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.
Best Stocks Under 5 Dollars: April 2020
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 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.
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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.
Recently, Power Plug announced its partnership with Lightning Systems. The two companies partnered to build the world’s first electric, fuel cell-powered, zero-emission Class 6 truck. Demand for zero-emission commercial fleet vehicles is expected to sky-rocket over the next few years, so there is potentially a massive market for these vehicles.
Like many highly-touted startups, Plug is not profitable and it’s trading at a big premium to its book value. However, this stock could be a great speculative investment for investors who believe in the product. Plug Power could become a major player in the market over the next decade if hydrogen fuel cell technology takes off, so investors could net massive gains if they get in on the ground floor.
Colony Capital (CLNY)
Colony Capital is a real estate investment trust (REIT) that focuses on industrial properties. With over $50 billion in assets, it’s a stable stock that pays steady dividends. However, it also has an interesting case for its long-term growth potential.
The firm recently expanded into the digital real estate sector. The new initiative includes investments in high-tech assets like data centers, cell towers, and fiber optics. Colony hopes that 5G will give these types of holding a major lift over the next decade and, if they’re right, these investments could generate major gains for shareholders.
Investors usually buy REITs for their relatively stable price action and above-market dividends. However, Colony Capital’s 5G initiative gives it the added possibility of long-term asset appreciation, so investors get the best of both worlds.
Iamgold Corp (IAG)
IAMGOLD is a Canadian company that owns and operates gold mines in various countries like Burkina Faso, Suriname, and Canada. It previously operates in Botswana and Mali. IAMGOLD engages in the exploration and evaluation work of mineral resources in South America, Africa, and North America.
The company planned to ramp up production on its Westwood project, but the coronavirus pandemic turned those plans upside down. However, the company could boost production in this region once the outbreak is over. IAMGOLD started production at its Saramacca facility last year, which could also increase its output.
RealNetworks provides software and services for streaming media producers and content creators. They also offer subscription-based entertainment and mobile messaging products.
In October last year, RealNetworks joined NVIDIA’s Metropolis Software Partner Program with its Secure Accurate Facial Recognition (SAFR) system. SAFR uses advanced AI to instantly detect and match people with an underlying database. The system can detect and identify millions of people with nearly perfect accuracy in a fraction of second. It can also assess demographic information, sentiment, and line-of-sight without collecting any personally identifiable information.
SAFR is intended for use in smart cities, transit hubs, retail, and locations to enhance security and provide improved visual intelligence. Under the terms of the Metropolis Software Partner Program, NVIDIA will provide the chips to power the technology.
There’s a lot of controversy surrounding the use of facial-recognition programs in cities, but it seems likely that the technology will be adapted in some form or another. Critics argue that facial-recognition software in public places derides personal privacy, and some cities – including San Francisco – have banned the technology outright. If other cities follow San-Fran’s lead, it could be a major obstacle for RealNetwork’s long-term growth plan, but the upside potential might make it worth taking a chance with a speculative position.
Cemex SAB (CX)
Cemex is an international building materials company based in Mexico. The company currently holds the title of the world’s third-largest cement manufacturer. Cemex manufactures and distributes cement and ready-mix concrete, and the firm operates in over 50 countries.
Currently, Cemex pays a $0.0995 annual dividend that yields about 5.2%. However, its payout ratio is 166% so it doesn’t appear to be sustainable in the long-term. As a result, the company could slash the dividend at some point this year.
The company had a challenging 2019, and the global pandemic could create more problems for Cemex this year. The outbreak is choking off demand for building materials like cement, so Cemex could have difficulties meeting its numbers. However, the company could be a great long-term value play. Share prices are resting near multi-year lows, so the stock looks like a bargain at these prices.
Despite a potentially difficult road ahead, Cemex is still trading slightly above its 5-year P/E average, so the market seems to have some long-term optimism. In any case, the company is very healthy financially, so it’s in good shape to weather a downturn. Cemex could be an interesting long-term value play in the materials sector.
Best Stocks Under $5: 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 Cheap Stocks
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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