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Kosmos Energy Ltd. (KOS): Top Penny Stock with Growth Potential

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Kosmos Energy Ltd. (KOS): Top Penny Stock with Growth Potential

We recently published a list of 11 Best NYSE Penny Stocks to Buy Right Now. In this article, we are going to take a look at where Kosmos Energy Ltd. (NYSE:KOS) stands against other best NYSE penny stocks to buy right now.

Small and medium-sized companies are the most affected by the direction of the economy and interest rates. With the US Federal Reserve cutting interest rates and the economy steering into a soft landing, the focus is slowly shifting towards penny stocks that remain well-positioned to be supercharged by improving macroeconomics.

It’s time to go all in into the small-cap rotation play after years of market domination by large-cap stocks. That’s the sentiment echoed by Citi  U.S. equity strategist Scott Chronert, who believes small-cap stocks offer an affordable way of investing in value and are well-poised to generate long-term value.

READ ALSO: 10 Worst-Performing Growth Stocks in 2024 and 8 Best Micro Cap Stocks to Buy According to Analysts.

“Combined, investors could be paying a much lower multiple for a similar growth profile going forward,” he wrote. “Given post-pandemic peculiarities, the lack of a real cycle, and secular trends that support leaders, we still want to be owners of some Large Cap winners, but increasingly view Small/Mid Cap as an attractive alternative to the other 493. Said differently, we are more comfortable dipping down cap in search of fundamental winners and thematic expressions.”

Although small and mid-cap stocks have delivered above-average, double-digit gains over the past year, they look increasingly attractive amid a monetary policy change. The US Federal Reserve, commencing its monetary easing cycle, is making it easier for such companies to borrow money to expand their businesses. With their long-term prospects looking positive, investors are slowly taking note of their depressed valuation.

Similarly, the Russell 2000 ETF, which consists mainly of small and medium-cap companies, is up by 13% compared to a 22% gain for the S&P 500, affirming the massive room for gains among penny stocks.

“We continue to believe that these stocks have been unfairly punished (or ignored) given what we have viewed as a mismatch between the fundamental underpinnings and the group’s relative performance, and nothing has changed in that regard. It is only a matter of time before the fortunes of this group take a turn for the better” now that central bankers are cutting rates. Wrote BMO analysts’ research notes to investors.

Likewise, there is an influx of investments into small-cap exchange-traded funds amid growing optimism that the companies are fairly valued with tremendous upside potential. According to ETF journalist Dave Nadig in an interview on CNBC, money inflow into penny stocks might not necessarily be a rotation from winning growth trades. Instead, it is a diversification play as the focus shifts to getting broader exposure heading into year-end. The diversification strategy is part of a broader strategy of absorbing   volatility

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