Most financial news is dominated with huge mega-corporations. These companies tend to come at a high share price as well.
Facebook and Microsoft trade for around $200 for a single share. Apple trades for over $350. And some companies like Google and Amazon trade for thousands of dollars per share. Investment advice often means to stick with these big names.
On the other end of the investment world are lesser-known names that can produce huge fortunes as well. But they trade for a far lower price. Narrowing that universe to just under $5 per share, we can find thousands of potential investment opportunities there. Some of those are great companies, even if they’re in an earlier stage of growth and aren’t household names like the mega-firms yet. They’re simply too cheap for Wall Street stock advisors to follow.
Stocks that trade under $5 per share are considered “penny stocks.” While that can sound risky, buying these otc stocks ahead of a major growth spurt could do far more than buying a big, established name now.
- Insurance For Your Investments? The Answer...Options
Investors are reevaluating how to do things in 2021. With Options, a stock’s price can drop to zero, but you can never lose more than the option’s premium and you know the full amount at risk right from the get-go.
Options are the most dependable form of hedge, and this also makes them safer than stocks.
With an eye towards finding the “next” Microsoft or Apple, we’ve got the stock picks for the 10 best stocks under 5 dollars to buy right now:
Best Stock Under $5 #1: Lloyds Banking Group (LYG)
Bank stocks tend to get hit pretty hard in any financial meltdown. But with shares down nearly half in the past year, Lloyds Banking Group is deep into penny-stock territory, at least on U.S. exchanges.
The company provides a number of traditional banking and financial services such as insurance with a variety of options under a number of different brands. The company has been in business since 1695, showing that not all penny stocks are necessarily small companies.
Lloyd’s is pretty famous in the financial world for some of the unusual things it has insured over the years. It’s come a long way from ensuring cargo in the 17th century to such esoteric assets as Keith Richards’ hands and Bruce Springsteen’s voice in the modern age.
The best thing about this company isn’t just the value in shares as banks are out of favor. Rather, it’s the fact that the company tends to pay out a dividend as well, typically in the 3 percent range. For investors looking for a low-priced way to start receiving income on their invested capital, investing in a dividend-paying stock is the way to go.
Best Stock Under $5 #2: Coty Inc. (COTY)
With a $3 billion market capitalization and over 19,000 employees, this cheap stock is a part of a sizeable corporation. Coty designs beauty products worldwide, including cosmetics and fragrances. Coty’s products are sold a number of well-known brands, including Calvin Klein, Hugo Boss, and Tiffany among others.
Shares are down over 60 percent in the past year. Sales have dropped sizably, as rising remote work trends have led to a drop in demand for cosmetics.
Yet the company has a long operating history and still managed to bring in over $7 billion in revenues in the past year. Insiders own nearly two thirds of shares, making this one of the low float stocks for investors to buy.
So long-term, we see Coty moving past its current challenges and providing investors with a sizeable profit opportunity in the years ahead, and investing in shares now is likely to lead to a sizeable winner as the economy gets back to normal.
Best Stock Under $5 #3: Banco Bilbao Vizcaya Argentaria (BBAC)
Another international penny stock banking play, this one has a staggering 13.2 percent dividend yield right now. The catch is that investors are buying a bank in Spain, an area that often suffers banking crises from time to time. It’s no wonder that shares have slid 37 percent in the past year, leading to an ugly stock chart!
Yet as a large and well-capitalized bank with a global footprint, offering both traditional banking services as well as private and wholesale banking operations, there’s a lot of potential upside to shares ahead as the economy gets back on track. The bank has also been working with customers to enhance digital and mobile offerings, giving it a bit of a fintech twist to it right now.
Investors buying today get an inexpensive global play, but also a large dividend stock. While there’s always some fear surrounding large dividends that a cut may be imminent, the overall valuation here makes for an attractive penny stock play in a company that should be trading far higher.
Best Stock Under $5 #4: Pareteum Corporation (TEUM)
Pareteum Corporation (TEUM) operates a communications cloud services platform. It integrates IT and back office functions with a single-sign-on application program.
It also provides support systems in those areas. Typically, software support is a recurring revenue business, rather than a one-time sale. That makes for improved and consistent profitability over time.
The software space is generally a solid investment thanks to high profit margins. With no physical product to deliver, the costs of making a product are limited to development, as opposed to manufacturing and delivery with physical goods. That can lead to higher profit margins.
In 2020, remote accessibility is also a critical need, and the company’s software is well positioned for that as well. The company has seen its shares decline by over two thirds in the past year, even as revenue growth has risen by 468 percent.
However, shares have already more than doubled off their prior low, and a new uptrend in shares appears to be shaping up. Those returns could improve even more if the company’s recent surge in revenue growth continues.
Best Stock Under $5 #5: Nokia (NOK)
Nokia is a well-known name, largely thanks to its ubiquitous cell phones before the smartphone era kicked off.
The company is alive and well, and operates as a multi-national telecom company with infrastructure assets and wireless services, providing strong cash flow. That makes this penny stock an interesting way to get in on 5G trends as well, and add some more international exposure to a stock portfolio. Both trends are useful as part of any investment strategy.
Shares of the company are down about 12 percent over the past year, but have been moving higher from lows set during the stock market panic of 2020. The company has also recently shaken up its C-Suite, with a new CEO and CFO bringing new changes to the helm that could help bring the company back to its glory days.
While shares aren’t a bargain on an earnings basis right now given the economy’s poor performance this year, shares do pay a 1.3 percent dividend yield.
Best Stock Under $5 #6: Endeavor Silver Corporation (EXK)
The gold penny stock space has a number of plays in the precious metals field. These companies are typically more exploratory in nature than the large mining and royalty companies, which already have done the exploration and are now extracting the metals.
One top penny stock mining play is Endeavor Silver Corporation. Gold prices are in rally mode right now. On a percentage basis, silver tends to outperform silver, both on the way up and on the way down. With a rally for the metals right now, a smaller silver play has some great potential here, before trading volume explodes.
Even better, Endeavor Silver has three producing mines in Mexico, as well as interests in some other mines in Mexico as well as a mine in Chile. Compared to the landmines of potential exploratory penny mining stocks, one that actually produces is in a strong position right now for massive profits ahead. Consider investing in this solid play among the penny stock mining universe.
Best Stock Under $5 #7: Matinas BioPharma (MTNB)
The penny stock world is riddled with biotech stocks and pharmaceutical companies. That’s because these companies are established to build drugs for a specific medical ailment, and if they can produce a drug that’s successful, a larger company will buy them out at a massive premium. That means massive upside potential.
It’s a rich field for penny stock traders, and with shares under $1 each, Matinas BioPharma could be a big winner. The clinical-stage company is working a on a number of products using lipid nano-crystal technology. They’ve also partnered to work on novel therapies for HIV treatment as well as antiviral drug candidates.
They’ve had some positive developments, and shares tripled last year. But with the focus on the healthcare space on dealing with a novel coronavirus right now, shares have given back most of those gains. If even one of their products appears to have good prospects for FDA approval, however, we’ll likely see another big surge in shares here. Investors should set a price target of $1 for whether or not to buy shares of this innovative biotech play.
Best Stock Under $5 #8: Harte Hanks (HHS)
At a price of around $3 per share, Texas-based advertising agency, Harte Hanks (HHS) looks like an attractive long-term winner. The company focuses on direct and digital communications. This includes website design, digital strategy, e-commerce, social media, email and database marketing and lead generation.
Besides these technologically advanced tools, the company also provides direct marketing services with traditional advertising tools such as printing and specialized mailing services. These services are still profitable, although the profit margins aren’t as good with traditional mailing compared to digital promotions.
Overall, it’s hard to bet against a space such as marketing. While the economy is currently suffering and marketing budgets likely are with it, chances are it will continue to improve in time. That’s also why the company looks attractive, even after it’s coming off some losses in the most recent quarter.
And with insiders owning over 40 percent of the company’s shares, this is one penny stock where the company management has their interests aligned with shareholders.
As with many stocks in the past year, there’s been a lot of volatility in shares. But they’re more than double off their lows and heading higher.
Best Stock Under $5 #9: Clean Energy Fuels Corp (CLNE)
There are a number of promising technologies that looks to move the energy market beyond the push and pull of oil prices. From a rise in natural gas production to improved technologies, there are a lot of ideas being explored by penny stocks. One of the more interesting is Clean Energy Fuels Corp.
The company provides natural gas for vehicular fleets, like a bus line or municipal garbage truck service. The gas comes in the forms of renewable natural gas, compressed natural gas, and liquefied natural gas.
By using natural gas, these vehicles are able to avoid oil, burn the fuel more cleanly, and function with heavy-duty trucks and other vehicles effectively. Electric vehicles just haven’t been able to meet these demands yet, and there’s still a great long-term opportunity for the company.
With over 1,000 fleet customers and 48,000 vehicles already, as well as 550 natural gas stations in 41 states, this small but profitable company is just one of the more proven alternative energy concepts out there right now.
Best Stock Under $5 #10: Auxly Cannabis Group (CBWTF)
Marijuana stocks have traded out of favor with the stock market for a long time. That means there are plenty of inexpensive plays thanks to large declines in the past year. But for a very inexpensive one that has huge upside, consider cbd penny stock Auxly Cannabis Group.
This company trades for just over twenty cents per share, but offers investors a play on firm that cultivates, develops and distributes cannabis and cannabis-related products under a variety of brands.
Even at that low share price, it still has a market capitalization of over $130 million, so it’s still a large enough company that it should be able to continue operations as the industry digests some of the overproduction of the past few years.
As one of the smaller players in the space, it may even end up getting bought out, providing investors with a fast return that blows away any potential price target that could be set. That’s one of the more undersold advantages of buying penny stocks gainers.
Why Buy Stocks Under $5 Instead of $10?
There are plenty of ways to define what makes a “cheap” stock. There’s no real agreement on whether that starts at $1, $5, $10, or even a higher amount.
However, $5 is a key price point. That’s because many professional money managers from hedge funds to ETFs to mutual funds are unable to buy shares of a company that are under $5. They usually even have to sell shares of a company they own if the price falls that low.
That’s because a stock trading under $5 on a major exchange is at risk of being de-listed. It will then trade over the counter, on the pink sheets. Trading isn’t as efficient in that market, and without institutional investor support, it’s seen as not worth trading.
Yet for individual investors, that means there’s an opportunity. By buying hot penny stocks that trade under $5, they’re not going to be caught in the whim of an institutional investor who can significantly move the price around by buying millions of dollars in shares. And for smaller companies still showing signs of growth, stocks that trade under $5 now could grow, become bigger players and get listed on a major exchange, and see their share price explode multiples higher than where they currently trade.
Can I Really Make Money Trading Penny Stocks?
Absolutely! Trading penny stocks can be a great way to take advantage of the large percentage gain potential in low-priced stocks. If a company with a share price of $100 rises $1, it goes up 1 percent. But if the stock price of a $5 stock goes up $1, it’s a 20 percent gain.
For investors who already have a trading strategy for playing large-cap companies, penny stock trading via their online account, such as TD Ameritrade, or mobile with a penny stocks app, can allow them to play the market and get returns that rival that of the pros. So consider running a penny stock screener the next time you’re looking for a potential big winner. It’s easy to come up with a penny stocks list that will allow you to start trading, if not day trading penny stocks.