There are opportunities for value investing if you look in the right places. To create a list of the best stocks under $20.00, investors must evaluate smaller, riskier companies and sectors that are either unknown or despised by the market at large.
While some of these inexpensive stocks may not appear particularly attractive at the moment, long-term investors prepared to exercise patience and hold onto these companies' shares over multiple economic cycles will profit.
Certain of these businesses represent fantastic investment opportunities since they are too small and regarded as too risky to attract the majority of managed mutual funds and Wall Street money managers. Others operate in unloved and unproven segments of the market.
Stocks under $20 are a low-cost alternative to more expensive assets for investors and traders. Despite the widespread belief that lower-priced stocks are riskier, the risk profile of many assets under $20 is comparable to that of much higher-priced stocks, as is the risk for profit from investing in them.
Additionally, well-established stocks under $20 frequently pay dividends, making them an attractive option for income investors. Certain of these stocks also offer listed options, which provides extra revenue streams if you want to sell covered call options.
We define cheap stocks as those that are less than $20 per share (but greater than $5 per share) and show a positive year-to-date return.
Another phrase for inexpensive or cheap stocks is "undervalued." For instance, an undervalued firm may have solid fundamentals. Still, the market has not yet recognized this, and the stock's present price does not fully reflect the company's true, possibly greater value. (This corresponds to the value and growth stock investing techniques.) In other words, undervalued stocks provide exceptional value for money, not simply a low share price.
Purchasing stocks for under $20 is an excellent way to begin building your portfolio. While some stocks may be inexpensive, they may yet provide significant future growth potential.
This is true for businesses that are growing rapidly and entering new areas. While they are still inexpensive stocks, they have moved beyond the "penny stock" level, indicating that they are likely to be more reliable than stocks priced below $5 or $10.
It's usually good to keep an eye out for stocks growing at this price range. Purchasing these stocks while they remain reasonable might occasionally yield massive rewards later on if the company's growth continues.
When determining the finest stocks under $20, consider the business plan of the company as well as crucial market data indicators. Revenue and profits per share increase year over year can signal the potential for share prices to continue rising. Additionally, you can examine the stock's earnings per share ratio to determine whether it is over-or under-valued in contrast to its most current financial data.
1. Delectable Ingredients (DAR)
Darling Ingredients' shares, a rendering and biodiesel fuel firm, were off to a strong start in 2017. The stock has been up 17% a year so far, compared to a 7% increase for the S&P 500.
The company is riding a wave of momentum following a great finish to 2016, and continuous investments in its biofuels sector should keep it rolling this year and into the future. Investors are bullish on Darling's joint venture with Valero Energy (VLO) to operate a plant in Louisiana that will convert animal fat and waste cooking oil into diesel fuel. The expansion of the factory is scheduled to be finished in the second quarter of 2018.
Additionally, investors appreciate the company's ongoing debt reduction efforts. Darling had long-term debt of $1.73 billion as of Dec. 31, 2016, down from $1.89 billion a year earlier.
Analysts anticipate the stock to continue its outstanding performance in the months ahead. According to Zacks, all three analysts covering Darling grade the stock as a strong buy, and their average price estimate of $17.17 suggests a 15% annual gain for Darling stock. With earnings-per-share growth of 9% this year and 21% next year, according to Zacks, the stock appears attractively valued at 21 times projected earnings.
2. Palantir Technologies (PLTR)
Once upon a time, a mathematician in the United Kingdom stated that "The new oil is data. As with oil, data is precious, but it cannot be used if it is not purified." Palantir Technologies (PLTR 4.08 percent) is a data analytics business that solves this very issue. Its two software platforms, Foundry and Gotham, let clients create custom solutions for data analysis that aid in making actionable decisions, identifying trends, and assisting human analysts. The company itself believes in "enhancing, not replacing, human intelligence."
Palantir began operations in the early 2000s, initially garnering traction with the US government. Palantir is used by a range of federal organizations, including Homeland Security, Defense, and others. While Palantir has expanded into the private sector to engage with businesses, the government continues to be the company's major customer, accounting for 58% of sales in 2021.
While revenue from commercial accounts increased by just 31% in 2021, Palantir's commercial client base tripled over the year compared to a 470% increase in government revenue. This could result in sustained revenue growth in the future since the company's multi-phase sales process produces income after the company's software becomes mission-critical for its customers.
3. AMC Entertainment Holdings, Inc. (NYSE: AMC)
AMC Entertainment Holdings, Inc. (NYSE: AMC) owns and operates multiple movie theater chains throughout the United States and Europe. It made headlines early last year when retail investors banded together on social media sites and purchased the company's shares in bulk, driving the share price higher and inflicting significant losses on institutional investors who had bet against its shares.
AMC Entertainment Holdings, Inc. (NYSE: AMC) reported fiscal Q4 sales of $1 billion and non-GAAP earnings per share of -$0.11, both of which are above analyst projections. In April 2022, the firm announced the acquisition of seven theaters in Connecticut, New York, and Maryland to increase its footprint in the states.
During the fourth quarter of 2021, Renaissance Technologies acquired a $127 million investment in AMC Entertainment Holdings, Inc. (NYSE: AMC). This was accomplished through the ownership of 4.6 million shares, which represented 0.15 percent of its investment portfolio. According to Insider Monkey's survey of 924 hedge funds over the same time period, twenty-four hedge funds owned the company's shares.
The largest shareholder in AMC Entertainment Holdings, Inc. (NYSE: AMC) is D. E. Shaw's D E Shaw, which holds 4.9 million shares worth $135 million.
4. VODACOM (VOD)
Vodafone, the UK's largest mobile operator, has recently underperformed the stock market. This is a result of the company's lackluster performance over the last couple of years and its growing debt load.
On the other hand, Vodafone is an excellent long-term bet due to its recent outstanding performance, attractive stock price, and solid dividend profile.
The corporation just reported first-half results that were better than expected. The telecom behemoth increased its earnings forecast for 2022 from 15 billion euros to 15.2 billion euros. Additionally, it upped its objective for free cash flow by 100 million euros.
Additionally, it offers a respectable dividend yield of nearly 6.8% and a payout ratio of nearly 90%. If it can reduce its debt load and improve its operational effectiveness, VOD stock could see a dramatic comeback in the near future.
5. Elixir (EXEL)
Exelixis is a pharmaceutical business specializing in oncology. Its claim to fame is the enormous success of its cancer medication, Cabometyx.
Since the drug's approval in 2016, Exelixis has worked to bolster its market position by conducting trials to combine Cabometyx with additional medications to treat more illnesses.
Despite the intense competition in the RCC market, the company achieved a double-digit increase in Cabometyx sales. The drug has produced over $1 billion in revenue.
Cabometyx may earn millions of dollars in annual revenue in the future as a result of various clinical trials. Additionally, the corporation has a cash position of more than $1.5 billion, allowing it to continue investing in its operations.
6. Everi (NYSE: EVRI)
Everi Holdings Inc. is a provider of entertainment and technology solutions to the casino and online gaming sectors in the United States, Canada, the United Kingdom, Europe, the Caribbean, Central America, and Asia. It operates through two segments: games and financial technology. The company provides both local and wide-area progressive gaming goods, including classic mechanical reel games and video reel games, as well as TournEvent, a slot tournament terminal and system machine; and it also distributes player terminals, licenses, game material, and related equipment. Additionally, it provides financial access services, including funds disbursed, credit card and point-of-sale debit card financial access transactions; check warranty; CashClub, a software transactions platform that provides gaming establishments with a personal computer workstation application user interface and point-of-sale terminal; CashClub Wallet, a payment systems platform for gaming establishments; and fully integrated kiosks that perform multiple functions on the casino floor. Additionally, the company provides non-funds dispensing terminals that authorize credit card financial access, point-of-sale debit card financial access transactions, and database services.
Additionally, it offers Everi Compliance solutions to assist casino operators with regulatory compliance; Central Credit, a gaming patron credit bureau service; JackpotXpress, a jackpot payout, and tax form administration platform; and a loyalty platform, as well as support and maintenance services. Global Cash Access Holdings, Inc. was the company's previous name until August 2015, when it changed to Everi Holdings, Inc. Everi Holdings Inc., headquartered in Las Vegas, Nevada, was founded in 1998.
7. Newmark Group Inc. (NASDAQ: NMRK)
Newmark Group is a New York-based developer and manager of commercial real estate. The corporation owns properties throughout the United States and has an international presence.
While commercial real estate is its primary focus, it also has a sizable portfolio of multi-family residential properties.
A broad income stream portfolio is critical for every organization since it can assist keep a corporation afloat during difficult economic times.
Newmark performed admirably well in 2021, posting some significant growth. Apart from a recent decline, share values were at record highs. Its Q4 financial report astounded investors with enormous sales and earnings per share growth, and other key growth measures have been robust as well.
Newmark Group's price-to-earnings ratio is also low at the moment, indicating that the company's share is likely undervalued despite its growth. Numerous Wall Street analysts anticipate that Newmark stock will continue to climb even after this massive surge.
Newmark has demonstrated the ability to weather difficult economic times, making it an interesting investment in the real estate business.
8. Mitek Systems (NASDAQ: MITK)
You may not be familiar with Mitek Systems (NASDAQ: MITK), but if you've ever deposited a check using your bank's mobile app, you've almost certainly used the company's technology. Mitek generates the majority of its revenue from software (subscription) and hardware connected to mobile check deposits, but the firm also offers identity verification software and a product that expedites form completion.
Mitek recently disclosed its fiscal 2022 first-quarter results. Revenue grew 25% year over year to $33 million, a record for the first quarter. The increased revenue also impacted profitability and cash flow, as net income jumped 44 percent and cash from operations totaled $2.3 million. The balance sheet closed the quarter with $218 million in cash and investments.
Mitek serves over 7,500 financial services businesses. However, there is some risk of customer concentration, with two customers accounting for 25% of sales in Q1 2022. Having said that, it's simple to see why mobile check deposit and fraud detection are gaining traction as our financial institutions become increasingly computerized. This risk of concentration should diminish over time.
Mitek's share price is currently about $13, implying a price-to-sales ratio of 4.7 and a free cash flow ratio of 20. Both of these are appropriate prices for a corporation operating in a significant and growing industry.
9. SOFI Technologies, Inc. (SOFI)
Founded in 2011, the company is headquartered in San Francisco, California. SOFI is an online financial services company with a mobile application that provides loans, mortgages, banking services, investments, personal finance tools, and direct deposit, among other things.
Since early November, the company's shares have fallen 41% year to date and approximately 61% year to date. It is currently trading at less than $7 per share, having been hit by the slump of inexpensive growth stocks.
Fintech went public in early 2021 and is still losing money. However, there is much to admire about SoFi's potential. It has been rapidly expanding, achieving records for new members/users acquired and items used in the fourth quarter while also increasing revenue by 67 percent year over year.
The other distinguishing feature of SoFi is its banking-as-a-service business, which it acquired in 2020 with the acquisition of Galileo and further strengthened this month with the acquisition of Technics. This business assists other businesses in developing their own digital banking businesses.
Through application programming interfaces, the combination of Technisys' platform and Galileo will support a variety of products, including checking, savings, deposits, loans, and credit cards. It will enable SoFi to satisfy the growing needs of its current partners while also attracting new ones. With its one-stop-shop financial services platform, SoFi aspires to be the Amazon Web Services of fintech.
10. Advanced Micro Devices (AMD)
Advanced Micro Devices' stock plummeted on May 2, a day after the company's first-quarter earnings fell short of analysts' forecasts. This frustrated momentum traders, who had nearly quadrupled AMD's price in the previous year. However, for long-term investors prepared to take a chance, this setback presents a risk to investing in AMD's potential at a far lower price.
"While the stock is likely to be weak in response to the results, we anticipate a slew of positive catalysts will emerge for the remainder of 2017, and our buy thesis remains firmly intact," said Canaccord Genuity analysts.
AMD is focusing on the graphics processing unit (GPU) market – the brains that enable computers to render images – due to the market's growth possibilities. GPUs are in high demand across a variety of rapidly growing industries, including data centers, gaming, and virtual reality. Simultaneously, AMD continues to compete with Intel (INTC) in the traditional computer processor sector.
The firm is a market leader in the gaming industry, having been the exclusive provider of specific specialized chips for Microsoft's Xbox One and Sony's PlayStation 4. AMD stands to benefit from Microsoft's upcoming Scorpio gaming console launch later this year. Do not be shocked if a successful launch of the console system results in a boost to AMD stock.
Stifel analysts, who rate the stock at hold, believe the company is on track to increase market share and return to profitability on an adjusted basis this year. (In the first quarter, AMD lost 4 cents per share on an adjusted basis.) In general, analysts who follow AMD are divided between extreme optimism and caution. According to Zacks' survey of 18 analysts, nine rates it as a strong buy, eight rates it as a hold, and one rates it as a strong sell.
Conclusion
"Purchase low, sell high" "is a well-known financial proverb. As a result, investors are constantly on the lookout for undervalued firms that have the potential to deliver exceptional value over time. "It is far preferable to acquire an amazing company at a reasonable price than it is to acquire an ordinary corporation at an ordinary price," investing guru Warren Buffett once stated. Purchasing stocks for under $20 is an excellent way to begin building your portfolio. While some stocks may be inexpensive, they may yet provide future growth potential.
This is particularly true for businesses that are growing rapidly and entering new areas. While these are still inexpensive stocks, they have surpassed the "penny stock" level. It's usually good to keep an eye out for stocks growing at this price range. Purchasing these stocks while they remain reasonable might occasionally yield massive rewards later on if the company's growth continues.
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