These stocks under $10 won’t break the bank.
The S&P 500 is off to a shaky start in 2022, providing buying opportunities in high-quality stocks. Unfortunately, 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 cheap 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 Santander’s business diversity provides downside protection for investors. He says the stock offers a compelling combination of high-growth emerging market banking exposure and relatively stable, high-visibility developed market banking exposure. Scholtz says Santander has opportunities to improve its profitability and generate valuation upside by dialing back exposure to areas in which it doesn’t have a clear competitive advantage, such as its lagging U.S. regional banking business. Morningstar has a “buy” rating and $4.70 fair value estimate for SAN stock, which closed at $2.84 on May 18.
Lloyd’s Banking Group PLC (LYG)
Lloyd’s Banking Group is a diversified bank and insurance provider based in the U.K. Analyst Niklas Kammer says Lloyd’s first-quarter earnings in April were impressive, including 10% net interest income growth and 11% growth in other income. Kammer says he was surprised at how quickly Lloyd’s has benefited from a higher-interest-rate environment. Net interest margin increased from 2.54% in the fourth quarter of 2021 to 2.68% in the first quarter of 2022, exceeding the company’s full-year guidance of 2.6%. Morningstar has a “buy” rating and $3.70 fair value estimate for LYG stock, which closed at $2.12 on May 18.
Banco Bradesco SA (BBD)
Banco Bradesco is one of Brazil’s largest banks. Analyst Michael Miller says cost management and loan growth drove an impressive first-quarter earnings beat for Banco Bradesco. Miller says recurring net income was up 4.7% in the quarter, even as the bank’s efficiency ratio dropped to 43.5%. Macroeconomic uncertainty in Brazil could weigh on the stock in the near-term, but Miller says Banco Bradesco’s underlying business is off to a strong start to the year and should benefit from both rising interest rates and loan growth. Morningstar has a “buy” rating and $4.30 fair value estimate for BBD stock, which closed at $3.87 on May 18.
ING Groep NV (ING)
ING is a Netherlands-based banking, insurance and asset management services company. ING shares have taken a big hit in 2022, falling 27% through May 18. Net attributable profit dropped 57% in the first quarter, net interest income was down 3%, and loan-loss provisions tripled. However, Kammer says fee income was up 9% thanks to growth in major clients and higher payment package prices. He says ING’s strong deposit franchises in its core markets give it a competitive advantage, and the company’s surplus capital provides opportunities for shareholder returns. Morningstar has a “buy” rating and $15.60 fair value estimate for ING stock, which closed at $9.87 on May 18.
Banco Bilbao Vizcaya Argentaria (BBVA)
BBVA is the third-largest bank in Spain and has international operations in Mexico and Latin America. Scholtz says BBVA’s focus on emerging markets will help it generate more profits than its banking peers. He is particularly bullish about the Mexico business, BBVA Bancomer, which he calls BBVA’s “undoubted crown jewel.” Scholtz says BBVA is the clear leader in Mexico, where it has generated impressive returns on equity of above 20%. He says BBVA’s geographical diversification and balance of commercial and retail services help offset its emerging market risk. Morningstar has a “buy” rating and $8 fair value estimate for BBVA stock, which closed at $5.02 on May 18.
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 domestic Japanese loans and 8.6% of deposits. He says the banking environment in Japan has been difficult for years, but Mizuho has opportunities to grow and gain market share in areas such as large consumer finance, credit cards and leasing. In addition, Makdad says Mizuho can beat its competitors in digitizing its business and improve its profitability via cost-cutting measures. Morningstar has a “buy” rating and $2.85 fair value estimate for MFG stock, which closed at $2.28 on May 18.
Barclays PLC (BCS)
Barclays is one of the largest U.K. financial services groups. Kammer says Barclays’ first-quarter earnings report was good outside of “bizarre” litigation and conduct charges related to over-issuing securities in the U.S. market. First-quarter income was up 10%, supported by Barclays’ investment banking business. Fixed income, currency and commodities revenue was particularly strong, up 37% in the quarter. Kammer says rising interest rates are supporting Barclays’ NIM, but mortgage margin compression is weighing on profits. He says Barclays remains the U.K. market leader in credit cards. Morningstar has a “buy” rating and $10.20 fair value estimate for BCS stock, which closed at $7.73 on May 18.
Ericsson supplies network infrastructure and services to the telecommunications industry. In early March, Ericsson disclosed that the U.S. Justice Department has 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 Ericsson’s post-earnings sell-off is an overreaction, given that the company’s 11% first-quarter sales growth demonstrates “robust” 5G network demand. He says Ericsson is a compelling value for investors willing to stomach the risk related to the Justice Department allegations. Morningstar has a “buy” rating and $11.50 fair value estimate for ERIC stock, which closed at $7.75 on May 18.
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 Sirius XM reported decent first-quarter earnings numbers despite losing 25,000 self-pay customers in the quarter. Macker says business should pick up in the second half of 2022 if supply chain issues in the auto industry ease. He says the vast majority of new Sirius XM subscribers come from conversions of new car buyers to paying customers following initial 12-month free trials. Morningstar has a “buy” rating and $8.25 fair value estimate for SIRI stock, which closed at $6.04 on May 18.
9 best cheap stocks to buy under $10:
— Banco Santander SA (SAN)
— Lloyd’s Banking Group PLC (LYG)
— Banco Bradesco SA (BBD)
— ING Groep NV (ING)
— Banco Bilbao Vizcaya Argentaria (BBVA)
— Mizuho Financial Group Inc. (MFG)
— Barclays PLC (BCS)
— Ericsson (ERIC)
— Sirius XM Holdings Inc. (SIRI)
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Update 05/19/22: This story was published at an earlier date and has been updated with new information.