EDITOR’S PICKS

Best Stocks Under 5 Dollars: Updated July 2019

day trading penny stocks

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 the best stocks for under 1 dollar 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 are also referred to as penny stocks. Learn more about penny stocks here.

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 the lower-priced stock. 

Top 5 Picks: Stocks Under 5 Dollars

To get you started on your investing journey, we’ve listed our top-5 low priced 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 based in the United States.

Agenus Inc. (AGEN)

Agenus is a clinical-stage immuno-oncology firm. Basically, the firm focuses on developing cancer treatments that activate the immune system to fight cancer. In addition to cancer treatments, Agenus is developing a variety of vaccines.

Like most small-cap biotech firms, Agenus is not profitable just yet, but 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.

Though Agenus isn’t turning a profit just yet, shares are trading for about three times sales; relatively cheap for an up-and-coming biotech firm. We’re not the only ones who like this one, Zack’s recently upgraded AGEN to a buy. AGEN could be worth keeping an eye on.

Gogo Inc. (GOGO)

This company provides inflight broadband and wireless internet connectivity to the aviation industry in the U.S. and internationally. It operates primarily through its three affiliates: Commercial Aviation North America (CA-NA), Commercial Aviation Rest of Work (CA-ROW), and Business Aviation (BA). CA-NA & CA-ROW provide inflight internet connectivity to commercial airlines in the U.S. and abroad. In addition, the BA unit offers a suite of powerful services for business clients, like an inflight entertainment service and satellite-based voice & data. 

The company caters to several sectors of the aviation industry. Its customers include aircraft manufacturers; aircraft owners & operations; government entities; and the military

Gogo is losing money but it’s growing. EPS is expected to grow by over 26% next year. Over 60% of GOGO is owned by institutions so it has a lot of Wall Street support, and the firm is an excellent performer on earnings, historically. GOGO posted an average earnings surprise of 38.68% in the preceding four quarters. 

Pitney Bowes Inc. (PBI)

This mid-cap tech play provides businesses technology to clients in the U.S. and abroad. Pitney Bowes offers a variety of services to help businesses manage their operations, and the company also provides revolving credit and interest-bearing deposit solutions. Some of the firm’s services include customer information management, location intelligence, and customer engagement software.

With the U.S. labor market close to maximum capacity, businesses have to find creative ways to utilize manpower. It’s possible that Pitney Bowes could capitalize on this trend. Its products help automate some office functions like mail sourcing and order fulfillment.

PBI is a great value pick. Its price to earnings ratio is less than 10 and it also pays a relatively healthy dividend of 4.98%. The problem here is that earnings are contracting and the company is forecasting little growth for next year. PBI has promising partnerships with Shyplite and Accenture PLC (ACN) that could be beneficial down the road, but this is more of a value play than a growth stock at the moment. 

Washington Prime Group (WPG)

Washington Prime Group isn’t technically a stock, it’s a real estate investment trust (REIT). REITs tend to be more appropriate for income investors because they offer stable dividend payments and low volatility.

However, this REIT play is a little different. WPG has greater risks than most REITs because of its exposure to retail leasing, a slowing industry, and its high amount of leverage. In addition, the trust’s Funds-From-Operations (FFO) to debt ratio is 9.8%, which Standard & Poor would classify as an aggressive risk.

WPG is walking a tight rope financially, but its generating quality earnings. 59% of the trust’s gross profits come from operations, so most of its earnings are business-related and recurring. Its last dividend payout yielded 27.47% of today’s share price, but it’s also possible that the next dividend will be cut so it yields closer to median rates.

Exela Technologies (XELA)

Exela provides business process automation (BPA) technology to clients in several industries. The firm’s customers include companies in banking, healthcare, insurance, and other sectors. The company operates three segments: Information & Transaction Solutions (ITPS), Healthcare Solutions (HS), and Legal & Loss Prevention Services (LLPS). Exela is a subsidiary of Ex Sigma 2 LLC.

Wall Street sentiment hasn’t been great for this stock. It was recently dropped by three hedge funds and Moody’s released a pretty negative report on the stock in May. But, Exela’s fortunes could soon turn around. News broke on July 18fth that Exela’s banking & financial solutions suite was recognized by a prominent business consulting firm. Share prices rallied by over 21% on the day the news broke.

However, negative sentiment could be an opportunity for contrarian investors with a long-term mindset. XELA is a value at only an 11.5 P/E ratio, and the company is forecasting earnings growth of 185% next year. There could be a huge upside in the stock if XELA proves the doubters wrong.

Best Stocks Under 5 Dollars:  Credibility Check

Pay attention to market capitalization. Generally, stocks with market caps below $500M tend to be more volatile. In addition, tt’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. 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. 

Screening tools help traders 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

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 when trading stocks this cheap.

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