Explore the concept of deferred revenue in our comprehensive guide. Learn how it impacts financial statements, cash flow, and business strategy, ensuring effective financial management and planning.
Explore the concept of deferred revenue in our comprehensive guide. Learn how it impacts financial statements, cash flow, and business strategy, ensuring effective financial management and planning.
2024 was another strong year for US banking giants. According to a report by the Financial Times, the four biggest banks in the country are on course to grab their largest share of the industry since 2015. As of September 2024, they collectively reported around $88 billion in profits during the first nine months of the year, representing 44% of the American banking industry’s profits.
In further encouraging signs for the industry, Moody’s in December upgraded the global banking industry from negative to stable for the first time since 2023. It cited monetary adjustments and interest rate cuts among G-20 countries as reasons behind the upgrade. The credit rating agency expects these measures to improve asset quality and liquidity in the banking system.
The Federal Reserve on December 18 announced a further quarter-point cut, reducing the central bank’s target interest rate to between 4.25% and 4.5%. This was the third cut for the year. The Feds also projected two more cuts for 2025. While higher interest rates generally allow banks to earn more, they can dry up the demand for more loans when they remain high for too long.
Moreover, Donald Trump’s victory in the presidential elections has also raised hopes of lax regulations in the financial sector amid growing concerns about antitrust scrutiny and capital requirements slowing down investment banking and lending revenues. Financial analyst Mike Mayo believes Trump’s win will be a ‘regulatory game changer’ with reduced oversight and a freer market, benefiting banks by driving revenues and loan growth. A more business-friendly environment is also likely to boost banks’ bottom line.
However, some analysts also warn of the risks of ongoing geopolitical conflicts in Europe and the Middle East, which are resulting in uncertainty around the outlook of the global economy. Val Srinivas, Senior Research Leader at Deloitte, made the following remarks in the firm’s annual banking outlook positions for 2025:
“Bank executives will welcome 2025 with mixed emotions. While inflationary pressures have subsided and interest rates are dropping, subpar economic growth and continuing geopolitical shocks will likely give bank CEOs anxiety.”
Increasing trade tensions between the United States and China, with growing protectionist policies can also hurt investment flows in 2025. Following his election victory, Trump has vowed to impose steep tariffs on imports from Canada, China, and Mexico, which could increase costs for manufacturers.
Last month, in a post on his Truth Social platform, the President-elect threatened the European Union (EU) with tariffs if it does not buy more oil and gas from the US. The spokesperson for the 27-nation bloc, which already relies on Washington for most of its energy needs, stated that the EU was open to negotiations.
We sifted through screeners to identify stocks in the banking sector that had a share price of under $5 as of the close of day on Friday, January 3, 2025. From there, we selected the 10 stocks with the highest number of hedge fund investors, based on Insider Monkey’s database of over 900 prominent hedge funds as of Q3 2024.
The 10 best bank penny stocks have been ranked in ascending order based on the number of hedge funds holding stakes in them. Where two or more stocks were tied on hedge fund sentiment, we used a higher market cap as a tiebreaker between them.
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).
A bustling financial district with a towering bank building at its center.
Share Price as of the close of January 3: $4.00
Number of Hedge Fund Holders: 6
Inter & Co, Inc. (NASDAQ:INTR) is a Brazilian company that operates as a digital multi-service bank, offering individuals and companies various financial services like loans, credits, cards, deposits, investments, and insurance. It is one of the best bank penny stocks to buy according to hedge funds.
The company reported strong results during the third quarter of 2024. Net income soared to a record high of R$260 million, 2.5x higher year-over-year, while the return on equity (ROE) stood at an impressive 11.9%. INTR’s Super App also attracts a growing client base that benefits from new features like personalized services and digital payroll loans. The app had an estimated 35 million clients at the end of Q3.
The NASDAQ-listed firm has navigated the economic and fiscal challenges in Brazil and is now eyeing international expansion beyond its home market. It established its Miami headquarters in 2023 to expand its financial services to Brazilian expatriates while also offering an app experience that is tailored to the American market.
Inter & Co, Inc. (NASDAQ:INTR) has been actively leveraging strategic alliances with expansion in the US firmly on its agenda. For instance, in September 2023, the company entered into multi-year agreements with the Orlando City Soccer Club and Orlando Pride as their official financial institution. Marketing partnerships such as these are helping INTR build awareness and capture market share.
Looking ahead, the fintech company has an ambitious strategic plan, intending to nearly double its client base, and achieve 30% efficiency, and a 30% ROE by 2027. Considering these factors, the overall sentiment around Inter & Co, Inc. (NASDAQ:INTR) is bullish. Wall Street analysts have a consensus Strong Buy rating for INTR, with an average share price upside potential of 62%.
Overall INTR ranks 9th on our list of the best bank penny stocks to buy according to hedge funds. While we acknowledge the potential of INTR 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 INTR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
