant financial challenges in Q3 2024, reporting a net loss of $1.2 million or $0.03 per diluted share, compared to a net income of $2.8 million in the same period of 2023. The company’s revenues declined substantially by 56% to $51.1 million compared to $116.8 million in the previous year. This decline was primarily attributed to lower sales volumes in the biofuel segment, amounting to $41,015, largely due to production issues and equipment supplier delays that affected biodiesel inventory building. The chemical segment faced a market-driven slowdown with increased margin pressure due to sluggish demand in end-use markets, while the biodiesel segment experienced margin and RIN pricing contraction.
Despite these challenges, FutureFuel Corp. (NYSE:FF) maintained a strong cash position with $133,398 in cash and cash equivalents as of September 30, 2024, though this was lower than the $219,444 reported at the end of 2023. Looking forward, the company anticipates potential improvement once there is more clarity around the IRA 45Z or Clean Fuel Production Credit. Notably, within the chemical segment, there are encouraging signs with robust activities continuing with key customers on future business development programs as the company invests to support future growth. With 14 hedge funds owning the stock, FF is one of the best fundamental stocks to buy now.
