First things first: Cheap stocks are not necessarily better stocks.
In fact, cheap stocks may have fallen from a higher price for good reason and now they are simply a fraction of their former size.
Furthermore, slicing a $500 million company into 100 million shares worth $5 each or 1 million shares worth $500 each is really just an academic exercise, as the underlying business itself does not change.
Does a pizza taste differently if it's cut into 80 very small pieces instead of eight big ones?
With that out of the way, let's acknowledge that many investors look at high-priced stocks and wonder if they should bother adding such a pricey investment to their portfolio when they can only buy one or two shares. Instead, they find cheap stocks under $10 as a more attractive option.
If you're one of these people looking to add some lower-priced investments to your portfolio, then we at Kiplinger can offer up a list of cheap stocks to buy. And we're not the only ones saying it – all the names here have consensus Buy or Strong Buy recommendations from Wall Street, according to analyst data collected from S&P Global Market Intelligence.
To that end: Here are 10 cheap stocks under $10 to consider based on current performance and bullish outlooks from the pros.
Data is as of May 20.
Sirius XM Holdings
- Market value: $24.5 billion
- Analysts' average rating: 2.06 (Buy)
You're likely already familiar with satellite radio service provider Sirius XM Holdings (SIRI, $5.98) from a consumer perspective… probably from the last time you rented or purchased a car. However, the company also provides streaming radio solutions for a digital age akin to services like Pandora and Spotify (SPOT).
Additionally, SIRI provides two-way wireless connectivity for cars, including roadside safety assistance, vehicle location services, satellite television services and real-time traffic and weather reports.
Organic revenue growth for SIRI has admittedly been slowing for the last few years, and is tracking for a roughly 4% expansion in the current fiscal year after rising just 3.2% in 2020. However, Sirius XM's earnings per share (EPS) continues to expand at a much faster rate than sales – a sign the company has very healthy margins.
Radio has generally been a very durable technology that has avoided the extinction some have predicted thanks to high-tech disruptions. And as the dominant player in the satellite space, particularly in the automotive marketplace, SIRI does have a measure of stability that investors can depend on to differentiate it from the other mishmash of streaming providers.
If you're particularly optimistic about vehicle sales picking up in the months ahead as COVID-19 restrictions wane and spending picks up, this cheap stock could be a natural beneficiary of such a trend.
- Market value: $1.8 billion
- Analysts' average rating: 2.36 (Buy)
Infinera (INFN, $9.05) is a high-tech company serving mainly telecommunications service providers through "optical transport networking equipment" and related software and services.
In other words, Infinera is a communications infrastructure company that helps transmit huge amounts of information over long-distance fiber optic cables and optimize transmissions by providing software, data and analytics to institutions.
It's a niche business and highly technical, but in a digital age, a cheap stock like Infinera has some obvious appeal.
The challenge is that Infinera is a glorified middleman in the information age, never achieving the scale of Big Telecom and not necessarily making the margins of specialized service providers to smaller institutions or businesses.
However, the long-term performance of Infinera is remarkably stable – and based on full-year 2021 forecasts, the company may see a nice uptick of almost 6% in total revenues this year and at last turn some significant operating profits instead of running around breakeven.
If you're interested in investing in this cheap stock, it's worth noting that Oaktree Capital Management, the hedge fund founded by Howard Marks, is a leading shareholder in the firm. There's no guarantee that this means INFN is a good buy, but with more than 25 million shares worth north of $233 million you can bet that the folks at Oaktree have a bit of sway over this stock – and thus, its likelihood to deliver shareholder value.
- Market value: $7.8 billion
- Analysts' average rating: 1.46 (Strong Buy)
Operating much like familiar domestic telecoms, Mobile TeleSystems (MBT, $9.15) is headquartered in Russia and focuses on cellular data, landline voice and internet service and related hardware and services for customers.
Founded in 1993 as part of the big boom in privatization across the former Soviet Union, Mobile TeleSystems was able to ride an initial wave of growth, but hasn't exactly been expanding in recent years as mobile subscribers have flatlined around 80 million.
A long-term look doesn't show a ton of share price volatility, either to the upside or the downside, but one very important thing to note is that this cheap stock offers a tremendously generous dividend as it passes on a portion of those monthly phone bills.
While the cycle is a bit off from domestic stocks, with MBT paying varying dividends twice a year – in July and October, instead of every single quarter – based on the last year's payouts the current yield on this is still a tremendous 9%. You don't have to see much share price appreciation to fall in love with that.
As with many other cheap stocks in emerging markets, the risk here is that local disruptions affect MBT. After all, if this company primarily serves Russia, then it fundamentally doesn't matter whether U.S. consumer spending is booming.
But considering Mobile TeleSystems is in a lower risk sector, with a generous but sustainable dividend, it may be a slightly safer bet than other cheap stocks in international markets.
- Market value: $1.4 billion
- Analysts' average rating: 2.09 (Buy)
Independent energy company Comstock Resources (CRK, $5.87) is pretty simple to understand. It's an oil-and-gas driller engaged in exploration primarily in Texas, Louisiana and North Dakota, with reported reserves that total 5.6 trillion cubic feet of natural gas equivalent and 17 million barrels of oil that it taps into via some 3,000 wells.
In early 2020, CRK and its peers took a hit as the pandemic sapped demand and energy prices crashed. With oil prices back above $60 a barrel and many pundits now talking about inflationary pressures, the prices of raw materials could rise even higher. As such, Comstock is looking much better, with a projected 50% year-over-year surge in revenue in 2021.
It should go without saying, though, that energy prices are far from static, so there's no guarantee oil won't roll back again in the near future. It's also important to understand the fundamental challenge of a fossil fuel company like Comstock amid growing talk over climate change and sustainable energy.
However, this cheap stock under $10 does seem to be popular among the Wall Street analyst community at present, so investors looking at low-priced energy stocks may want to give this name a closer look.
- Market value: $470.9 million
- Analysts' average rating: 1.38 (Strong Buy)
One of the riskier investments on an already fairly aggressive list of cheap stocks to buy is Viking Therapeutics (VKTX, $6.03).
VKTX is a clinical-stage biopharmaceutical company that is racing to develop potential treatments for rare metabolic and endocrine disorders. The word "potential" is very important here, because as of right now, Viking is bleeding red ink as it tries to get its newly developed drugs through trials that prove they are indeed clinically effective and worthy of U.S. Food and Drug Administration (FDA) approval.
Its current lead drug candidate is a pill that is primarily meant for thyroid hormone conditions, but has also shown promise as a potential treatment for lipid disorders, including nonalcoholic steatohepatitis (NASH).
Viking Therapeutics is also developing other drugs – including a possible treatment for type 2 diabetes that could be a big blockbuster if the chips fall in VKTX's favor.
The World Health Organization estimates that the number of people suffering from diabetes rose from 108 million in 1980 to 422 million in 2014 – and globally, the numbers have only increased in recent years. That's a big opportunity for Viking if it's able to snag some of the market share.
As with many biotech stocks, however, there's a lot of risk here.
If Viking doesn't get the clinical results it needs, then it has spent a significant amount of time and money on a medication that doesn't work as intended – and it's likely the stock drops precipitously as a result.
But if the drugs meet their primary goals, there's a good chance the headlines will not just justify the present share price, and the cheap stock could power higher. So be aware of the stakes here before you dive into this currently unprofitable healthcare stock.
- Market value: $847.7 million
- Analysts' average rating: 2.45 (Buy)
Small-cap drugmaker Amneal Pharmaceuticals (AMRX, $5.70) is involved in generic medications of all sorts, including "oral solids" – a fancy name for pills – as well as injectables, ophthalmic solutions, topical creams, inhalation products and a range of other non-branded treatments.
It's not a particularly interesting or high-margin business to sell cheap generics to hospitals and pharmacies, but it's a reliable one as many patients who get sticker shock are eager to get a similar drug for a lower price from Amneal Pharmaceuticals rather than its competitors.
What makes AMRX interesting as a cheap stock is that it is not like many development-stage biotechs that are simply bleeding cash in the hopes of banking on a big drug.
Amneal is comfortably profitable; and while growth isn't burning down the house, it's important to add that earnings and revenues are forecast to rise both in the current fiscal year and the next one, too. That makes it much different than other small-cap healthcare stocks struggling to get by.
What's really interesting is that Amneal also has a small branded division that specializes in its own pharmaceutical products, primarily for niche illnesses including central nervous system disorders and hormone conditions.
This segment represents only about 19% of total revenue, based on the most recent Securities and Exchange Commission (SEC) filings, but obviously the potential for profit margins is much higher. Of particular note is that AMRX has a branded Parkinson's disease treatment in this area that could see growth in the next several years.
As far as drugmakers go, it's not particularly large. But if you're looking for a cheap stock to buy in the healthcare sector then AMRX has a lot going for it right now – including an impressive run of about 60% from its lows from last summer.
- Market value: $3.1 billion
- Analysts' average rating: 2.36 (Buy)
Dutch telecom Veon (VEON, $1.78) – formerly known as VimpelCom for those who travel internationally or are more up to speed on European companies – is one of the cheapest stocks you'll find out there that isn't a microcap penny stock, with the current share price under $2. However, it's actually larger than many of the stocks on this list when you measure by market cap, as well as its annual revenue of almost $8 billion.
Like the aforementioned Mobile Telesystems, VEON is pretty familiar in that it offers voice, data and other telecommunication services through both its wireless and landline infrastructure.
But what sets VEON apart from other telecom companies is its massive reach, which runs from Pakistan to Algeria to Eastern Europe, even though it's headquartered in Amsterdam. This creates an interesting makeup for the cheap stock. Not only does it have the potential for growth that some investors are looking for in emerging and frontier markets, but also a bit of stability in its exposure to more mature markets across Europe, as well as the reliable nature of telecom as a sector.
Revenue is only growing by low single digits right now, but EPS are rising rapidly – from just 27 cents per share last fiscal year to a forecast of 39 cents by the end of FY2021 and then 42 cents in FY2022.
That bodes well for future performance of this cheap stock. However, in full disclosure it's worth noting that shares are down pretty significantly from their highs in 2017 in part because Veon stopped paying a dividend. If you're looking for stable telecoms that provide income, this isn't it.
But if you are primarily interested in cheap stocks with potential, you could do worse than look deeper at this large and geographically diversified telecom company.
Annaly Capital Management
- Market value: $12.9 billion
- Analysts' average rating: 2.08 (Buy)
It's rare that you find a stock that checks so many boxes for profit-hungry investors, but Annaly Capital Management (NLY, $9.23) appears to do just that.
For starters, it's trading under $10 – appealing to the cheap stocks' crowd. It also has a tremendous dividend north of 9% for those seeking high-dividend names. And to top it off, the shares are up roughly 50% in the last 12 months, outperforming the S&P 500 Index by almost 7 percentage points.
What's not to like?
While this is certainly an attractive list of facts, as with any investment, it's important to explore precisely what the company does before you buy.
Annaly Capital Management is structured as a real estate investment trust (REIT), meaning it's a special class of stock that gets tax breaks on its massive property holdings in exchange for a mandate to deliver 90% of taxable income back to shareholders.
That helps explain the big dividend yield – but keep in mind that just because this cheap stock is a REIT, that doesn't have to mean it holds a ton of property.
In fact, it's more of a financial stock, as it manages a portfolio of residential and commercial real estate loans, and its assets are mostly mortgage-backed securities. So rather than collect rent, it's collecting loan payments and then sharing a piece of the interest with shareholders.
Part of the reason NLY has bounced back is because as COVID-19 restrictions ease and hopes of an economic recovery build, there's less fear of defaults on these loans.
But beyond the here and now, it's important to note that NLY has a strong long-term history of generous dividends, as it passes on a bit of these loan payments to shareholders. Even if the share prices are hot at current levels and the cheap stock may not outperform in the near term now that the recovery is priced in, that juicy dividend could make NLY worth a look going forward – particularly if you're an income-oriented investor.
- Market value: $471.3 million
- Analysts' average rating: 2.22 (Buy)
A $500 million would-be disruptor of the old way of buying autos, TrueCar (TRUE, $4.77) operates portals that allow for market-based pricing data on new and used cars and aims to connect users with dealers for a nominal finder's fee.
TrueCar's value proposition is pretty obvious to anyone who has struggled to find accurate pricing for vehicles, or has been puzzled why certain geographic areas vary so much in cost or inventory than in others. The company is not currently profitable, but is projected to operate in the black starting in fiscal year 2022 as its dealer network and technology platforms continue to mature.
With shares up nearly 100% from summer 2020, there's a lot to like when it comes to the narrative behind this cheap stock.
But keep in mind that narrative isn't everything, and investors will have to be patient before profitability becomes a reality next year – and of course, that's presuming TRUE hits its numbers and doesn't fall short, as is very much possible.
It's also important to note that there are a host of competitors and the barriers to entry are not particularly large on this front as many firms are racing to figure out a better digital way to connect with car shoppers.
There are assuredly risks in this ambitious tech company, but if you're looking for a cheap stock with breakout potential, TRUE may be worth a look.
- Market value: $3.2 billion
- Analysts' average rating: 2.00 (Buy)
Surely you've seen the ads – smiling young adults talking about their new, perfect teeth that were aligned thanks to SmileDirectClub (SDC, $8.19) through the mail without the hassle of in-person orthodontist appointments.
But have you ever thought about sharing in the success of this disruptive start-up?
SDC has made waves as it looks to cut out the middleman of the oral care industry, looking to own the chain completely from the point of contact to the manufacturing of aligners and braces to by-mail fulfillment and final review by licensed teledentistry professionals.
Revenue growth trends prove the company is indeed making headway, with more than 25% expansion in the top line projected both this fiscal year and in fiscal 2022. However, as SmileDirect invests heavily in growth, it's still operating in the red and doesn’t have any profits to speak of.
Wall Street analysts don't seem all that concerned, as Buy ratings are prevalent. But it's worth reading into the record that there are other companies trying to get in on the act – and just like the mail-order boom for shaving products a few years ago, there's only so much room for competition and imitators in the space.
Shares have largely underperformed over the last year or so, but if you're interested in cheap stocks, SDC may be worth a look given its tangible success when it comes to producing real sales growth. Profitability will have to materialize as it fends off competition, of course, but investors banking on this teledentistry provider could see a decent return if and when that occurs.
Jeff Reeves writes about equity markets and exchange-traded funds for Kiplinger. A veteran journalist with extensive capital markets experience, Jeff has written about Wall Street and investing since 2008. His work has appeared in numerous respected finance outlets, including CNBC, the Fox Business Network, the Wall Street Journal digital network, USA Today and CNN Money.
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