Good Stocks To Buy Under $5 NEW!
Everyone's shopping for bargains this holiday gift-giving season. A lot of investors might be taking a similar approach to picking new investments. There are a lot of stocks that have fallen sharply this year, and once the wave of tax-loss selling is complete it could be a feeding frenzy. Shoppers and investors alike are looking for stocking stuffers.
good stocks to buy under $5
I took a look at a couple of stocking stuffer stocks trading for less than $10 a share earlier week. Let's go lower. Shares of Redfin (RDFN 11.03%) and SoFi Technologies (SOFI 6.12%) closed below the $5 mark on Tuesday. Here's why I think these are attractively priced investments for fans of low-priced stocks.
A year ago there was no shortage of analysts and market watchers arguing that banking and fintech stocks would hold up well in a mild inflationary and recessionary environment. Higher rates offer the opportunity for lenders to cash in on the net interest spread. A soft recession means more financing charges on carrying over credit card debt, as long as defaults don't surge.
Things haven't played out that way. Traditional bankers haven't rallied. Fintech stocks are getting crushed. Things have gone even worse for online banks. SoFi Technologies is trading 84% below the all-time highs it hit early last year.
Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Redfin. The Motley Fool recommends the following options: short February 2023 $7 calls on Redfin. The Motley Fool has a disclosure policy.
In the past, companies used to split their share prices frequently to keep their stocks affordable to the general public. This has changed in recent years, however. Now, companies such as Amazon.com Inc. (ticker: AMZN) and Alphabet Inc. (GOOG, GOOGL) let their stock prices go up to the thousands, making it difficult for newer investors to buy any shares at all. As such, many traders gravitate to companies with much lower stock prices so they can buy large quantities of stock. But penny stocks tend to be risky and many operate low-quality businesses, so it's necessary to use greater due diligence on the average low-priced stock. That said, there are some worthwhile prospects among inexpensive companies. Here are nine cheap stocks to buy for less than $5 per share, each of which has solid prospects.
Next among the best cheap stocks to buy under $5 is Western Copper and Gold, a Canadian mining firm focused on its Casino project in the Yukon province. The company counts Rio Tinto PLC (RIO) among its strategic backers. It also offers shareholders a strong balance sheet, as the company is debt-free. The company is progressing toward developing the mine and expects to give investors an updated feasibility study later this year. The project consists of 41% copper and 38% gold, along with smaller amounts of molybdenum and silver. As far as gold is concerned, Casino hosts more than 14 million ounces of measured and indicated reserve. Western's shares surged from $1.20 to $2.80 last year as copper prices hit multiyear highs. There's been a dip in copper and gold lately, hitting Western's share price. With inflation on the prowl, however, demand may come roaring back for this sort of asset.
Ambev, a leading Brazilian brewing company, is an outlier among the top cheap stocks, boasting a $43 billion valuation. The company operates as a regional arm of global beer giant Anheuser Busch Inbev SA (BUD). Unlike many penny stocks, Ambev has no financial difficulties or major structural problems. In fact, it has a debt-free balance sheet, trades at a low price-earnings multiple and offers investors a healthy dividend. Shares have declined, however, due to factors outside of the company's control. These include an unsettled political situation and soaring inflation in Brazil, along with a steep drop in on-premise beer consumption thanks to the pandemic. Both of these issues should clear up in 2022. Brazil has elections this year, which will provide certainty to the political situation. Meanwhile, restaurants and bars are reopening and the World Cup later this year is a huge drinking event in South America.
Up Fintech is a major retail brokerage operation for the Chinese marketplace. The stock went public in 2019 but didn't do much for quite awhile. In 2020, however, Up Fintech enjoyed a massive surge in activity and share price performance. Like in the U.S., overseas brokerage firms enjoyed a boom in activity as people were stuck at home and turned to the markets as a new hobby and way of making money. TIGR stock soared from $6 to the $30s at one point. Since then, the stock has crashed. Chinese regulators have cracked down on numerous domestic companies, and U.S. investors are shunning virtually all Chinese stocks. Up Fintech continues to grow revenue by more than 40% per year and is selling for just 13 times estimated 2022 earnings. The company also counts Interactive Brokers Group Inc. (IBKR) among its strategic investors, giving it significant credibility outside of China.
It's often said that mutual funds and other institutional investors can't own stocks that trade for less than $5, condemning low-priced stocks to retail ownership only. But the truth is actually the opposite -- there are some roadblocks for investing in penny stocks , but they are most applicable to average Joes, not professional investors who run institutional sums.
Congress put share prices in the spotlight when it made it more difficult for brokers to process client transactions in stocks priced lower than $5 each, the cutoff point below which a stock earns the " penny stock " label.
These regulations were put into place following a broad crackdown on sketchy stock broker s in the early 1990s. Back then, brokerages sold penny stocks of questionable quality to investors all around the country by phone, charging huge commissions on each trade.
These folks weren't bad at picking good stocks, but rather good at selling bad stocks. One of the largest busted brokerages was J.T. Moran, which was the basis for the story in the movie Boiler Room . Stratton Oakmont, featured in Wolf of Wall Street , fits the description, too. You get the idea here.
Congress decided that it needed to make it harder for individual investors to buy bad stocks, deciding to make $5 the dividing line between "good" and "bad" stocks. And with new rules in place, it immediately became all that much harder for brokers to pitch stocks that trade for less than $5 per share.
According to the Securities and Exchange Commission, brokers can't process trades in stocks worth less than $5 without following a laundry list of rules and processes. Before transacting in penny stocks, brokers must first:
The rules are reflective of the times in which they were adopted. In the 1980s and 1990s, commissions were generally assessed on a per-share basis, rather than on a flat fee basis that is the standard today. Thus, brokers made more by selling 2,000 shares of a $1 stock than 10 shares of a $200 stock, which is why penny stocks were commonly pitched by the sleaziest of stockbrokers, and why Congress targeted penny stocks with legislation.
In fact, one of the largest actively managed stock funds on the market today is the Fidelity Low-Priced Stock Fund (NASDAQMUTFUND: FLPSX) , which specifically seeks to invest in stocks priced at less than $35 per share. It launched in 1989 at the height of the public's love affair with low-priced stocks, and has crushed the market since inception. (Its focus on low-priced stocks may be more of a guide than a rule today, since its five largest investments all trade for more than $35 per share, a testament to the fact that self-imposed restrictions are rarely set in stone.)
Of course, index funds are more prominent today than in the past, and many have a mandate to own all stocks in the index they track, regardless of share prices. The S&P 500Index , and the funds that track it, all have at least one penny stock in their portfolio, Chesapeake Energy . The Russell 2000 Index , which is generally regarded as the small cap stock index, includes 157 penny stocks, based on my analysis of the iShares Russell 2000 ETF .
Realistically, penny stocks don't make up a large part of the market in terms of value, but they are numerous, and many are owned by funds because share prices are largely irrelevant to the decision to buy or sell. Professional investors know that a stock that trades for $4 that they believe to be worth $10 is a far better investment than a $40 stock they believe to be worth $50.
The next time someone tells you that a stock that has dropped will drop even further when institutions are forced to sell below $5, refer them to this article. Though the average Joe may face a few hurdles when buying or selling stocks under $5, there is no meaningful institutional bias against stocks that trade for less than $5 each. In fact, thanks to the rise of index funds, there are perhaps more funds that are required by their mandate to buy penny stocks than funds that purposefully exclude them.
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Wal-Mart wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Inflation has been a hot topic recently due to the latest PCE data. The index showed a higher-than-expected increase of 0.6% month-over-month and 4.7% over the last year. Investors are concerned as inflation can affect the stock market. But that may mean something different for those trading penny stocks.
Another one of the penny stocks heating up the scanners this week is Lucira Health. The company caught attention on Monday after announcing FDA-related news. It received FDA Authorization for its at-home combination of Covid-19 and Flu test.
Indeed, assets under management have been somewhat volatile, but have moved decidedly in the wrong direction in recent years. U.S. Global Investors is not unique among asset managers in seeing volatile AUM, but its very small scale and overall negative trend in AUM is concerning from our perspective. 041b061a72