1. Penguins don't go in to hero storage anymore. They have their own storage. They are used like items to level up heros/fodder.
2. Always max out any storage using skystones. It's the best investment you can make regardless of where you are in the game.
3. Level up fodder using penguins to 3 or 4 star. Or feed them to mega phantasmas.
4. If you are in early to mid game I suggest you keep them in the off storage and repeat step 3.
5. Transmute them. I don't recommend this because fodder become more necessary to farm when going on upgrading character spree.
If you have too many 3 stars hero you need to use the Transmute function. This is by no means a waste, since you can use the transmute stones to buy 2 molagoras per week, and that alone is worth it.
Aside from that, you can :
- Increase your hero storage limit by spending skystones.
- use the waiting room to store a few more heroes (up to 150).
Always keep one SSS 3 stars hero of each kind, and transmute the rest. There's no real need in hoarding them.
Same thing for 4 stars, although you might wanna feed extra RGB 4 stars to their ML counterpart before you get rid of the extras.