Stocks under $10 may sound risky. There’s a big difference between the price of a stock and the value it offers. A penny stock may be a great value, and a stock trading for hundreds of dollars per share may be a poor investment.
While that difference will always remain, investors who focus on less expensive stocks—that also offer value, of course—can fare pretty well. That’s because less expensive stocks are easier to trade in and out of. And institutional investors buying after Wall Street analysts discover these stocks can do a lot to move the share price higher.
Looking at the investment opportunities in inexpensive stocks trading under $10 per share, investors in the stock market can find some great growth opportunities in anything from AI stocks to cannabis plays… as well as beaten-down blue chips with massive upside potential as well.
There are hot stocks worthy of day trading in a bull market or bear market, and others are big, successful companies with regular dividend payments. It’s a rich field. We’ve identified the best stocks under 10 dollars for 2020:
Great Stock Under $10 #1: NIO Inc (NIO)
Don’t feel like shelling out nearly a grand for shares of Tesla but still want an electric vehicle play? That’s where NIO, a Chinese competitor comes into play. Founded in just 2014, the company already produces electric SUVs capable of eating 5-7 users.
And besides its existing electric vehicle, the company also emulates Tesla in that it’s working on battery technology and charging solutions for rechargeable devices.
With the popularity of electric vehicles increasing, shares have surged 165 percent in the past year. That’s a huge move, but there’s still more room to run. The company isn’t quite at profitability yet— again, like Tesla—but it’s got a viable product on the marketplace and has great access to the world’s largest consumer market.
Automobile sales are a cyclical market, and the company’s strength during a time of economic uncertainty is a sign that this inexpensive stock could be worth far more in the future for those who buy shares now and go along for the ride over the next few years.
Great Stock Under $10 #2: Investors Bancorp (ISBC)
A regional bank in the New Jersey area, Investors Bancorp is a cheap stock that offers a lot to investors right now.
First, shares trade at about 0.8 times their book value. Book value is a great metric for looking at a bank stock, as book value looks at the number of loans against a bank’s market cap. Any book value under 1 is a potential bargain in the bank space.
Second, shares have lost nearly 30 percent in the past year, even as the bank has remained profitable. That decline has helped push up the bank’s dividend yield to a sizeable 5.8 percent. And the bank just increased its dividend, so today’s investors are likely to see growth in their payouts over time. Growing dividends are key to investment success over time.
Finally, smaller profitable banks are attractive as potential buyout candidates from larger banks. The banking sector has been consolidating for decades, and other large regionals may likely make a buyout offer. Typically, buyout offers come at 1.2 times book value or more.
So there’s a lot of potential upside in shares, along with a big dividend while waiting for that to play out. That makes this inexpensive company look like an even bigger bargain.
Great Stock Under $10 #3: Cronos Group (CRON)
The cannabis and medical marijuana space has a number of inexpensive plays under $10 per share. The sector has been out of favor for a while, and Cronos is hardly leading the pack with losses, despite being down a whopping 62 percent in the past year.
But insiders own nearly half the company, and they’re not selling. They have a number of brands for various products, including hemp-derived supplements and cosmetic products.
Overall, this space has a lot of growth potential behind it, but investors put too much cash into the space. Now that the trend has reversed, it’s starting to look attractive again.
Besides its branding, Cronos has the financial strength to weather the market, and possibly even pick up assets from competitors.
That’s thanks to their cash-rich balance sheet, which has over $1.2 billion in net cash after backing out the debt. That makes for a great opportunity with some fantastic long-term upside ahead.
Even better, shares could head much higher than $10 in the near future. That’s because a large percentage of shares are being shorted by the market right now.
As the company has started to come off its lows, shorts will increasingly need to go on the market to buy shares and close out their position. That could result in a squeeze that sends shares vaulting over $10 soon. That huge upside potential makes it a great play for traders right now.
Great Stock Under $10 #4: Avid Bioservices (CDMO)
The biotech space is rife with a number of inexpensive stocks under $10. Most of these biotech stocks are essentially like buying an option on a potential wonder drug. Unlike an option, however, the shares don’t expire.
Avid is a bit different, however. It is a contract development and manufacturing organization for the biotech space. Its products include antibodies and recombinant proteins as well as packaging and other services for the industry.
Generally, suppliers tend to be steadier players. The company has seen shares essentially trade flat in the past year as biotechs have been somewhat out of favor with the market.
With the rise of a global pandemic, however, biotechs are getting a lot more investor interest. Any company doing supply work for that industry is likely to see a surge in revenue and profits going forward.
In the past year, shares have traded between $3 and $8.50. The current price around $6 is about the mid-point for shares. Investors may want to consider buying a tranche now, then buying an additional tranche of shares on a drop to the lower end of the range.
Smaller biotech plays will often trade in a rangebound manner, and buying more near the low (and being willing to sell shares near the top of a range), can produce repeated profits while waiting for longer-term trends to send shares to a new and higher trading range.
Great Stock Under $10 #5: ADT Inc. (ADT)
Around since 1874, ADT is another stock trading under $10. It’s a well-known brand in the private security space, with a number of solutions for home and business security.
We see strong trends towards having additional security in an age rife with riots, as well as calls to change how police forces do business.
The emphasis on automated solutions is particularly attractive, as it requires fewer costly personnel, and because new technologies can provide a range of services unthinkable in the past, like real-time video feed access from anywhere in the world.
That should be accretive to the company’s bottom line. Shares are up 23 percent in the past year, but are down nearly half from their IPO highs back in 2018.
Right now, however, shares are coming off some weak returns. The company lost nearly $660 million last year, and while revenue is up, profit margins are still negative.
The company’s high debt levels are also a cause for concern, although ADT has managed to take advantage of lower interest rates to lower their cost of debt. As the company pays down debt, it’s easy to see the company hitting a price target in the $12-15 range in the next few years.
Great Stock Under $10 #6: Jumia (JMIA)
Although it’s headquartered in Germany, Jumia operates as an e-commerce platform in Africa. That includes a marketplace, bringing together buyers and sellers online, as well as logistics and payment options to ensure goods are transferred and the money changes hands.
Besides the traditional sale of goods, Jumia’s platform offers services such as flight booking and restaurant food delivery. Services offer far higher margin than acting as a middleman for the sale of mere goods.
Africa has a huge potential e-commerce market. The demographics of the continent are young and fast-growing. And Africa has been quick to embrace new technologies, often leapfrogging over technologies that developed more quickly in more advanced markets.
For investors who missed the rise of Amazon or China’s Alibaba, this is a chance to get in on a huge potential market on a proven tech play.
With the world economy struggling right now, it’s no surprise that this frontier market play has shed nearly 80 percent of its value in the past year. Or, that like Amazon most quarters, the company doesn’t yet turn a profit.
But this is a reasonable long-term play on the continued rapid economic growth in an often under-invested continent. And with a low price and insiders owning about 38 percent of the company, their interests are aligned with long-term buyers today. This is a $5 stock that could provide the same returns investing in Amazon in the 1990s for patient investors willing to look beyond a short-term price target.
Great Stock Under $10 #7: Yamana Gold (AUY)
Gold stocks have been hot the past few months, and finding a solid play at a reasonable price is no small feat right now. Many stocks trading under $10 in the gold space are some of the more speculative names. Most of the major mining companies have far higher share prices, even when the metal is out of favor with the market.
But with Yamana Gold, investors can get a company with a number of operational mines in Canada, Chile, Brazil, and Argentina without having to buy one of the more speculative names likely to trade under $10 per share.
The downside to the rally in gold is that Yamana trades near a multi-year high right now. And shares are up 115 percent in the past year. And that’s as the company’s overall revenue growth slid 12 percent in the past year! The company even pays a small dividend, although its dividend yield is just under 1 percent, that’s still more income than you’ll get owning any amount of physical gold.
But with strong price trends in place for the metal, an inexpensively-priced gold miner is a great place to be in. As gold’s price rises, and as costs remain mostly fixed in the short-term, gold miners offer a leveraged return relative to gold.
Gold currently has a price target of $2,000 to $3,000 by some estimates. Chances are gold stocks still have triple-digit opportunities ahead.
Great Stock Under $10 #8: Sirisux XM Holdings (SIRI)
The satellite radio company is a near-monopoly in the space. And with the acquisition of Pandora, it’s big in the world of Internet radio as well, making it a valuable tech stock play. The company has over 30 million subscribers.
Even better? The company’s subscription-based revenue model makes it a simple-to-understand business model with regularly-recurring cash coming in month after month. That’s why this company combines technology, a low monthly cost, and an insatiable demand for entertainment into a winning play.
That’s reflected in the company’s earnings growth of 81 percent in the past year, as lower costs have helped boost returns from a 12 percent rise in total revenue.
Shares of SIRI have bounced between $4 and $7.50 in the past year, essentially trading flat. Shares are currently just under $6. That’s put shares at around 24 times current earnings, but given the company’s subscription growth, there’s still strong demand in the years ahead.
Shares also pay a dividend of $0.05 per year. That’s just under a 1 percent yield. It’s not much, but for an inexpensive stock, it provides investors with both growth potential and some modest income that will likely rise over time.
Great Stock Under $10 #9: Ford Motors (F)
Shares of the carmaker have slid 40 percent in the past year, decisively leaving shares under $10.
That’s an extreme move, although the company did see an extreme loss last year, losing $3.9 billion despite earning nearly $150 billion in revenue.
Even with this loss, the company is still a big leader in several niches. The F150 truck remains the industry standard for comparison, and sales of that truck remain robust. Prolonged lower gas prices will likely help this and other fuel-inefficient vehicles see sales from slumping too much.
The company is also working on new electric vehicles and hybrids in line with industry trends for cleaner vehicles. This diversified fleet is an attractive play, and the company’s products continue to have strong branding power.
To save money, the company eliminated their dividend recently, which also helped push the stock price down as income investors left in search of better opportunities.
But typically, companies that eliminate their dividends and survive tend to see a strong rebound in shares. Many even end up restoring the dividend later. For a cyclical company like Ford, that kind of strategy makes sense, and buying shares near panic lows could provide a big portfolio move.
Great Stock Under $10 #10: General Electric (GE)
During its heyday, General Electric was a Wall Street conglomerate darling that seemed to do no wrong. Working to be the best in whatever business it took on, the company ended up owning everything from light bulbs to network and cable television. And analysts loved the company’s consistent, steady growth. No portfolio manager would be caught without shares.
But times have changed.
Shares of General Electric were booted from the Dow Jones Industrial Average after years of poor performance. Too much diversification, led by increased financialization, occurred at just the wrong time.
Yet shares had started making a turnaround before the Covid pandemic struck. The company was shedding non-industrial divisions, and slowly transforming into a leaner, more industrial play.
That’s led to new problems today, as one of the company’s top divisions, jet engines, has seen demand collapse.
While things look dire now, that’s allowed shares to reach all-time lows. While the company will have a struggle going forward, its moves to deleverage its balance sheet had started to pay off.
Shares of the company are down 40 percent in the past year, even as GE saw its earnings rise by 73 percent.
This is one inexpensive stock that could move far higher as the economy rebounds. A return to its old 52-week high would send shares rallying more than double from here. That’s certainly achievable in the next few years.
FAQs:
Why Buy Stocks Under $10?
There are a few great reasons for investors to target stocks priced under $10 per share, especially compared to simply buying an ETF or fund of low-priced stocks.
First, there’s the low price per share. That makes it easier to buy in round lots (100 shares at a time). That’s typically the cheapest way to buy shares rather than 5 at a time or even fractions of shares which many online brokerages now offer.
Second, smaller-priced companies are more likely to be growth stocks. If they’re smaller companies, they’re also less likely to be followed by analysts, making for a potential bargain. This is where individual stock buying can beat the overall market by leaps and bounds.
And they offer larger percentage gains. A stock trading at $100 that rises $1 goes up a mere 1 percent. A $10 stock that rises $1 goes up 10 percent. As investors, we always want to look for opportunities with the best upside, and finding stocks that are inexpensively priced is one way to do it.
Finally, there’s the advantage of getting Wall Street money interested in a low-priced stock. When a big fund starts to buy into one of these names, their share price tends to start moving a lot higher than a large-cap stock. That’s why finding low-priced, out-of-favor names can provide big returns over time.
What are the Risks of Buying Stocks Under $10?
As with any purchase, you risk losing as much money as you put into the trade. That’s simple investment advice for any trade. However, that’s in a worst-case scenario where a stock goes broke. You can avoid that problem by using a stop loss to limit your loss to a smaller percentage.
Smaller companies that trade under $10 also may need to issue shares more often to raise capital. They may also have a tougher time getting loans at the best interest rates. These factors can weigh on their price as well. And without analyst coverage, your research may not uncover some potential danger that you may otherwise be aware of.
Fortunately, many stocks under $10 are also dividend stocks. Investors can get started growing their dividend income inexpensively with these stocks, and dividend payments can offset temporary market fluctuations.
Just beware the trading volume of a given stock and scale your buys appropriately so you can get in and out of a trade without moving the market for that stock.