The major stock market indexes keep hitting new all-time highs. While the rally has certainly generated large profits for investors, it might also leave people wondering what bargains are left in today’s ever-more-expensive market.
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But despite the rally, there are still more than 1,800 stocks listed on major American stock exchanges with a price of $5 per share or less. Of course, many of these companies have major problems such as a broken business model or a creaky balance sheet. But there are also some real diamonds in the rough.
Here are nine of the best stocks to buy today for less than $5 per share:
— Ambev SA (ticker: ABEV)
— Sirius XM Holdings Inc. (SIRI)
— Enel Chile SA (ENIC)
— LG Display Co. Ltd. (LPL)
— Latham Group Inc. (SWIM)
— Planet Labs PBC (PL)
— Compass Inc. (COMP)
— Evotec SE (EVO)
— Grupo Aval Acciones y Valores SA (AVAL)
Ambev SA (ABEV)
Ambev is Brazil’s dominant brewing company. The firm operates as a subsidiary of global giant Anheuser-Busch InBev SA/NV (BUD). Thankfully, however, Ambev has made several key strategic decisions that distinguish it from its corporate parent. For one, Ambev maintains a net cash position, whereas A-B InBev is heavily indebted. For another, Ambev has avoided the sorts of culture war battles that caused boycotts of key Budweiser products in North America.
Regardless of Ambev’s strengths, shares have recently fallen to multiyear lows. Investors are skeptical of Brazil’s economic outlook. And alcohol stocks in general have been slumping as analysts fret about competitive disruption in the industry. However, Ambev’s core South American market is more insulated from these risks than most rivals. At this point, ABEV stock sells for just 12 times forward earnings while offering a 6.9% dividend yield.
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 and hopes of a potential takeover. Ultimately nothing came of the deal chatter, however, and shares quickly gave back their gains. In fact, the stock has now slumped from last year’s $8 peak to less than $2.50 today.
But not everyone is giving up on Sirius XM. In fact, none other than Warren Buffett’s Berkshire Hathaway Inc. (BRK.B, BRK.A) recently added to its position in a tracking stock tied to the value of Sirius XM shares, and Berkshire now has a roughly $1.5 billion stake in that holding. SIRI stock currently sells for about eight times forward earnings, less than 1.2 times revenue and offers a generous 4.1% 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 should make ENIC stock a natural beneficiary for fund managers interested in environmental, social and governance (ESG) investing approaches.
The environmental angle doesn’t end there. Chile has the world’s largest proven lithium reserves and is also a major player in the copper market. These elements are crucial for making batteries and other inputs for electric vehicles. More broadly, Chile’s export-led economy should benefit from higher commodity prices. Finally, Chile’s central bank has slashed its interest rate from 11.25% last year to just 6% in May, giving a huge tailwind to the economy and, in turn, electricity demand.
LG Display Co. Ltd. (LPL)
LG Display primarily manufactures and sells thin-film transistor liquid crystal display (TFT-LCD) and organic light emitting diode (OLED) technology-based display panels. These go into various consumer electronic devices such as TVs, laptop computers, navigation devices and medical equipment.
LG Display got caught up in the pandemic-era electronics boom. Demand for TVs and other consumer electronics skyrocketed as people were stuck at home and seeking better entertainment options. Since then, however, demand has faded and inventories have stacked up. LG Display’s revenues dropped from their 2021 peak of $25 billion to just over $16 billion in 2023. Not surprisingly, the company fell well into the red amid this abrupt decline in revenues. However, analysts are projecting a double-digit rebound in revenue this year, and over time, LG Display should get back on track. With shares down more than 43% over the past 12 months, traders are getting a sharply discounted entry point today.
[See: Artificial Intelligence Stocks: The 10 Best AI Companies.]
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 $513 million in revenue for Latham in 2024. While that’s a negative, Latham is still much larger today than it was in 2019. Furthermore, the company’s downcycle appears to be ending. Shares leapt more than 20% in May following an upbeat first-quarter earnings report where Latham reported a far smaller loss than what analysts had been expecting. This positions Latham for significantly improved profitability during the summer swimming season.
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.
Planet Labs came about via a special purpose acquisition company (SPAC) merger. Like many SPACs, Planet Labs remains in the penalty box with shares down more than 80% from their launch price. In addition, shares are down more than 60% over the past 12 months alone as investors seemingly tire of the company’s continuing unprofitability. However, the company’s most recent earnings report was upbeat with revenues growing 11% year over year and topping expectations. The company expects to reach positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) later this year. And with $299 million in cash on hand, Planet Labs has plenty of resources to play the long game as the space industry gains momentum.
Compass Inc. (COMP)
Compass is a leading real estate brokerage. The business model is to consolidate different local real estate agencies in various markets around the United States, creating a unified platform with significant marketing benefits and cost savings. The company is approaching an estimated 5% market share of all U.S. real estate transactions. It added further momentum with the recent acquisition of Latter & Blum, adding roughly 3,000 real estate agents to Compass serving New Orleans and the surrounding Gulf Coast region.
Compass stock is currently in the dumps due to the downturn in housing market activity. High interest rates have slowed down transactions and hammered Compass’ margins. But rates won’t stay elevated forever, and in the meantime, Compass continues to invest for growth, putting it in position to profit when the market inevitably rebounds.
Evotec SE (EVO)
Evotec is a new entrant in the sub-$5 stock club. Shares have careened almost 60% lower this year following a weak earnings report that led to full-on market panic. This reaction is partly understandable, as Evotec flies far under most investors’ radars. It is a German life sciences company focused on drug discovery. Specifically, it helps biotech and pharma firms with the development of new clinical products and therapies.
There are certainly a fair number of contract research organizations (CROs) that can perform this sort of work. What makes Evotec unique is its dual-till revenue model. It gets paid for performing research services and it also earns a royalty on drugs it services which ultimately gain regulatory approval. Over time, this should help Evotec build a diversified royalty revenue stream off a variety of FDA-approved therapeutics. Evotec has increased revenues from $501 million in 2019 to an estimated $955 million for this year. When biotech spending recovers, Evotec should be set for dramatic gains.
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. Historically, this industry structure has led to strong sustained profitability, and that’s proven no different this cycle as the Colombian economy snaps back from the pandemic-era disruptions.
Colombia’s economy is heavily tied to oil exports, so recent weakness in that market will be a drag on Aval’s outlook for 2024. But investors shouldn’t lose sight of the bigger picture. Commodity prices for key Colombian exports remain at much higher levels than they were in prior years, and the recent bout of inflation should further bolster pricing power for Colombian firms. AVAL stock remains depressed and near its pandemic lows, offering investors the opportunity to buy this quality banking franchise at a significant discount to book value.
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9 Best Cheap Stocks to Buy Under $5 originally appeared on usnews.com
Update 06/06/24: This story was previously published at an earlier date and has been updated with new information.
