9 Best Cheap Stocks to Buy Now Under $5
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These are potentially explosive stocks.
Every investor in his or her right mind wants to find cheap stocks to buy. It just so happens that the following shares are cheap in several senses: They look like they could be primed for big advances, and they also happen to trade for less than $5 a pop. Remember, with prices that low, this group of names is indeed far riskier than your typical S&P 500 member — so keep the risk-versus-reward dynamic in mind before pulling the trigger. Caveats aside, here are nine of the best cheap stocks to buy now for less than $5 per share.
Denbury Resources (NYSE: DNR)
Like many of the best cheap stocks to buy now, Denbury is rife with both opportunity and risk — best illustrated by its wild ride from $17 per share in 2014 to less than $1 in 2017. Now trading above $4 a share, this $2 billion company is a U.S. oil and natural gas producer whose fate is intertwined with energy prices. DNR can be considered an attractive technical play, a momentum play and a patient, long-term option for bullish energy investors. Its leverage (a debt-equity ratio above 4.2) exaggerates the correlation with oil, so an energy bear market is the biggest risk. Still, a forward price-earnings ratio of 6.9 is enticing.
Office Depot (ODP)
Office Depot is one of the more interesting cheap stocks to buy below $5, for a number of reasons. First, the office supplies chain is unambiguously profitable, and analysts expect revenue growth this year (about 6 percent). Second, ODP pays a pretty sizable dividend, which looks safe for the time being, of 4.2 percent. Third, this stock is cheap by a number of traditional measures, including forward P/E (6.9), price-sales (0.13), price-book (0.6) and price-free cash flow (4). Finally, one of Wall Street’s favorite hedge fund managers, David Einhorn, just bought 2.1 million shares of ODP in the first quarter through his fund, Greenlight Capital.
Genesis Healthcare (GEN)
Long-term buy-and-hold investors would ironically be best served by ignoring shares of Genesis Healthcare, which owns and operates long-term care facilities. GEN is more for the proverbial Wall Street gunslinger with a shorter-term outlook and a tendency to play momentum stocks. That’s because GEN shares, despite only trading about $2 a pop, have rallied violently higher in 2018, with shares up 175 percent through June 1. The money-losing company is aggressively restructuring, selling off dozens of facilities, refinancing and negotiating lease reductions, all in the last four months or so. Since GEN shares were aggressively sold short, a short squeeze has helped propel the stock higher, though business remains troubled.
Genworth Financial (GNW)
No list of the best cheap stocks to buy now is complete without Genworth Financial. A mortgage and long-term care insurer, GNW is not only inexpensive at 3.5 times forward earnings, but it’s also coming off two straight impressive quarters and is growing revenue, with shares up more than 20 percent since the May 2 earnings report. Importantly, GNW can be considered a “merger arbitrage” opportunity; China Oceanwide Holdings Group has agreed to buy GNW for $5.43 per share — nearly a 50 percent premium from late May levels. GNW has said the deal’s deadline is July 1, but regulators must approve it first. (As of now, the market clearly thinks that unlikely.)
United Microelectronics Corp. (UMC)
Here’s one of the rare stocks below $5 that appears to be a so-called “normal” company: no special situations surrounding it, no intense debt, not a victim of vicious commodity whipsaws, and so on. In fact, this Taiwanese tech company is somewhat of a plain Jane, manufacturing semiconductor wafers for other chip companies. This slow but steady grower has top-line sales advancing about 2 to 4 percent a year. It does around $5 billion in annual business and is modestly profitable. Incidentally, UMC is suing Micron Technology (MU) for patent infringement; while a win there could boost UMC stock, the company’s also doing just fine without it.
Zynga (ZNGA)
Something miraculous happened to Zynga shareholders recently. In fact, it’s virtually peerless in Wall Street history: On May 2, the company’s founder and former CEO, Mark Pincus, voluntarily diluted his voting rights in the company, abolishing the dual-class structure that gave him 70 percent control. He now controls 10 percent of voting shares. The mobile and social gaming company, behind games like “Words With Friends,” “Zynga Poker,” “FarmVille” and “CSR Racing,” saw shares soar 20 percent in the following weeks. This is an extraordinarily bullish move that makes ZNGA far more attractive to institutional and individual investors alike. Growing sales and profits don’t hurt, either.
