Equity analysis is about discovering a stock’s inherent value and therefore its fair market price. Analysts look at data points like price-to-earnings ratios, book value, debt-to-equity ratios and other metrics. Some also consider technical factors like price momentum and trading patterns. A stock’s relative share price alone should never be the sole determining factor when making a buying decision. There is, however, a human element to investing that is difficult for investors to quantify.
That human element is one reason low-priced stocks — those trading for less than $20 — are attractive to investors. They are seen as having more room for price appreciation over both the short- and long-term. Investors view them as undervalued or in the early stages of their corporate life cycle.
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While it’s true that some low-priced stocks represent a superior value and offer excellent growth prospects, investors should understand that many cheap stocks are highly speculative. The rewards can be great if a company succeeds, but if it fails to execute its business plan, losses can add up quickly.
If you understand the special risks of owning low-priced equities and are looking for some stock ideas, here’s a timely list of seven cheap stocks to buy for less than $20 per share:
| Stock | Market Cap |
| Warner Bros. Discovery Inc. (ticker: WBD) | $27.5 billion |
| Vale S.A. (VALE) | $38.1 billion |
| Energy Transfer LP (ET) | $63.8 billion |
| Host Hotels & Resorts Inc. (HST) | $13.1 billion |
| Ford Motor Co. (F) | $40 billion |
| KeyCorp (KEY) | $17.7 billion |
| NIO Inc. (NIO) | $9.3 billion |
Warner Bros. Discovery Inc. (WBD)
WBD is an entertainment company with a market cap of $27.5 billion. The company produces full-length feature films for theatrical release through its studios division, owns several popular domestic and international TV networks through its networks division, and operates a premium digital entertainment streaming service through a division it calls DTC (or direct-to-consumer).
The company’s portfolio includes many of the world’s best-known entertainment brands including Warner Brothers, HBO, HGTV, the Food Network, TNT, TBS, TLC and OWN. It also controls some of the biggest franchises in gaming, TV and movies. They include Batman, Superman, Wonder Woman, Harry Potter and Lord of the Rings, just to name a few.
WBD has struggled to find its footing in the highly competitive digital entertainment industry and the stock has underperformed its peers and the market as a whole this year. Still, the stock has performed well since the summer and some analysts are bullish on the name.
On Aug. 12, WBD closed at $6.71. By Dec. 17, the stock ended the day at $11.35. That’s a gain of 69% in a little over four months. Research analyst Jessica Reif Ehrlich covers WBD for BofA Securities. Ehrlich has a “buy” rating on the stock based on the company’s announced restructuring plan which she believes will enhance strategic flexibility, create new opportunities and, ultimately, unlock shareholder value.
Vale S.A. (VALE)
Vale is a $40 billion metals and mining stock. The company is a premiere producer of iron ore, nickel and other industrial and precious metals.
Iron and iron byproducts are the firm’s primary products but it has significant gold, silver, platinum, copper, manganese and coal interests as well. These holdings diversify its portfolio and make Vale a well-rounded natural resources stock.
On top of its exploration, extraction and production businesses, Vale profitably operates its own successful transportation infrastructure company, meaning this company makes money on both distribution and production.
Vale has a presence in more than 30 countries worldwide. The sustained global economic growth many economists are projecting over the next several years bodes well for a well-diversified company like Vale. The stock has a current dividend yield of 16.1%.
[READ: 7 Best International Dividend Stocks for Diversification]
Energy Transfer LP (ET)
ET is organized as a master limited partnership, or MLP. An MLP is a unique publicly traded entity that’s technically a partnership rather than a corporation. From a trading standpoint, investors won’t notice significant differences between MLPs like ET and traditional stocks. They both trade on all major exchanges every business day.
ET boasts a market cap of close to $64 billion but the stock price is under $20. The company is in the business of storing and transporting natural gas and other petroleum products. Its customers include regulated utilities, refineries, chemical companies and seaports, to name a few. The firm’s network of pipelines and storage depots is extensive, and it stretches to major ports and transportation hubs all over the U.S.
MLPs are required to distribute at least 90% of taxable income to shareholders in the form of a regular dividend. For this reason, ET and many other MLPs are excellent income vehicles. ET stock pays a large dividend yield of 6.9% at the time of this writing.
Host Hotels & Resorts Inc. (HST)
Of the 501 stocks in the S&P 500, only 12 are trading under $20. HST is one of those 12. HST is a real estate investment trust (REIT) that invests in luxury hotels in the U.S. and internationally. Upscale travelers will recognize all of the company’s brand partners, which include Four Seasons, Ritz-Carlton, St. Regis and Swissôtel.
In total, HST owns over 43,000 rooms. Due to the high quality and exclusivity of the company’s properties, these rooms command some of the highest revenue per room in the hospitality industry. The consensus of the 16 Wall Street analysts who follow the stock is that HST will generate $5.6 billion in revenue for 2024 and will grow revenue by 3.6% to $5.8 billion in 2025.
The market capitalization of HST stands at $13 billion. Because it is organized as a REIT, investors can expect a regular dividend income. Currently, the stock is yielding 4.3% as of the Dec. 17 close.
Stifel Financial maintains a “buy” rating on HST stock, with Wells Fargo also giving the stock an “overweight” rating.
Ford Motor Co. (F)
Ford, General Motors Co. (GM) and Stellantis N.V. (STLA) are a group of companies known on Wall Street and around the world as the Big Three automakers. Ford isn’t the oldest of the Big Three but it has been around for 121 years and has a market cap of almost $37 billion.
The company designs, manufactures and sells cars, trucks, vans, minivans and SUVs to consumers and businesses around the globe, and routinely reports more than $40 billion a quarter in revenue.
Not all of the company’s revenue comes from vehicle sales. Ford has a thriving parts and service segment and generates significant cash flow from Ford Credit, the company’s financial division. Ford Credit provides lease and purchase financing to automobile lessees and buyers. That division is expected to contribute $1.5 billion in revenue to Ford’s top line for the full year 2024.
The stock enjoys a well-earned reputation as an income producer. F stock currently yields 6% as of its Dec. 17 close.
KeyCorp (KEY)
Cleveland, Ohio-based KEY is a major regional bank with a market cap of more than $17 billion. The company was founded in 1825 and has grown into one of the largest bank holding companies in the U.S. According to the company’s latest financial reports, KEY has assets of about $190 billion and a network of close to 1,000 full-service branch offices in more than 15 states. There are more than 40,000 Key Bank ATMs nationwide.
In addition to deposit accounts, consumer credit cards and lending services, KEY offers its wealthy customers a complete suite of wealth management services and consumer finance products.
In August, Bank of Nova Scotia (BNS) agreed to buy 15% of KEY for $2.8 billion. The deal is under review by the U.S. Federal Trade Commission but is expected to close in the first quarter of 2025. KEY intends to use this capital infusion to gain market share and finance future growth initiatives.
Additionally, KEY has a dividend yield of 4.6% as of Dec. 17 close.
NIO Inc. (NIO)
With a market cap of close to $10 billion, NIO is the largest electric vehicle maker in China. NIO — founded by Chinese billionaire William Li — is one of the only EV makers that poses any real competition to Tesla Inc. (TSLA), which is run by Elon Musk.
NIO offers EV buyers a small but popular selection of five models. Its lineup includes sedans, coups and an SUV. The company pioneered the concept of battery-swapping. Battery-swapping sets NIO apart from its competition. Instead of plugging vehicles into charging stations and waiting around for hours while they charge, NIO owners just pull into a swapping station and have their depleted battery replaced with a fully charged unit in just a few minutes. It saves time and, according to the company, increases customer satisfaction.
Right now, NIO lags Tesla in fully autonomous self-driving technology but it has partnered with Nvidia Corp. (NVDA) and other technology companies in order to make up ground in that important area of the EV business.
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7 Best Cheap Stocks to Buy Under $20 originally appeared on usnews.com
Update 12/18/24: This story was published at an earlier date and has been updated with new information.
