investing

Two Good Stocks Under $10 to Buy Now

These low-priced stocks offer an easy way to diversify your holdings without breaking the bank.

Stocks under $10 can be a cost-effective way for the little guy to diversify a portfolio, especially if you don't have a lot of money left over to invest after you pay bills and pad your emergency fund. However, many low-priced stocks are priced low for a reason, so you need to pick stocks under $10 that have a good shot at turning into stocks over $10 in the not-too-distant future. Is it risky? Sure. Don't plow your life's savings into a stock simply because it seems cheap. But do take a chance on a promising stock when you can snag it at a bargain price.

We found two low-priced stocks that do, indeed, show promise. But before you place a buy order, keep trading expenses in mind. Let's say you only have $100 to invest. Even if you pay just $4.95 for an online trade, your investment is already down 5%. For small trades, consider opening a free Robinhood account. You can use the brokerage's smartphone app to make no-commission stock trades.

Take a look at two good stocks under $10 to consider buying now. (Share prices and other data as of May 2, 2017.)

ArcelorMittal

  • Symbol: MT
  • Share price: $7.90
  • 52-week range: $4.18 - $9.37

The world's largest steelmaker is expected to post big jumps in revenue and earnings this year, thanks in part to growing demand in Europe and emerging markets. Industry group the World Steel Association expects European demand for steel to inch up 0.5% this year and 1.4% in 2018, driven by better-than-expected economic growth. Luxembourg-based ArcelorMittal derives nearly half its revenue from Europe.

The improving economic situations in Brazil, Russia and elsewhere are also adding to demand. Perhaps most importantly, China is slowing production in response to the global steel glut. The threat of tariffs in the U.S. also helps the outlook for prices.

Against that better fundamental backdrop, ArcelorMittal shares look attractively priced relative to growth prospects. Earnings per share are forecast to increase 30% this year on revenue growth of 17%, according to a survey by Thomson Reuters. However, the stock trades at just 9.5 times forward earnings, or about half the forward price-earnings ratio of the S&P 500.

Further, analysts at Credit Suisse say the global steel glut is actually a myth, and contend that the pressure on raw materials prices helps ArcelorMittal more than other industry players. The analysts rate the stock at outperform (buy, essentially). Their price target of $11.71 implies a 50% gain in the next 12 months or so.

United Community Financial Corp.

  • Symbol: UCFC
  • Share price: $8.59
  • 52-week range: $5.60 - $9.50

United Community Financial Corp. is the holding company for the Home Savings and Loan Company of Youngstown, Ohio. It's a small bank, but it's getting big praise from the analyst community. Boenning & Scattergood says its transformation into a "formidable" commercial banking operation is "nothing short of impressive." B&S rates the stock at outperform, and it's not alone. The three analysts tracked by Thomson Reuters all say it's a buy.

The bank has been active in the mergers and acquisitions markets, which could spur a big jump in operating profits, B&S says. Companies often need to bolster their funding when interest rates are moving up.

Shares in United Community Financial appear to be taking a breather after a strong 2016. The stock gained more than 50% last year and is currently down about 3% year-to-date. The pause shouldn't last long, if analysts are correct. Indeed, they're looking for the stock to rise 16% in the next 12 months.

Be forewarned that this is a very small stock. The company’s market capitalization – share price times number of shares outstanding – is just $424 million. A good regional bank such as KeyCorp (KEY) has a market capitalization of more than $20 billion. Small stocks tend to be more volatile than large ones.

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