Markets finished the year on a high note, as major indexes approached or exceeded record highs in December. Many jubilant investors expect the Federal Reserve to pivot toward easier monetary policy by implementing interest rate cuts in 2024. If inflation has indeed been tamed, falling rates would favor higher equity valuations.
Lots of stocks have already run up sharply on this change in the investment landscape, but there is still good news for bargain shoppers: As of the beginning of 2024, there are roughly 1,800 stocks listed on the major American exchanges trading for $5 per share or less. While most of these companies have significant structural problems that have led to their low share prices, there are some diamonds in the rough.
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These are nine of the top stocks currently trading for $5 per share or less:
— LG Display Co. Ltd. (ticker: LPL)
— Grupo Aval Acciones y Valores SA (AVAL)
— Planet Labs PBC (PL)
— Matterport Inc. (MTTR)
— Baytex Energy Corp. (BTE)
— Luminar Technologies Inc. (LAZR)
— Nordic American Tankers Ltd. (NAT)
— Enel Chile SA (ENIC)
— Olaplex Holdings Inc. (OLPX)
LG Display Co. Ltd. (LPL)
LG Display is a South Korean firm that designs and manufactures display panels and screens. These are generally used in TVs, laptop computers, desktop monitors, tablets and auto display units. Like many consumer technology companies, LG Display saw its revenues jump in 2021 as people bought electronics at a record pace during the pandemic.
As the economy reopened, however, tech sales fell sharply in 2023. This left the industry with a glut of inventory leading to a sharp decline in demand for new screens. LG Display ran a large loss in 2023 amid this sudden drop in demand. But shares appear to be a bargain now. The company expects to return to profitability in 2024, and in the meantime, shares sell at a discount to book value. This suggests that while current operating conditions are unfavorable, investors have punished the company too aggressively for its temporary problems.
Grupo Aval Acciones y Valores SA (AVAL)
Grupo Aval is one of Colombia’s largest financial groups. Aval and two other rival Colombian banking groups collectively make up nearly 70% of the domestic banking market. This concentration ensures limited competition and high levels of profitability. Aval’s founder and majority shareholder, Luis Carlos Sarmiento, is Colombia’s wealthiest person and has a net worth of about $7.4 billion.
Aval had a rough couple of years amid a prolonged economic downturn in Colombia and the election of the country’s first left-wing president. However, the country’s politics swung back toward the right with Colombia’s fall 2023 regional elections. It seems the market is catching up to the turn, and AVAL stock surged in December. Regardless, shares are still selling at a large discount to book value and offer an 8.4% dividend yield. The company has a monthly dividend policy, which adds to the appeal for income investors.
Planet Labs PBC (PL)
Planet Labs is a space industry stock focused on Earth observability. Planet Labs’ business model is to take frequent satellite imagery of the Earth and sell that data to clients such as government agencies, industrial companies, transportation firms and farmers. Updated satellite imagery helps clients evaluate their operations and make nearly real-time decisions. That last point has become crucial over the past two years as geopolitical tensions have flared up in Ukraine, the Middle East and elsewhere.
Historically, satellite imagery was too expensive and infrequently updated to power this sort of informed decision-making. But as Planet Labs brings down the cost, it greatly expands the addressable marketplace, and the firm is enjoying rapid revenue growth as a result. Planet Labs also stands out from peers due to its strong balance sheet; it has more than $300 million of cash and very low debt, giving it a long runway to further build the business.
Matterport Inc. (MTTR)
Matterport is a spatial data company. It develops tools to turn physical spaces into data for digital purposes. Not surprisingly, the stock became popular during the metaverse excitement cycle. As that fizzled out, though, MTTR stock slumped to the low single digits.
Matterport is still evolving its business model, and revenue monetization has been a bit messy between its hardware, fixed licenses and subscription services. The company is in the early stages, and investors are understandably skeptical. But the underlying concept is great. For example, consumers can use a Matterport specialized camera to make a 3D model of a building and use those images to market real estate properties. This can be useful either for brokerage services or for buildings such as entertainment venues, hotels and other such places wanting to show a 3D, immersive model of a building to prospective clients.
Matterport hasn’t yet reached profitability. But analysts expect it to generate more than $175 million in revenues this year, and top-line growth remains healthy.
Baytex Energy Corp. (BTE)
Baytex is a Canadian oil and gas exploration and production company focused on operations such as the Peace River and Duvernay fields in Canada and the Eagle Ford in Texas. It generates about two-thirds of its production from crude oil, with the balance coming from natural gas and natural gas liquids. Baytex is strongly profitable, with shares currently trading for less than six times forward earnings.
The appeal now is that BTE stock fell significantly to close out 2023. This likely coincided with the fall in crude oil prices. However, the company continues to generate strong shareholder value. And it is spreading the wealth to its shareholders; it has repurchased 41 million shares since June 2023, retiring 4.7% of the company’s entire outstanding stock. In addition, the company recently initiated a dividend. This smaller energy company is gushing with cash right now and is set to rally in 2024 as oil and gas sentiment improves.
Luminar Technologies Inc. (LAZR)
Luminar Technologies is a company developing laser imaging, detection and ranging sensors (lidar) units for vehicles. Lidar systems allow a vehicle to detect the conditions around itself, allowing for safe autonomous driving functions. With many car companies investing heavily in achieving full vehicle autonomy, demand for lidar systems should grow substantially. Luminar has benefited from this trend; it has grown revenues from $14 million in 2020 to $41 million in 2022. And as of the third quarter, annualized revenues are now at $68 million.
Despite the rapid growth, many investors remain skeptical of the company. It is unprofitable and it is a former special-purpose acquisition company. However, there is real business momentum here, and lidar seems like a clear growth market in the years to come. With more than 20% of Luminar’s stock float currently sold short, shares could pop on any positive developments.
Nordic American Tankers Ltd. (NAT)
Nordic American Tankers is a shipping company that operates a fleet of 20 Suezmax crude oil tankers. The company has had an up-and-down history over the years. While the share price has often been disappointing, the company provides investors with a strong income stream. And things are looking particularly good on that front today. NAT stock is currently offering a 5.4% dividend yield. That figure is likely to further increase in 2024. Analysts were already modeling a strong uptick in revenues given favorable demand in the tanker market.
With the rise of attacks on ships passing through the Red Sea, many vessels are diverting all the way around the southern tip of Africa to avoid that risk. This ties up ships for a far longer periods, effectively lowering supply and thus driving prices far higher. The current geopolitical chaos could lead to a sharp upswing in Nordic American’s fortunes, and even if it doesn’t, the stock is on offer here at a reasonable 7.6 times forward earnings.
Enel Chile SA (ENIC)
Enel Chile is an electric utility that generates and distributes electricity throughout much of Chile. It operates as a subsidiary of the multinational Italian firm Enel S.p.A. (OTC: ENLAY). The Chilean subsidiary has a broad range of power generation sources, counting hydroelectric, wind, solar and geothermal facilities among its assets. Chile’s Atacama Desert enjoys some of the highest solar intensity in the world, making Chile a great place for generating grid-scale solar power. Given Chile’s abundant renewable power opportunities, Enel Chile has a pathway to become one of the fastest emerging-market-based utilities to get to carbon neutrality.
Investors don’t have to sacrifice profitability to benefit from this sustainable push. Enel Chile is selling for less than seven times estimated forward earnings. Additionally, shares pay a whopping 11.1% dividend yield.
Olaplex Holdings Inc. (OLPX)
Olaplex is a consumer wellness company focused on hair care and beauty products. Its innovation is 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, that trend reversed course in 2022 as in-person shopping patterns started to return to normal. Olaplex also relies heavily on social media and influencer-based marketing. Some of these campaigns fell flat over the past 18 months, leading to a sharp reversal in the firm’s prior momentum. OLPX stock fell from a peak of $29 in 2021 to less than $2 late last year. The stock has now nearly doubled off those lows. The latest quarterly earnings report showed that the business has stabilized, and the firm just brought in a new CEO in December. The pieces are here for a turnaround, and shares are still going for just 11.5 times forward earnings.
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9 Best Cheap Stocks to Buy Under $5 originally appeared on usnews.com
Update 01/05/24: This story was previously published at an earlier date and has been updated with new information.
