Best Stocks Under 5 Dollars: March 2020

If you’re investing on a small budget, you can appreciate the value of cheap stocks. The best stocks under 5 dollars are a great place to start for many new investors. They’re cheap enough that most investors can afford to buy a round lot of 100 shares. You won’t pay any more than 500 dollars for a lot of any of the best stocks under 5 dollars, so they’re perfect for new traders.

Be sure to check out this article for more low-cost options, and the best stocks for under 10 dollars offer even more great picks for everyday traders. Stocks under 5 dollars or those that trade under $5 per share are also referred to as penny stocks. Learn more about penny stocks on this page.

Many blue-chip stocks are too expensive for most retail investors. A thousand bucks will only get you about 5 shares of Apple (AAPL).  You could buy 200 shares of a five-dollar stock for the same price, and if share prices went up by only one dollar you would net a 200-dollar gain. Therefore, in our hypothetical Apple trade, share prices would have to make a 40-dollar move to net you the same gains as low-priced stocks. 

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Top 5 Picks: Stocks Under 5 Dollars

To get you started on your investing journey, we’ve listed our top-5 low priced penny stock picks. These stocks are high-risk high-reward assets, so remember to consult a professional financial advisor before making any investments. All of our best stocks for under 5 dollars are also based in the United States.

Agenus Inc. (NASDAQ: AGEN)

Shares of Agenus fell off a cliff when the coronavirus crash kicked off, but this biotech stock has a lot of long-term potential. It’s been posting solid revenue and earnings growth over the last few quarters, and it has a promising product pipeline that could pay off big in the future. The coronavirus should have a minimal impact on Agenus’s core business, so there seems to be a disconnect between the price action and the actual impact on earnings. As a result, the recent sell-off could be a long-term buying opportunity. 

Like most small-cap biotech firms in the industry, Agenus is not profitable just yet, but there’s a sign that the future looks bright. The firm has collaboration agreements with several notable biotech firms, and it’s also working with Gilead Sciences (GILD) sciences to develop immuno-oncology therapies.

FuelCell Energy (NASDAQ: FCEL)

This micro-cap company specializes in producing fuel cells for large-scale industrial applications. Its products use chemical reactions to produce electricity for a variety of industries. The firm has clients across various sectors, including industrials, wastewater treatment, healthcare, communications, and more. The company generates most of its revenues in the United States and South Korea.

We first called out FuelCell in our newsletter in November. It spiked rapidly after that, and a lot of readers made some pretty nice gains. It started to slide after the coronavirus fears pushed stocks into a bear market, but it’s still up over 40% from when we made the call. FCEL could have some short-term potential for a rebound once the bearishness subsides.

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ViewRay Inc. (NASDAQ: VRAY)

ViewRay makes a revolutionary new MRI machine that allows doctors to read real-time MRI images during focussed radiation treatments. Focussing the radiation allows doctors to better target the affected tissues, and it helps reduce harmful side effects for patients.

Right now, ViewRay is in a bit of a slump. It missed badly on its first earnings report for 2020, but we still think this stock has long-term potential. ViewRays MRIdian technology is a real game-changer, and it’s already available in a handful of hospitals around the U.S. Healthcare providers rave about these machines, and patients appreciate that they reduce radiation exposure in comparison to traditional treatments.

ViewRay was riding high last year, but it came crashing down along with the rest of the market last February. Investors must be assuming that the hospitals are more focussed on their COVID-19 response than buying fancy new MRI machines. However, this slide could be a long-term buying opportunity. Shares are down nearly 50% from their 2019 highs, so it could be a long ride back up if things work out.

Any way you slice it, ViewRay has a valuable technology on their hands, so there’s a good chance it will rebound when the market comes back to its sense. Even if it doesn’t bounce back, ViewRay could be a possible buyout target for a larger company.

Plug Power Inc. (PLUG)

This company manufactures hydrogen, fuel cell systems, and other alternative energy technologies for material handling and stationary power applications in North American and Europe. Its primary products are proton exchange membrane (PEM) fuel cell and fuel processing technologies.

Renewable energy is the future, but we don’t know which technologies will be adopted on a mass scale just yet. Right now, EVs look like they will be the next generation of transportation, but hydrogen fuel cell vehicles are giving them a run for their money. This technology has several benefits over battery-powered EVs, and some argue that they are a better long-term solution for the environment because they don’t have massive, toxic batteries like EVs. Some people have even called hydrogen-powered vehicles “Tesla Killers”. Outsider Club has a great presentation on hydrogen vehicles. Check it out here.

Best Stocks Under 5 Dollars:  Credibility Check

Pay attention to market capitalization. Generally, stocks with market caps below $500 million tend to be more volatile. In addition, it’s also important to consider which exchange lists the stock. 

OTC markets have less stringent listing requirements than NASDAQ or NYSE, so it’s important to pay attention to exchanges when considering a trade or buy. Most stocks under 5 dollars are not in the S&P 500 or other major indices. 

Finding The Best Stocks Under 5 Dollars

To find your own 5-dollar stocks, use a stock screener. Most brokers have a stock screener built into their trading platforms. Screeners are a great tool for finding new trade opportunities to buy.

Screening tools help investors sort through stocks and find the ones that meet their criteria. It’s like a search engine for stocks. Finviz has a free screening tool that offers tons of features and works well enough for most retail traders. You can also search for buy recommendations.

Best Stocks Under 5 To Buy: Expect Volatility

Even the best stocks under 5 dollars are not a sure thing. Small-cap stocks are even more volatile, so you have to keep a close watch on your positions in the market when trading stocks this cheap. For more interesting stocks, read here.

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Chris Dios is an American writer and entrepreneur based in the Greater NYC area.

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