These sub-$5 stocks appear set for big moves in the back half of 2021.
A lot of investors like to focus on low-priced stocks. A stock trading for $5 per share or less inherently seems cheaper than higher-priced rivals. For the cost of one share of Amazon.com (ticker: AMZN) stock, for example, an investor could buy many hundreds of shares in cheaper stocks. It’s true that investors should probably look at the total market capitalization in addition to just the nominal share price when considering a potential purchase. That said, many traders love cheap stocks and thus it’s worth highlighting the best options available. In many cases, when stocks end up trading for less than $5, it’s because the business ran into hard times. If these companies manage to turn things around, they can return many multiples of their entry price. The following seven cheap stocks to buy for less than $5 could have what it takes to deliver outsized shareholder returns.
Waitr Holdings (WTRH)
Waitr Holdings operates food delivery services in the U.S. Unlike rivals, Waitr has focused on smaller cities, where it can more easily gain market share and keep marketing costs down. The company benefited dramatically from last year’s delivery boom. Indeed, Waitr actually turned a profit, which is a rare feature in the home delivery category. Investors are understandably concerned about whether Waitr will be able to keep up with its much bigger rivals. However, that’s probably why the stock is trading around $2. As it stands now, Waitr is still growing revenues even as the stay-at-home tailwind fades. Waitr could well turn out to be a decent niche player in the delivery industry or be a takeover target for a bigger player.
Grupo Supervielle (SUPV)
Grupo Supervielle is one of Argentina’s larger banking firms. Shares were trading for $30 as recently as 2018. However, the one-two punch of the recent Argentine economic meltdown and COVID-19 pandemic caused the stock to plummet to as low as $1.53 per share last year. The stock has rebounded to around $2.20 now and could have a lot of room to run. As it stands today, Supervielle is trading at just seven times trailing earnings, making this one of the cheapest stocks around both in terms of price and valuation. There is upside from a fundamental standpoint as well. Argentina is a large exporter of base metals such as copper. The price of these metals has soared this year thanks to the current inflationary wave. Furthermore, upcoming Argentine elections this fall could weaken the country’s ruling left-wing party, offering a more constructive business climate for Argentine banks going forward.
Dogness International (DOGZ)
Dogness is aiming to bring the Internet of Things to the pet industry. Its flagship line of products is for the intelligent feeding of cats and dogs. Dogness’ feeding units have cameras to monitor pets remotely, track when they eat, keep tabs on the amount of food remaining and so on. Dogness offers an app so users can follow their pets’ habits and make sure everything is in order. There are also add-ons such as a smart drinking water dispenser. Admittedly, it’s unclear if this product line will be a big enough business to make Dogness successful. Last year, Dogness lost $7 million on $20 million of revenue. However, Dogness has signed distribution agreements with big-name retailers this year, including a recent deal with Costco Wholesale Corp. (COST). That could be the tipping point to get Dogness to profitability. And, as far as “meme stock” potential goes, Dogness is barking up the right tree. Its ticker symbol, DOGZ, could also appeal to Reddit traders.
Most stocks linked to travel, going out and economic reopening have already soared. Online travel website Trivago hasn’t joined the fun yet. The stock is up some lately, but it’s still lingering around $3.50 per share. That’s down more than 80% from where it traded at its peak in 2017. Trivago long spent heavily on marketing, with its ads omnipresent on television. Trivago also tried to expand internationally at breakneck speed and may have lost focus on its core markets. Either way, investors feared it would never reach profitability. However, the pandemic gave Trivago the opportunity to slash costs. With the pent-up demand for vacations, Trivago could be able to use last year’s crisis as a springboard to get back on track. Trivago launched its initial public offering at $12 in 2017 and the stock subsequently traded into the $20s, so there’s plenty of blue sky ahead from the current depressed share price if the company can capitalize on the travel boom.
Ambev is a publicly traded subsidiary of global brewing giant Anheuser-Busch InBev (BUD). Ambev primarily serves the South American and Canadian markets. Ambev has underperformed other brewing companies in recent years, primarily because its main markets — such as Brazil — have slumped due to falling prices for oil and other raw resources. However, oil, metals and grains are all surging this year. This should bolster the economic prospects for key Ambev geographies like Brazil and Argentina. Meanwhile, Ambev has a net cash position on its balance sheet, giving it the strength to ride out downturns. In addition, it holds more than 50% market share for beer in numerous markets, including Brazil. ABEV stock is down from $7 to less than $4 in recent years, but it could snap back quickly as Latin American economies reopen. Next year’s World Cup could also serve as a catalyst to boost the share price.
National CineMedia (NCMI)
National CineMedia is an advertising company. It’s primarily known for operating the ads that appear at cinemas prior to the beginning of a feature film. National CineMedia also does advertising for movie theater lobbies and is expanding into other areas such as advertising for interactive tablets and menus at restaurants. Needless to say, this business suffered a terrible 2020. However, things are looking up as patrons return to the cinemas. And given that cheap stocks are the focus, it’s important to consider movie theater chain AMC Entertainment (AMC). AMC shares were going for just $2 less than a year ago, and they’re now up thousands of percent since then. AMC’s revival is likely to boost interest in going to the movies, as shareholders support their beloved business. In addition, traders that enjoyed windfall profits in AMC may naturally gravitate to AMC’s key advertising partner as the next logical cheap stock to buy.
Invesco Mortgage Capital (IVR)
Invesco Mortgage Capital is a mortgage real estate investment trust, or mREIT. These are high-yield instruments that invest in and trade mortgage loans, capturing a spread between their borrowing costs and the income from their mortgages. In normal times, this is a good business, and mREITs can often generate 8%, 10% or even higher dividend yields for shareholders. COVID-19 was a disaster for the industry, however. Mortgage payment forbearance caused mREITs to not get paid in a timely fashion, and that in turn caused operating losses and dividend cuts. IVR stock sank from $17 to $2.50 as a result. Now, though, Invesco Mortgage Capital is recovering. The share price is up nicely, and the company was able to increase its dividend this year. The stock currently yields 9% and has become popular with Reddit traders due to the high short interest. With the housing market looking stronger, Invesco Mortgage Capital should be able to rally further, especially if meme magic strikes.
Seven best cheap stocks to buy for less than $5:
— Waitr Holdings (WTRH)
— Grupo Supervielle (SUPV)
— Dogness International (DOGZ)
— Trivago (TRVG)
— Ambev (ABEV)
— National CineMedia (NCMI)
— Invesco Mortgage Capital (IVR)
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Update 06/22/21: This story was published at an earlier date and has been updated with new information.