8 Best Cheap Stocks To Buy Under $5.00
Most investment professionals tell investors to stay away from stocks under $5. These stocks, commonly referred to as penny stocks, tend to come with the highest levels of risk. On the other hand, they also represent compelling opportunities. Believe it or not, small-cap stocks have outperformed their large-cap counterparts throughout history.
Read: 3 Things You Must Do When Your Savings Reach $50,000
The key to investing in smaller companies is doing adequate research and choosing the best stocks under $5. These are the types of stocks that have the potential to experience significant growth.
What Are the Best $5 Stocks To Buy Now?
If you’re looking for the best stocks under $5, you’re in risky territory. The smaller the company, the higher its potential to face insolvency, bankruptcy and significant losses. However, there are some gems in the market.
1. Ambev S.A. (NYSE: ABEV): $2.84 per Share
Ambev is an interesting play because it trades like a penny stock but is part of one of the largest companies in the world. The company is the South American arm of the world’s largest brewer, Anheuser-Busch InBev SA, and is the exclusive distributor of Pepsi products in Brazil.
Ambev’s full-year profits dipped slightly in 2020 but grew 11% and 14%, respectively, over the next two years. Revenues have climbed steadily, from $52.6 billion in 2019 to $79.71 billion last year. The company is also flush with cash, as demonstrated by its 5.20% dividend yield.
Analysts rate ABEV a “buy” according to Yahoo Finance, although the tide is shifting toward “hold.” If the growth in its parent company is any indication of its future, the stock is one of the best in its price range.
2. Braemar Hotels & Resorts (NYSE: BHR): $2.62 per Share
Braemar Hotels & Resorts is a real estate investment trust that invests in luxury hotels and resorts. Its current portfolio includes Hilton, Marriott and Ritz-Carlton branded properties in seven states throughout the U.S., with a combined total of over 4,000 rooms.
CEO and president Richard J. Stockton came to Braemar 25 years ago after 15 years with Morgan Stanley. He said in a Q3 2023 earnings recap that record highs in 2022 resulting from a return to travel after the pandemic were unsustainable, as demonstrated by unfavorable year-over-year comparisons. Nevertheless, our resort hotel performance continues to meaningfully outperform pre-pandemic levels.”
Stockton also said that urban hotels are on an “upward recovery trend” as demand for business and corporate travel increase.
BHR shares are down about 36% thus far, but analysts apparently see that as an opportunity. They rate it a “buy” with the potential to nearly triple in price in the next 12 months. In the meantime, BHR’s dividend yields 7.49%.
3. Sachem Capital Corp. (NYSE: SACH): $3.80 per Share
Connecticut-based Sachem Capital Corp. is another REIT, but instead of purchasing real estate, it originates, services and manages first mortgage loans. The company’s investors and shareholders fund a variety of loan types, including bridge loans, new construction, fix and flip and refinance.
Shares appear to be an excellent value right now, with analysts forecasting roughly 21% gains in the coming year and 110% growth over the next five years. What’s more, the 44-cent dividend represents a 11.49% yield. Analysts polled by Yahoo Finance rate the stock a “buy.”
4. Bark, Inc. (NYSE: BARK): $0.8076 per Share
Bark is a direct-to-consumer company focused on the pet supplies space. Founded in 2012 as BarkBox, the company has since changed its name to Bark, Inc.
Bark’s flagship product, the BarkBox — a monthly subscription-based product that ships goodies for your dog to your home — did well during COVID-19. However, as traditional retail opened back up, sales slumped. At the same time, investors ran from special-purpose acquisition companies — Bark went public as a result of its merger with Northern Star Acquisition Corp., a publicly traded SPAC — causing further pain for the company.
Nonetheless, some are expecting a comeback after the company restructured its business to offer more products. Of the three analysts following this stock in September and October, two rated it a “strong buy” and one rated it a “buy.”
5. MarketWise, Inc. (NASDAQ: MKTW): $2.96 per Share
Tech stocks fell hard in the bear market that began last winter, but they’ve rebounded nicely in the market’s recovery. MarketWise, Inc. is a perfect example. The stock was down over 23% year to date in August. However, this fintech, which offers a subscription-based platform with financial research, education and tools for self-directed investors, is up around 75.15% year to date as of Dec. 27. And analysts say it’s still undervalued.
While profits have trended downward, MarketWise’s subscriber base grew 15.5% year over year in the third quarter. Analysts rate the stock a “buy” with a $3.83 price target.
6. Ardelyx, Inc. (NASDAQ: ARDX): $6.52 per Share
Ardelyx is a biopharmaceutical company focused on developing and commercializing drug candidates that address significant unmet medical needs. Its current product takes a novel approach to treating irritable bowel syndrome. Pipeline products include a small-molecule therapy for renal and cardiorenal conditions, including metabolic acidosis, for which there is no cure.
The bottom fell out in July 2021 for ARDX shares, and at one point they traded for 25 cents. But prices have trended upward over the past 16 months and gained 146% over the past year. All seven analysts who follow the stock rate it a “buy” or “strong buy,” and the price target is $10.31 — almost double the current share price.
7. Envela (NYSE: ELA): $5.26 per Share
Envela is a “re-commerce” company offering retail and commercial services. On the retail side, it buys and sells jewelry and bullion to consumers, dealers and institutions. On the commercial side, it provides electronics recycling solutions that help businesses safeguard their data while reducing waste.
ELA share prices plummeted in August and continued to trend downward until early November. They’re currently up from their 52-week low but still appear to be undervalued. Yahoo Finance forecasts 112% returns over the next five years, and analysts who watch the stock believe it could reach $8 within the next 12 months.
8. Genasys Inc. (NASDAQ: FNSS) $2.00 per Share
Critical communications systems are an integral part of emergency management. Genasys provides an Internet of Things platform for those communications, giving governments and other enterprises the tools they need to broadcast targeted messages, issue mass alerts and facilitate evacuations.
Genasys has had six consecutive years of revenue growth and expects 2023 to be its seventh. While not yet profitable, its 12-month price target is $4.80, a little more than double the current share price.
Tips for Selecting Penny Stocks
Stock investing is inherently risky, and penny stocks are some of the riskiest of all. However, you can reduce the risk of losing some or all of your investment by researching stocks before you buy. Here’s what to look for:
Shares that trade on a major exchange, such as the Nasdaq or New York Stock Exchange, rather than over the counter
Undervalued companies. Use an online screening tool to compare a stock’s P/E ratio to the ratios of similar companies. Lower ratios are better.
Stocks for companies that represent an economic moat. A moat is a distinct advantage that helps a company maintain an edge over competitors. Alphabet is one example. As it came to dominate the internet search market, it leveraged its processes and its data to expand into advertising and other industries to the point that there’s no close second waiting in the wings.
Liquidity. A stock with low trade volume might be difficult to sell and could leave you with worthless shares.
Stocks with share prices of at least $1. Stock exchanges can delist companies whose shares trade for less than $1 for an extended period.
If you’re not sure you’re ready to invest real money into penny stocks, consider opening a practice account. A number of brokerages, including Webull and eToro, offer simulators you can use to test and hone your stock-picking skills.
Final Take
Although most stocks under $5 come with significant risk, sometimes taking that risk pays off. If you’re considering jumping into small-cap stocks, those listed above are some of the best stocks under $5 on the market today.
FAQ
Find the answers to some of the most common questions about stocks under $5 here.
What is a good stock to invest $5 in?
All the stocks listed above represent strong investment opportunities for under $5 per share. However, you must do your research to determine which stocks in that price range fit into your unique portfolio.
What are some good $1 stocks?
Some stocks in the $1 range to consider are:
Envela (NYSE: ELA): $5.26 per share as of Dec. 27
Bark, Inc. (NYSE: BARK): $8076 per share as of Dec. 27
What are the best stocks under $10?
There are several stocks on the market for $10 or less. However, the best stocks in that price range for you may be different than the best stocks for your neighbor. Do your research and find quality investments that fit in well with your current portfolio.
What are the best cheap shares to buy now?
Some of the cheapest stocks to buy are:
Ambev S.A. (NYSE: ABEV)
Braemar Hotels & Resorts (NYSE: BHR)
Sachem Capital Corp. (NYSE: SACH)
Bark, Inc. (NYSE: BARK)
MarketWise, Inc. (NASDAQ: MKTW)
Ardelyx, Inc. (NASDAQ: ARDX)
Envela (NYSE: ELA)
Genasys Inc. (NASDAQ: FNSS)
Daria Uhlig contributed to the reporting for this article.
Share prices are accurate as of market closing on Dec. 27, 2023.
This article originally appeared on GOBankingRates.com: 8 Best Cheap Stocks To Buy Under $5.00
