Several experienced investors and market experts avoid classifying stocks as “cheap” or “expensive”. They tend to look beyond the face value of the stocks and consider their performance in the market and emphasize on earnings, estimate revisions, etc. while they are choosing a stock to invest or buy, which will hopefully be winners for investors.
As per John Divine,
”Trends in asset classes and company financials – as well as stock prices themselves – can be extrapolated to predict outperformers. And for believers in fundamentals, a number of the following stocks look attractive on those terms as well. Nominally cheap stocks, let’s say those trading for less than $15 a share, enjoy higher liquidity, which means narrower bid-ask spreads and confidence you’ll be able to sell when necessary.” 1
Buying Low Priced Stocks
Stocks that are at a lower price point or cheap, are often more volatile and can be more speculative than stocks that trade at higher prices. Although they are volatile; less expensive stocks have the competence and can be attractive to investors for many reasons. They also present the chance to take a larger position in a company.
While market experts are looking for a low priced stock they consider the same parameters and trends that they would consider for other stocks at a higher price. They look for similar trends in growth, value, momentum, and suitably analyze the potential that these companies have.
Top 5 Under $20 Stocks
According to Sanghamitra Saha, [Source (3)]
“In a nutshell, a high dividend feature clubbed with low prices can make an intriguing investment choice at the current level. After all, with low-priced stocks, retail buyers would need less cash to join the market.
Also, stocks below or equal to $20 see huge profits as share price increase of a dollar adds to 5% in one’s portfolio. Meanwhile, stocks priced at $100 or above see 1% or less gain if their share price rises by $1.”
Stocks under just $20 have potential and can be a good investment decision. Here are 5 stocks that are presently trading for under $20 per share that can be profitable for investors to buy heading into September –
- NeoPhotonics Corporation NPTN
Prior Close: $6.14 USD
NeoPhotonics Corporation is a San Jose, California-based firm that makes components for high-speed communications networks and holds a Zacks Rank #2 (Buy) currently and an “A” grade for Growth. NeoPhotonics has seen its stock price jump 73% in the last three months alone.
Based on estimates the stock NeoPhotonics’ current-quarter EPS figure is expected to jump from a loss of $0.05 per share from last year at the same time to 10% higher revenues. These positive changes on both the top and bottom lines are expected to continue for the year ahead as well.
- Danone S.A. DANOY
Prior Close: $17.82 USD
Danone is known to sell everything from Evian water to Silk milk and its namesake yogurts. It is essentially a food and beverage brand. DANOY shares have effortlessly outperformed the broader food market’s 6% decline with its shares have been soaring over 27% in 2019.
Another reason for investors to buy Danone stock is that it is a dividend payer, with a strong 1.92% yield at the moment. The firm’s bottom-line estimates have seen an upward movement lately for both fiscal 2019 and 2020. This has enabled it to earn a Zacks Rank #2 (Buy) currently and hold a “B” grade for Growth.
- First Horizon National Corporation FHN
Prior Close: $15.36 USD
First Horizon National Corporation is a regional banking, wealth management, and capital market services firm. Its shares have increased have by 12% in the past three months, while its broader industry slipped 6%.
Following its Q2 release, its earnings and estimate revision picture turned far more positive. Experts predict the EPS figure to climb roughly 13% on 5.1% higher sales in 2019. First Horizon also shows an impressive discount of price/sales ratio 2.0 against the industry average of 2.7. They also pay an annualized dividend of $0.56 a share, along with a strong 3.65% yield. [Source (2)]
- New York Mortgage Trust, Inc. NYMT
Prior Close: $6.16 USD
New York Mortgage Trust real estate investment trust that invests in residential mortgage loans, that is internally managed. NYMT shares have roughly increased by 5% in 2019 while, the real estate market at large displays an increase of 19%. Despite, a comparative lower climb, the stocks did well and also shows a whopping 13% dividend yield.
[Source (4)] “Earnings Per Share represents the portion of a company’s profit allocated to each outstanding share of common stock. The net income (reported or estimated) for a period divided by the total number of shares outstanding (TSO) during that period.
Data Provider: Data is provided by Zacks Investment Research”
New York Mortgage Trust’s market cap $1.4 billion and REIT’s Q3 2019 revenue is projected to skyrocket 96%. The full-year revenue is expected to surge 73.5% from $78.7 million to $136.6 million. [Source (2)]
- JetBlue Airways Corporation JBLU
Prior Close: $16.55 USD
JetBlue Airways stocks stood out since Wednesday after Deutsche Bank analysts said the airline stock’s recent dip has enabled a buying opportunity. JBLU is currently trading at a massive discount compared to its industry in terms of both forward earnings and sales.
The firm’s fiscal revenue for 2019 and 2020 are estimated to increase to 7.1% and 7.9%, respectively and its 2019 earnings are expected to surge 31%, with an added 22% bottom-line growth expected in 2020. Additionally, JetBlue Airways also plans to start its “European service” in 2021, with flights from Boston and New York to London.
When it comes to investing, buying cheap stocks, it is not enough to base your decision solely on absolute price– you have to invest in them relative to some measure of value. Buying cheap stocks based on absolute price alone could be detrimental. While investing in cheap stocks comparative to earnings, cash flow, or assets will make it possible = to protect yourself from the downside while giving you the high probability chance to enjoy the profits of the investments.