The recent downturn in the stock market has led to a surge in the number of low-priced stocks out there. As of the beginning of November 2023, there were almost 2,000 stocks listed on the major American exchanges that were trading for $5 per share or less. It might seem daunting trying to sift through such a large pile of low-priced stocks to find the proverbial needle in the haystack.
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Most firms that end up in penny stock territory have seen something go dramatically wrong. Often, the business model has broken down, management has made major blunders or the balance sheet has fallen into disrepair. With the economy slowing down amid high interest rates and weakening employment data, investors should use prudence. However, these nine stocks should be solid opportunities for investors that are seeking significant upside in cheap stocks:
| Ticker | Year-to-date performance (as of Nov. 7) |
| ICL Group Ltd. (ticker: ICL) | -30.8% |
| Wipro Ltd. ADR (WIT) | -1.5% |
| Rocket Lab USA Inc. (RKLB) | 19.4% |
| Luminar Technologies Inc. (LAZR) | -28.1% |
| Perimeter Solutions SA (PRM) | -66.5% |
| Sunpower Corp. (SPWR) | -76.3% |
| Ambev SA (ABEV) | 1.8% |
| Grupo Aval Acciones y Valores SA (AVAL) | -3.0% |
| Olaplex Holdings Inc. (OLPX) | -66.8% |
ICL Group Ltd. (ICL)
ICL Group is an Israel-based specialty minerals and chemicals company focused on agriculture. Its business segments include industrial products, potash, phosphate solutions and growing solutions. These are vital inputs that go into the farming supply chain. Historically, goods like potash have been subject to a boom-bust cycle and investors have been reluctant to assign high valuation multiples to these companies. Indeed, the cycle is at work again. Crop prices soared in 2022 with Russia’s invasion of Ukraine. However, prices have retreated significantly this year as the rest of the globe has increased its agricultural output to make up for the shortfall from Eastern Europe. Throw in the recent violence in Israel, and it’s understandable why ICL stock has slumped in recent months. However, this has pushed ICL stock down to less than five times earnings.
Wipro Ltd. ADR (WIT)
Wipro is an India-based information technology company. It serves as an outsourcing shop, providing solutions such as software implementation, services and consulting to large enterprises around the world. The company’s robotic process automation (RPA) solutions are a particular source of strength and have helped drive new business as companies have rushed to deploy RPAs in recent years. The rise of remote work and automated tech solutions is likely to drive a faster investment cycle in IT solutions in coming years as Fortune 500 companies look to transform their workflows to adapt to the new workplace environment. Wipro shares have been merely flat over the past year as there has been a slowdown in IT spending in 2023. That’s a near-term headwind, but it leaves Wipro at a reasonable valuation point at 18 times forward earnings.
Rocket Lab USA Inc. (RKLB)
Rocket Lab operates in the fast-growing field of launch services and space systems solutions. When industrial companies or defense agencies need to launch objects such as satellites into space, they can hire Rocket Lab to design and plan the mission to deliver that cargo to its orbit or destination. Rocket Lab has already proven substantial commercial demand, generating $211 million in revenues in 2022. The company was briefly derailed following a launch anomaly; however, the Federal Aviation Administration (FAA) has now given Rocket the go-ahead to resume launch activities with corrective measures in place. Investment bank Cantor Fitzgerald initiated coverage on the stock in late October with an overweight rating and $6 price target citing the company’s proven and successful launch track record.
Luminar Technologies Inc. (LAZR)
One of the more interesting hunting grounds for new opportunities is in the special-purpose acquisition company, or SPAC, category. In 2020 and 2021, hundreds of companies went public during the SPAC boom. Most of these were overvalued and of low quality, and investors have shunned SPACs as a group since then. But some of these fallen stars are set to recover. Luminar could be one of those.
Luminar develops laser imaging, detection, and ranging sensors (lidar) for vehicles to enable self-driving functions. As self-driving vehicles are in the early days of commercialization, this is still a relatively unproven technology. And several other lidar companies which went public have seen their share prices collapse. Luminar appears poised to be a survivor in the field, though. It generated $40 million in revenues in 2022, and analysts project that to roughly double in 2023. Luminar counts firms such as Volvo and Daimler Trucks among its clients and has already moved well down the road in terms of making lidar a commercially viable product.
Perimeter Solutions SA (PRM)
Perimeter Solutions is another busted SPAC that has become an opportunity. It is the leader in selling products used in firefighting, such as fire suppressants and firefighting foams. The company also has a lubricant additives business. Perimeter went public with a SPAC featuring deal insiders such as William Thorndike and W. Nicholas Howley, who are well-respected figures in the value investing community. However, Perimeter has gotten off to a slow start. A wet spring season greatly curtailed wildfire activity this year, leading to fewer sales of Perimeter products. However, investors should think about the company on a multiyear basis, as the weather should average out over time between benign and more destructive fire seasons. Perimeter has high market share within most of its core products, and thus it should only be a matter of time until it bounces back from its current low point.
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Sunpower Corp. (SPWR)
Sunpower is a California-based solar power company. It works in both technology and energy services, selling solar, storage and home energy solutions in North America. The firm’s SunVault solar battery storage system, for example, allows homeowners to store the power they generate on-site using either Sunpower or third-party solar panels. Having both the panels and battery come from Sunpower makes it easier for homeowners as everything is monitored through one application and backed by a single integrated warranty.
Sunpower shares have collapsed this year, along with most of the solar industry. Governments have not been as forthcoming with green energy subsidies as investors had hoped. And higher interest rates have made folks question the merits of solar power as returns on solar investment are often quite marginal. That said, with SPWR stock down about 75% over the past year, shares are now discounted sharply and poised for a comeback when sentiment brightens for the industry.
Ambev SA (ABEV)
Ambev is the South American division of global brewing giant Anheuser-Busch InBev SA/NV (BUD). AB-InBev has had a challenging 2023 due to its excessive debt and various marketing issues with its Bud Light brand. Thankfully, these problems aren’t a concern for its South American subsidiary Ambev. In fact, Ambev holds a net cash position, and has avoided the sorts of competitive mistakes that have tripped up the parent company.
Investors have shunned South American consumer companies after years of economic weakness and political uncertainty in those markets. However, markets such as Brazil have shown more strength amid inflationary conditions and higher commodity prices. In the meantime, shares trade for just 14 times forward earnings and offer a 5.3% dividend yield.
Grupo Aval Acciones y Valores SA (AVAL)
Grupo Aval is one of Colombia’s largest financial groups.Aval and two other Colombian banks make up nearly 70% of the domestic market. This concentration means that competition is limited and the industry is highly profitable. Aval’s founder and majority shareholder, Luis Carlos Sarmiento, is Colombia’s wealthiest person and has a net worth of about $6.5 billion as of August 2023.
Aval’s fortunes waned over the past 12 months as the country’s growth rate slowed and it faced a large inflationary spiral. However, the mood has brightened. Regional elections in October delivered huge winning margins to conservative candidates in most of Colombia’s large cities and departments, which should read through to more business-friendly economic policy. And the price of oil is remaining firm, which bodes well as crude is Colombia’s largest export. Aval pays a generous monthly dividend and is set to surge when sentiment improves.
Olaplex Holdings Inc. (OLPX)
Olaplex is a consumer wellness company focused on hair care and beauty products. Its innovation is in selling products directly to consumers rather than relying exclusively on lower-margin, third-party distribution channels. As direct-to-consumer commerce flourished during the pandemic, companies like Olaplex thrived. However, this momentum reversed course as brick-and-mortar stores reopened. And now, it appears, consumer spending has decelerated sharply after a record 2022. Throw in some marketing missteps at Olaplex and the stock has cratered, losing the vast majority of its value over the past two years. However, the company remains profitable and analysts expect the company to return to growth in 2024. That could put some shine back on the company’s stock price outlook as well.
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9 of the Best Cheap Stocks to Buy Under $5 originally appeared on usnews.com
Update 11/08/23: This story was previously published at an earlier date and has been updated with new information.
