After a huge run-up in the stock market over the past year, the market appears to be at a crossroads heading into the summer months. Persistently higher-than-expected inflation readings may slam the brakes on the anticipated Federal Reserve interest rate cuts. Geopolitical tensions are elevated. And the upcoming presidential election adds further uncertainty to the mix.
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Regardless of the market’s near-term direction, there are plenty of low-priced bargain stocks out there. As of this writing, there are slightly more than 1,800 stocks listed on the major U.S. stock exchanges that trade for $5 per share or less. While many of these low-priced stocks face major structural challenges, there are some real gems within the bunch.
Here are nine of the top cheap stocks to buy now for less than $5:
— Rocket Lab USA Inc. (ticker: RKLB)
— Planet Labs PBC (PL)
— Up Fintech Holding Ltd. (TIGR)
— Latham Group Inc. (SWIM)
— Traeger Inc. (COOK)
— Vimeo Inc. (VMEO)
— Sirius XM Holdings Inc. (SIRI)
— Enel Chile SA (ENIC)
— Grupo Aval Acciones y Valores SA (AVAL)
Rocket Lab USA Inc. (RKLB)
Rocket Lab is a space company focused on launch services and space system solutions. The company helps both defense agencies and private enterprises to launch satellites. This is already a well-established and fast-growing operation. Rocket Lab has increased revenues from $62 million in 2021 to $245 million in 2023. Analysts see that surging to $423 million this year, and $594 million in 2025. Rocket Lab is not yet profitable, and it will likely still be several years until it reaches that threshold. However, it has gone from having negative gross margins in 2021 to a 25% gross margin over the past 12 months.
This speaks to the firm’s massive operating scale as it ramps up its launch capabilities and offers more frequent services to customers. With $492 million of cash and short-term investments on hand as of its last report, Rocket Lab is primed to keep expanding its business going forward.
Planet Labs PBC (PL)
Planet Labs is a pioneer in the Earth observability industry. Planet Labs provides its clients, which include both governments and commercial customers, with on-demand satellite imagery. Enterprises use satellite imagery in industries such as agriculture and forestry, shipping, natural resources and insurance. Meanwhile, governments can use satellite imagery for espionage, real-time tactical planning and disaster response.
It’s still early in the commercialization of earth imagery, and Planet is growing out its revenues and customer base. However, as the industry grows, there should be enormous scale benefits, and as the price of imagery falls, the total addressable market will dramatically expand. Mass adoption should lift Planet Labs well into consistent profitability. Planet Labs has $299 million of cash and short-term investments on hand, giving it a long runway to keep ramping up its business.
Up Fintech Holding Ltd. (TIGR)
Up Fintech is a brokerage and financial services company focused on the Chinese markets. The company primarily operates in partnership with Interactive Brokers Group Inc. (IBKR), which is the clearing and trading facilitator that powers Up Fintech’s brokerage operations. Interactive Brokers also owns a sizable equity stake in Up Fintech, giving outside investors confidence that the firm has credible management that is aligned with shareholders.
Chinese equities have plunged over the past couple years amid a major economic slump. Not surprisingly, this has crushed fees and trading volumes for Chinese brokerage operations. Despite that, Up Fintech is selling for less than 13 times projected forward earnings, and analysts are projecting top- and bottom-line growth this year. If Up Fintech can prosper amid this slump, it should be able to deliver tremendous results during the next Chinese bull market.
Latham Group Inc. (SWIM)
Latham is a designer and manufacturer of in-ground swimming pools. It operates multiple brands including Latham, Narellan, CoverStar and GLI. The company went public several years ago and garnered a generous valuation as pool sales boomed during the pandemic. Specifically, Latham’s revenues soared from $318 million in 2019 to $696 million in 2022. As the economy reopened, however, sales tapered off.
Analysts are forecasting $510 million of revenues for Latham in 2024. While that’s a negative, Latham is still much larger today than it was in 2019, and analysts foresee the company returning to top-line growth in 2025. Making matters better, the company’s first-quarter earnings report showed substantial improvements in costs and a much smaller operating loss. This positions the company well heading into the summer swimming season.
[READ: 10 of the Best Stocks to Buy for 2024]
Traeger Inc. (COOK)
Like Latham, Traeger is another consumer discretionary goods winner that has now seen its fortunes fade. Traeger makes wood pellet barbecue grills, which were another big spending area when people were stuck at home. Now, though, with restaurants reopened and the economy returning to normal, interest in grills has leveled off. At the same time, the pandemic arguably pulled forward demand; people who already bought a grill in 2020 or 2021 probably aren’t going to be in the market again for a few years.
Traeger’s revenues have fallen approximately 25% since its 2021 peak. The company has also gone from strongly profitable to around breakeven on an earnings-per-share basis. That said, with the stock down more than 90% from the all-time highs and the market capitalization down to $300 million, the price is certainly right for a comeback when grilling demand heats back up.
Vimeo Inc. (VMEO)
Vimeo is a software company focused on videos. Historically, it has hosted user-created videos, and more recently it has developed software-as-a-service (SaaS) offerings to help users create and share videos within a single platform. It also operates in fields such as artificial intelligence-powered video creation and video tools for shopping and e-commerce. This assortment of products and services has helped grow Vimeo’s revenues from $196 million in 2019 to an estimated $400 million this year.
What makes Vimeo compelling now is its massive cash balance. It has $304 million of cash on hand and just $14 million in long-term debt. With the company’s market capitalization being around $670 million, this means almost half of Vimeo’s valuation is backed by its cash pile. Meanwhile, the underlying business is selling for a roughly $360 million enterprise value after subtracting out the cash. While Vimeo is only marginally profitable, it is selling at a low price-to-sales multiple, and there has been media speculation around a potential takeover offer given the bargain valuation.
Sirius XM Holdings Inc. (SIRI)
Sirius XM operates a leading satellite radio platform. In addition to its automotive-based core listening market, Sirius also operates the Pandora streaming service. Sirius XM shares spiked last summer during a short squeeze based on hopes of a buyout. That didn’t pan out, however, and since then the stock has fallen from a peak of around $8 to barely above the $3 mark now. But investors shouldn’t give up just yet.
Warren Buffett’s Berkshire Hathaway Inc. (BRK.B, BRK.A) continues to add to its position in a tracking stock tied to the value of Sirius XM shares, and Berkshire now has more than $1.7 billion in that holding. SIRI stock currently sells for less than 10 times forward earnings, less than 1.5 times revenue and offers a solid 3.5% dividend yield.
Enel Chile SA (ENIC)
Enel Chile is one of Chile’s largest independent power producers. The firm is appealing for two primary reasons. First, it’s one of the world’s greenest utilities. Thanks to ample hydroelectric capacity and some of the world’s highest-yielding solar farms, Enel Chile is uniquely situated to deliver affordable carbon-free electricity. This positions the company well to benefit from funds that focus on environmentally sustainable economic growth.
Chile’s large reserves of copper, lithium and other key metals make it a leading supplier in the renewable energy revolution. Adding to that, Chile’s export-driven economy should benefit from the current inflationary environment and higher commodity prices. Finally, Chile’s central bank has slashed its interest rate from 11.25% last year to just 6.5% in April, giving a huge tailwind to the economy and, in turn, electricity demand.
Grupo Aval Acciones y Valores SA (AVAL)
Grupo Aval is one of the three large Colombian banking and financial groups. Aval owns majority stakes in four different Colombian banking franchises. Combined, these have about 25% market share in the country. Aval and its two major competitors dominate the Colombian market. The low level of domestic competition tends to lead to high profitability and stable operating conditions.
Colombian stocks collapsed between 2014 and 2022. That was tied to a plunge in the price of oil, which is Colombia’s leading export product. However, the price of oil has recovered, and other Colombian exports like fresh flowers, fruit and coffee have also perked up amid the world’s more inflationary conditions of late. Aval is selling at a sizable discount to book value and should be set for a large share price recovery when sentiment improves.
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9 Best Cheap Stocks to Buy Under $5 originally appeared on usnews.com
Update 05/09/24: This story was previously published at an earlier date and has been updated with new information.
