On January 27, 2023, during an appearance on CNBC’s ‘Closing Bell Overtime’, Matt Stucky, an investment strategist at Northwestern Mutual, highlighted a shifting market landscape that is moving investor attention beyond established mega-cap stocks. Stucky noted improvements in earnings revisions across various sectors, particularly in small-cap stocks, which may signal new opportunities for investors.
He emphasized that for small-cap stocks to outperform, the market must see consistent upward revisions in earnings and a narrowing valuation gap between small and large-cap companies. Stucky expressed a growing interest in mid-caps, small-caps, international stocks, and investment-grade fixed income, indicating a shift away from a dominant focus on US mega-caps. While acknowledging the strength of major tech companies, he raised concerns about market concentration and the potential risks of underperformance in that sector.
In this context, Stucky suggested that the next wave of growth in artificial intelligence (AI) might involve smaller and mid-cap companies that utilize AI to enhance productivity. He believes these firms, which tend to be more labor-intensive than their larger counterparts, could benefit significantly if AI emerges as a key productivity driver over the coming years.
Based on Stucky’s insights and additional research, a list of 11 undervalued penny stocks has been compiled for investors looking for opportunities in this evolving market landscape.
Methodology Behind Stock Selection
To identify these stocks, screeners were employed to filter companies trading below a forward price-to-earnings (P/E) ratio of 15 and priced under $5 per share. The final selection focused on companies that have made noteworthy developments likely to influence investor sentiment. This selection includes stocks that are popular among analysts and elite hedge funds, reflecting a strategy that has historically outperformed the market.
The quarterly newsletter associated with this strategy has returned an impressive 427.7% since May 2014, outperforming its benchmark by 264 percentage points.
Top Undervalued Penny Stocks
1. Citius Oncology Inc. (NASDAQ: CTOR)
Citius Oncology Inc. recently announced an exclusive distribution agreement with Uniphar to expand its oncology treatment, LYMPHIR, throughout Europe. This agreement marks the company’s third major international partnership. LYMPHIR, which is currently FDA-approved in the US, targets patients with relapsed or refractory cutaneous T-cell lymphoma. Its unique mechanism aims to selectively destroy cancerous T-cells, making it a promising treatment option.
2. Ceragon Networks Ltd. (NASDAQ: CRNT)
Ceragon Networks reported a Q4 2025 revenue of $82.3 million, a decline of 23% from the same period in 2024. Despite this, management anticipates growth in 2026, projecting revenue between $355 million and $385 million, driven by new product launches and a significant contract in the Asia-Pacific region.
3. Commerce.com Inc. (NASDAQ: CMRC)
Commerce.com achieved fiscal year 2025 revenue of $342 million, marking a 3% year-over-year increase. The company has focused on operational efficiency, resulting in an expanded operating margin. For 2026, revenue is projected to be between $347.5 million and $369.5 million, reflecting optimism about new product launches.
4. CCC Intelligent Solutions Holdings Inc. (NASDAQ: CCC)
On February 16, Josh Valdez was appointed as Chief Product Officer, tasked with enhancing the company’s AI-driven technologies. CCC aims to improve decision-making in the insurance sector through innovative solutions, leveraging Valdez’s extensive experience in the technology field.
5. Banco Bradesco (NYSE: BBD)
Banco Bradesco announced a recurring net income of BRL 24.7 billion for 2025, representing a 26.1% increase year-over-year. The bank’s growth strategies include a focus on AI and digital engagement, leading to a substantial increase in its digital customer base.
6. Digital Turbine Inc. (NASDAQ: APPS)
Digital Turbine reported a 12% year-over-year revenue increase to $151.4 million for FQ3 2026, driven by strong international growth. The integration of AI and machine learning has contributed to improved profitability and operating efficiencies.
7. AmpliTech Group Inc. (NASDAQ: AMPG)
AmpliTech recently launched two new 5G base station units to support Open RAN deployments. This expansion positions the company to capture growth in both public carrier upgrades and private 5G networks, significantly broadening its market reach.
8. Agenus Inc. (NASDAQ: AGEN)
Agenus presented promising data from its Phase 1b trial, demonstrating the effectiveness of its therapy in challenging cancer types. The findings suggest a potential new avenue for treatment, which could expand the patient population eligible for next-generation cancer therapies.
9. Alliance Entertainment Holding Corporation (NASDAQ: AENT)
Alliance Entertainment reported a net income of $9.4 million in FQ2 2026, supported by a surge in physical movie revenue. The company is actively pursuing merger opportunities and new product lines to enhance its market position.
10. Accendra Health Inc. (NYSE: ACH)
Accendra Health reported nearly $2.8 billion in revenue for 2025, despite challenges in Q4. The company aims to focus on core healthcare services and implement technology-driven operational efficiencies in the coming year.
11. Ambev (NYSE: ABEV)
Ambev reported a net income of nearly 16 billion BRL for Q4 2025, with revenue growth driven by its digital ecosystem. Although the company faced volume pressures, it remains well-positioned for future growth in the beverage sector.
While these stocks present potential opportunities, investors should conduct thorough due diligence and consider market conditions before making investment decisions.
