These stocks under $10 won’t break the bank.
The S&P 500 is off to a shaky start in 2022, but the market remains near all-time highs after more than doubling from its March 2020 lows. At this point, quality stocks trading for less than $10 per share are few and far between. Stocks priced at this level can be a red flag for investors that something serious is wrong with a company. Many of these stocks have challenged underlying business models or difficult near-term outlooks. However, the Morningstar analyst team has identified nine cheap, high-quality stocks that could be excellent buying opportunities for frugal investors. Here are nine of the best stocks to buy under $10, according to Morningstar.
Banco Santander SA (ticker: SAN)
Banco Santander is a large Spanish bank with a sizable international presence. Analyst Johann Scholtz says the diversification of Santander’s business provides downside protection for investors. Santander’s mix of emerging markets and developed markets banking may not be suited to every investor. However, Santander is generating return on equity, or ROE, well into the the high-double-digit percentage range in Latin America, and its European and U.S. businesses help it keep its overall earnings “remarkably stable” compared with its European peers, analysts say. Morningstar has a “buy” rating and $4.70 fair value estimate for SAN stock, which closed at $3.37 on April 22.
Lloyds Banking Group PLC (LYG)
Lloyds Banking Group is a diversified bank and insurance provider based in the U.K. Lloyds underwent a major restructuring in 2011, and analyst Niklas Kammer says it is now a low-risk play on British retail and commercial banking. Unfortunately, mortgage pricing is under pressure in the U.K. in a fiercely competitive environment, and mortgage loans represent about two-thirds of Lloyds’ customer lending. Still, Lloyds’ shares are a compelling value given its limited exposure to Russia and Ukraine. Morningstar has a “buy” rating and $3.70 fair value estimate for LYG stock, which closed at $2.32 on April 22.
Banco Bilbao Vizcaya Argentaria SA (BBVA)
BBVA is the third-largest bank in Spain and has international operations in Mexico and Latin America. Scholtz says BBVA’s focus on attractive emerging markets, such as Mexico, will help it generate greater mid-cycle profitability than its peers. At the same time, Scholtz says BBVA’s geographical diversification and retail and commercial balance help limit its risk for investors. Scholtz says BBVA’s fully owned Mexico subsidiary, BBVA Bancomer, is the “crown jewel” of its portfolio and has consistently generated ROE above 20%. Morningstar has a “buy” rating and $8 fair value estimate for BBVA stock, which closed at $5.34 on April 22.
Barclays PLC (BCS)
Barclays is one of the largest U.K. financial services groups. Kammer says Barclays’ investment banking business has been solid in recent quarters, and its U.K. retail banking business is anchored by its leading market share in credit cards. Kammer is bullish on Barclays’ product and geographical diversification, but he says Barclays’ investment banking business increases its overall earnings volatility. In the near term, Barclays should be able to offset some inflationary cost pressures via efficiency savings, he says. Morningstar has a “buy” rating and $10.20 fair value estimate for BCS stock, which closed at $7.63 on April 22.
Mizuho Financial Group Inc. (MFG)
Mizuho Financial is one of Japan’s three largest financial services companies. Analyst Michael Makdad estimates that Mizuho accounts for about 7.2% of Japan’s domestic loans and 8.6% of its deposits. Makdad says he expects the Japanese banking business to remain challenging, but Mizuho has adapted by expanding its international operations. Makdad says Mizuho also has opportunities to grow and digitize its consumer finance, credit card and leasing operations, and potentially gain market share from its two largest competitors. Morningstar has a “buy” rating and $2.85 fair value estimate for MFG stock, which closed at $2.45 on April 22.
Ericsson is a leading supplier of network infrastructure and services to the telecommunications industry. In early March, Ericsson said the U.S. Justice Department accused the company of compliance breaches related to a 2019 settlement regarding allegations of misconduct by Ericsson in Iraq from 2011 through 2019. Analyst Mark Cash says the allegations create significant near-term uncertainty for Ericsson, but he expects the company will continue to benefit from the global 5G wireless network upgrade cycle. Morningstar has a “buy” rating and $11.50 fair value estimate for ERIC stock, which closed at $8.53 on April 22.
Sirius XM Holdings Inc. (SIRI)
Sirius XM Holdings is a leading provider of satellite and internet radio services, largely to the auto industry. Analyst Neil Macker says chip shortages have kept auto market inventory levels depressed since mid-2021, but Sirius XM’s auto market demand should significantly improve starting in the second half of 2022. In fact, Macker projects Sirius XM will return to growth in 2023, led by its satellite radio service, which accounts for about 75% of its revenue and 85% of its gross profits. Morningstar has a “buy” rating and $8.25 fair value estimate for SIRI stock, which closed at $6.25 on April 22.
Credit Suisse Group AG (CS)
Credit Suisse is a Swiss financial services company that specializes in investment banking and wealth management. Scholtz says Credit Suisse’s discounted valuation is driven largely by its management team’s history of poor risk management. He says investors haven’t gotten a clear picture of the company’s true earnings potential in years due to ongoing restructuring costs. Scholtz says Credit Suisse has profitable, asset-light businesses with secular growth outlooks, and its valuation may improve if management can win back the market’s confidence. Morningstar has a “buy” rating and $10.60 fair value estimate for CS stock, which closed at $7.18 on April 22.
Nissan Motor Co. Ltd. (NSANY)
Tokyo-based Nissan is one of the world’s largest automakers. Analyst Richard Hilgert says Nissan’s cross-ownership and alliance with Renault SA (RNLSY) has been a unique success. Nissan is also an early leader in mass-market all-electric powertrain vehicle technology. Hilgert says Nissan is updating its product portfolio, reducing incentives and eliminating sales to daily rental car companies. He says these refresh initiatives will make Nissan a leaner, more efficient organization. Finally, Hilgert says only about 2% of Nissan’s global volume comes from Russia. Morningstar has a “buy” rating and $27 fair value estimate for NSANY stock, which closed at $8.10 on April 22.
These cheap stocks under $10 can add value to your portfolio:
— Banco Santander SA (SAN)
— Lloyds Banking Group PLC (LYG)
— Banco Bilbao Vizcaya Argentaria SA (BBVA)
— Barclays PLC (BCS)
— Mizuho Financial Group Inc. (MFG)
— Ericsson (ERIC)
— Sirius XM Holdings Inc. (SIRI)
— Credit Suisse Group AG (CS)
— Nissan Motor Co. Ltd. (NSANY)
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Update 04/25/22: This story was published at an earlier date and has been updated with new information.