In an expensive market, these stocks are still bargains.
Every week, it seems, the stock market makes new all-time highs. The S&P 500 is up more than 25% this year and has more than doubled since its March 2020 drop. In such a situation, investors may find it hard to find cheap stocks worth buying. There are always penny stocks, but those tend to elevate risk. A tier up from that, however, are stocks in the $5 to $10 price range. Many of these are higher-quality firms, established businesses that have temporarily fallen out of favor. If they recover, they could make substantial gains for shareholders. So what quality stocks are available below the $10 level? These nine cheap stocks look promising heading into 2022.
Sabre Corp. (ticker: SABR)
Sabre is a travel company most known for its global distribution system, or GDS. Airlines, cruise lines and other transport companies use a GDS to publish their routes and ticketing options. Travel agents and online travel sites use the GDS to check ticket availability. In essence, it’s a marketplace for travel itineraries. Not surprisingly, Sabre was punished during the pandemic, as global travel ground to a halt. Things are quickly picking back up, however, and Sabre made it through the period. There are only three GDS operators that compete in most markets, giving them strong profit margins and a solid moat. Meanwhile, Sabre was already upgrading its information technology systems prior to the pandemic, which should now start to pay off for the company. Sabre shares traded at more than $20 prior to the pandemic but closed at $9.22 on Nov. 15.
Playa Hotels & Resorts NV (PLYA)
Playa Hotels & Resorts is another travel stock that hasn’t enjoyed a full recovery yet. The company operates several hotels in Mexico, Jamaica and the Dominican Republic. These hotels are primarily associated with the Hyatt and Hilton brands. Playa’s revenues plummeted in 2020 but are making a quick recovery in 2021. Mexico has relatively loose pandemic restrictions, so its travel industry is back to pre-pandemic levels. Last quarter, Playa reported a small operating loss, though it was much improved from 2020. Meanwhile, revenues jumped to $151 million for the quarter, which was only marginally below Playa’s quarterly revenue run rate in 2019. Analysts forecast that Playa will return to profitability in 2022. The company just issued stock at $8.35 per share to shore up its balance sheet, and investors have an opportunity to buy in while the business moves back into positive earnings territory. PLYA shares closed at $7.91 on Nov. 15.
Energy Transfer LP (ET)
Energy Transfer is a midstream energy company. The company owns pipelines and other infrastructure assets for storing, transporting and processing oil and gas, and it owns more than 90,000 miles of pipelines crossing 38 states and Canada. Pipelines had been out of favor in recent years, as investors questioned the long-term need for oil and gas assets. However, 2021 has turned the tables on that, and it’s becoming clear that analysts wrote obituaries for the fossil fuels industry a bit prematurely. Over time, society will adopt more renewable energy, but there are still opportunities for owners of bridge energy assets to make money during the green energy transition. Energy Transfer also offers a 6.6% dividend yield. Morningstar’s Stephen Ellis set a price target of $16.50 per share for this stock, which closed at $9.29 on Nov. 15.
AvePoint Inc. (AVPT)
AvePoint is a cloud computing company that completed its special-purpose acquisition company, or SPAC, merger in July. The company is a software service provider for the Microsoft 365 ecosystem, helping companies migrate to the Microsoft Corp. (MSFT) cloud offering and then assisting them with things such as data storage and security. Microsoft’s business is firing on all cylinders, with the cloud division growing at a tremendous rate. This gave AvePoint a big tail wind. In its second-quarter results, AvePoint grew revenue by 38% year over year, including a 76% jump in its cloud software revenue. AvePoint stock went up to about $12 once the SPAC deal closed but fell amid the carnage in the SPAC sector. Once traders sort the wheat from the chaff, however, AvePoint should recover. It’s an enterprise software firm with a differentiated product offering that is still selling at a reasonable price. AVPT shares closed at $8.33 on Nov. 15.
Paysafe Ltd. (PSFE)
Paysafe is another former SPAC that got a cold reception from the market. The company processes online payments for transactions involving gambling, digital subscriptions and online games. The SPAC that acquired Paysafe is led by William Foley, who is a legend in the financial industry. Despite that pedigree, Paysafe shares dropped about 70% this year as the company missed guidance last quarter and payments stocks have broadly sold off. At the end of the day, however, the company isn’t going anywhere. It is free cash flow positive, and it generates healthy earnings before interest, taxes, depreciation and amortization, or EBITDA. While the company needs to improve its digital wallet product to get back to growth, investors have overly punished this firm for its soft start as a public company. PSFE shares closed at $4.51 on Nov. 15.
Grupo Aval Acciones y Valores SA (AVAL)
Grupo Aval is a holding company that controls Colombia’s largest network of banks. Colombia is a highly attractive market for banks since regulators place strict limits on competition and risk-taking. The leading three banking firms control two-thirds of the overall market, keeping rates and profit margins high. Aval, for example, typically earns a higher return on equity than most large banks. The Colombian economy is roaring back, and the country’s top three exports — oil, coffee and coal — are all surging in price. An influx of hard currency should give a further boost to a Colombian economy that is already approaching double-digit annual gross domestic product growth. The stock sells at just 6.6 times forward earnings and pays a 5.1% dividend yield. AVAL shares closed at $5.53 on Nov. 15.
UWM Holdings Corp. (UWMC)
UWM Holdings is a leading mortgage origination company. Like several other firms on this list, it became public via SPAC merger within the past year. Since going public in January, shares have tanked. UWM is still worth paying attention to, however. The company has benefited from the tremendous surge in the housing market as mortgage activity increases. Lower interest rates have also helped: When people refinance their mortgages, UWM gets more business. In any case, UWM is earning heaps of money and trades at 8.4 times forward earnings. In 2023, analysts see UWM’s earnings growth resuming once again, making shares even more attractive. The stock has heavy short interest and pays a juicy 6% dividend, offering two other catalysts that could boost the stock heading into the end of the year. UWMC shares closed at $6.85 on Nov. 15.
Banco Bilbao Vizcaya Argentaria SA (BBVA)
BBVA is a Spanish banking conglomerate. The core Spanish banking market has been weak for a decade now. Spain built too many houses in the late 2000s and ended up in a prolonged economic bust thereafter. However, investors may be penalizing the company too much for its Spanish exposure. Arguably the crown jewel asset is BBVA’s subsidiary in Mexico. That division generates healthy returns on equity and is poised for growth as Mexico emerges as a big winner in the current economic landscape. As industrial companies move out of China, Mexico is picking up a lot of new business. The bank also has exposure to other Latin American economies that are picking up steam as commodity prices surge. Meanwhile, shares are trading at just 8.5 times forward earnings estimates. BBVA shares closed at $6.65 on Nov. 15.
Nokia Corp. (NOK)
Nokia is a leading telecom and networking equipment provider. The firm has had a long and volatile past, but things have been looking up more recently. The U.S. efforts to keep Huawei out of the market for sensitive networking equipment opened a big window of opportunity for Nokia and Telefonaktiebolaget LM Ericsson (ERIC). In particular, Nokia is a leader in the rollout of 5G communication technology around the world. While Nokia’s revenues have been roughly flat in recent years, analysts see the company returning to a bit of growth as the pandemic disruption winds down and 5G adoption accelerates. Meanwhile, shares are trading for 13.5 times forward earnings, making Nokia a relative bargain among tech stocks. NOK shares closed at $5.59 on Nov. 15.
Best cheap stocks under $10:
— Sabre Corp (SABR)
— Playa Hotels & Resorts NV (PLYA)
— Energy Transfer LP (ET)
— AvePoint Inc. (AVPT)
— Paysafe Ltd. (PSFE)
— Grupo Aval Acciones y Valores SA (AVAL)
— UWM Holdings Corp. (UWMC)
— Banco Bilbao Vizcaya Argentaria SA (BBVA)
— Nokia Corp. (NOK)
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Update 11/16/21: This story was published at an earlier date and has been updated with new information.